As filed with the Securities and Exchange Commission on August 23, 2005
1933 Act Registration No. 2-25469
1940 Act Registration No. 811-1424
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 85 X
and/or
REGISTRATION STATEMENT UNDER THE X
Amendment No. 85 X
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(Check appropriate box or boxes.)
Robert H. Graham
Copy to:
Ofelia M. Mayo, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
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It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
_X_ on October 25, 2005 pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
AIM DIVERSIFIED DIVIDEND FUND
PROSPECTUS
OCTOBER 25, 2005
AIM Diversified Dividend Fund seeks to provide growth of capital and, secondarily, current income.
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 OBJECTIVES 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 Hypothetical Investment and Expense Information 5 DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager 7 OTHER INFORMATION 7 ------------------------------------------------------ Sales Charges 7 Dividends and Distributions 7 FINANCIAL HIGHLIGHTS 8 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Excessive Short-Term Trading Activity Disclosures A-5 Purchasing Shares A-7 Redeeming Shares A-9 Exchanging Shares A-11 Pricing of Shares A-14 Taxes A-15 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, 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, 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 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 primary investment objective is growth of capital with a secondary objective of current income. The investment objectives of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet these objectives by investing, normally, at least 80% of its assets in dividend-paying equity securities. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts.
The fund may invest up to 20% of assets in master limited partnerships or in investment-grade debt securities of U.S. issuers. 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 selecting investments, the portfolio manager seeks stocks that have paid consistent or increasing dividends. The portfolio manager focuses on the financial health and profit sustainability of the company issuing the stock, and selects stocks that offer the most total return potential from price appreciation and dividend return. The portfolio manager considers whether to sell a particular security when any of these factors materially changes.
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 objectives.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you receive from your investment may vary. 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.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
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.
(PERFORMANCE GRAPH)
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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2002................................................................... -12.90%
2003................................................................... 26.90%
2004................................................................... 13.84%
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The Class A shares' year-to-date total return as of September 30, 2005 was
[ ]%.
During the periods shown in the bar chart, the highest quarterly return was 14.18% (quarter ended June 30, 2003) and the lowest quarterly return was -14.15% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a 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 may 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
2004) 1 YEAR INCEPTION DATE
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Class A 12/31/01
Return Before Taxes 7.57% 5.95%
Return After Taxes on Distributions 6.93 5.70
Return After Taxes on Distributions
and Sale of Fund Shares 5.42 5.04
Class B 12/31/01
Return Before Taxes 8.12 6.39
Class C 12/31/01
Return Before Taxes 12.13 7.24
Class R(1) 12/31/01(1)
Return Before Taxes 13.67 7.80
Investor Class(2)
Return Before Taxes 13.84 7.96 12/31/01(2)
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S&P 500 Index(3) 10.87 3.58(6) 12/31/01(6)
Russell 1000--Registered Trademark--
Index(4) 11.40 4.27(6) 12/31/01(6)
Lipper Large Cap Core Fund Index(5) 8.29 2.11(6) 12/31/01(6)
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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 shares only and after-tax returns for Class B, C, R and Investor Class shares will vary.
(1) The returns shown for these periods are 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 Class R shares. Class R shares would have different returns because, although the shares are invested in the same portfolio of securities, Class R 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 Class R shares is October 25, 2005.
(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 Rule 12b-1 fees applicable to Class A shares. 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 July 18, 2005.
(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. The fund has also included the Russell 1000--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the fund has included the Lipper Large Cap Core Fund Index (which may or may not include the fund) for comparison to a peer group.
(4) The Russell 1000--Registered Trademark-- Index measures the performance of the 1,000 largest companies domiciled in the United States.
(5) The Lipper Large-Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Core Classification. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically 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 500 Index.
(6) 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 INVESTOR from 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(4,5) ------------------------------------------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS R CLASS -------------------------------------------------------------------------------------------- Management Fees(6) 0.51% 0.51% 0.51% 0.51% 0.51% Distribution and/or Service (12b-1) Fees(7) 0.25 1.00 1.00 0.50 0.17 Other Expenses 0.28 0.28 0.28 0.28 0.28 Total Annual Fund Operating Expenses(8,9) 1.04 1.79 1.79 1.29 0.96 ------------------------------------------------------------------------------------------------------- |
(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) Total Annual Fund Operating Expenses have been restated to reflect the current fees in effect upon the closing of the reorganization of AIM Core Stock Fund into the fund on July 18, 2005.
(6) Effective July 18, 2005, the Board of Trustees has approved a permanent reduction of the advisory fee of the fund to 0.60% of the first $350 million, plus 0.55% of the next $350 million, plus 0.50% of the next $1.3 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next $2 billion, plus 0.375% of the next $2 billion, plus 0.35% of the fund's average daily net assets in excess of $8 billion.
(7) The Board of Trustees has approved a permanent reduction of the Rule 12b-1 fees applicable to Class A shares to 0.25% effective July 1, 2005. Distribution and/or Service (12b-1) Fees reflect this agreement.
(8) The fund's investment advisor has contractually agreed to waive advisory
fees and/or reimburse expenses to the extent necessary to limit Total Annual
Fund Operating Expenses (excluding certain items discussed below) of Class
A, Class B, Class C, Class R and Investor Class shares to 1.40%, 2.15%,
2.15%, 1.65% and 1.40% of average daily net assets, 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 limits 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), or items designated as such 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, in addition to the expense
reimbursement arrangement with AMVESCAP (as defined herein) described more
fully below, the only expense offset arrangement 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 expense limitation for Class A, Class B and Class C shares is
in effect through October 31, 2005 and for Class R and Investor Class shares
through October 31, 2006.
(9) The fund's investment advisor has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Investor Class shares to 1.00%, 1.65%, 1.65%, 1.25% and 1.00% of average daily net assets, 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 limits 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), or items designated as such 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, in addition to the expense reimbursement arrangement with AMVESCAP (as defined herein) described more fully below, the only expense offset arrangement from which the fund benefits are in the form of credits that the fund received 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 upon consultation with the Board of Trustees without further notice to investors. Further, at the request of the Board of Trustees, AMVESCAP (as defined herein) has agreed to reimburse the fund for expenses related to market timing matters. Total Annual Fund Operating Expenses restated and net of all of the above agreements were 1.00%, 1.65%, 1.65%, 1.25% and 0.96% for Class A, Class B, Class C, Class R and Investor Class shares, respectively for the year ended October 31, 2004.
If a financial institution is managing your account, you may also be charged a transaction or other fee by such financial institution.
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, that the fund's operating expenses remain the same and includes the effect of contractual fee waivers and/or expense reimbursements, if any. To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 $650 $863 $1,092 $1,751
Class B 682 863 1,170 1,908
Class C 282 563 970 2,105
Class R 131 409 708 1,556
Investor Class 98 306 531 1,178
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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 $650 $863 $1,092 $1,751
Class B 182 563 970 1,908
Class C 182 563 970 2,105
Class R 131 409 708 1,556
Investor Class 98 306 531 1,178
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HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The following supplemental hypothetical investment information provides additional information in a different format from the preceding Fee Table and Expense Example about the effect of a fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. Because a fund's annual return when quoted is already reduced by the fund's fees and expenses for that year, this hypothetical expense information is intended to help you understand the annual and cumulative impact of a fund's fees and expenses on your investment. Assuming a hypothetical investment of $10,000 in each class of shares of the fund and a 5% return before expenses each year, the chart shows the cumulative return before expenses, the cumulative return after expenses, the ending balance and the estimated annual expenses for each year one through ten. The chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for each class, which is the same as stated in the Fee Table above, is reflected in the chart and is net of any contractual fee waiver or expense reimbursement. There is no assurance that the annual expense ratio will be the expense ratio for the fund class. To the extent that the advisor makes any waivers or reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account initial or contingent deferred sales charges, if any. You should understand that this is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios; your actual returns and expenses are likely to differ (higher or lower) from those shown below.
CLASS A--ANNUAL EXPENSE RATIO 1.04% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.96% 8.08% 12.36% 16.81% 21.43% End of Year Balance $10,396.00 $10,807.68 $11,235.67 $11,680.60 $12,143.15 Estimated Annual Expenses $ 106.06 $ 110.26 $ 114.63 $ 119.16 $ 123.88 -------------------------------------------------------------------------------------------- CLASS A--ANNUAL EXPENSE RATIO 1.04% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 26.24% 31.24% 36.44% 41.84% 47.46% End of Year Balance $12,624.02 $13,123.93 $13,643.64 $14,183.93 $14,745.61 Estimated Annual Expenses $ 128.79 $ 133.89 $ 139.19 $ 144.70 $ 150.43 -------------------------------------------------------------------------------------------- |
CLASS B--ANNUAL EXPENSE RATIO 1.79% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.21% 6.52% 9.94% 13.47% 17.11% End of Year Balance $10,321.00 $10,652.30 $10,994.24 $11,347.16 $11,711.40 Estimated Annual Expenses $ 181.87 $ 187.71 $ 193.74 $ 199.96 $ 206.37 -------------------------------------------------------------------------------------------- CLASS B--ANNUAL EXPENSE RATIO 1.79% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 20.87% 24.75% 28.76% 33.86% 39.16% End of Year Balance $12,087.34 $12,475.34 $12,875.80 $13,385.68 $13,915.75 Estimated Annual Expenses $ 213.00 $ 219.84 $ 226.89 $ 136.56 $ 141.97 -------------------------------------------------------------------------------------------- |
CLASS C--ANNUAL EXPENSE RATIO 1.79% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.21% 6.52% 9.94% 13.47% 17.11% End of Year Balance $10,321.00 $10,652.30 $10,994.24 $11,347.16 $11,711.40 Estimated Annual Expenses $ 181.87 $ 187.71 $ 193.74 $ 199.96 $ 206.37 -------------------------------------------------------------------------------------------- CLASS C--ANNUAL EXPENSE RATIO 1.79% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 20.87% 24.75% 28.76% 32.89% 37.16% End of Year Balance $12,087.34 $12,475.34 $12,875.80 $13,289.11 $13,715.69 Estimated Annual Expenses $ 213.00 $ 219.84 $ 226.89 $ 234.18 $ 241.69 -------------------------------------------------------------------------------------------- |
CLASS R--ANNUAL EXPENSE RATIO 1.29% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.71% 7.56% 11.55% 15.69% 19.98% End of Year Balance $10,371.00 $10,755.76 $11,154.80 $11,568.65 $11,997.84 Estimated Annual Expenses $ 131.39 $ 136.27 $ 141.32 $ 146.57 $ 152.00 -------------------------------------------------------------------------------------------- CLASS R--ANNUAL EXPENSE RATIO 1.29% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.43% 29.05% 33.83% 38.80% 43.95% End of Year Balance $12,442.96 $12,904.60 $13,383.36 $13,879.88 $14,394.82 Estimated Annual Expenses $ 157.64 $ 163.49 $ 169.56 $ 175.85 $ 182.37 -------------------------------------------------------------------------------------------- |
INVESTOR CLASS--ANNUAL EXPENSE RATIO 0.96% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.04% 8.24% 12.62% 17.17% 21.90% End of Year Balance $10,404.00 $10,824.32 $11,261.62 $11,716.59 $12,189.94 Estimated Annual Expenses $ 97.94 $ 101.90 $ 106.01 $ 110.30 $ 114.75 -------------------------------------------------------------------------------------------- INVESTOR CLASS--ANNUAL EXPENSE RATIO 0.96% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 26.82% 31.95% 37.28% 42.82% 48.59% End of Year Balance $12,682.42 $13,194.79 $13,727.86 $14,282.46 $14,859.47 Estimated Annual Expenses $ 119.39 $ 124.21 $ 129.23 $ 134.45 $ 139.88 -------------------------------------------------------------------------------------------- |
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission (SEC) within 60 days of the fund's first and third fiscal quarter-ends. In addition, portfolio holdings information for the fund is available at (http://www.aiminvestments.com). To reach this information, access the fund's overview page on the website. Links to the following fund information are located in the upper right side of this website page:
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APPROXIMATE DATE OF INFORMATION REMAINS
INFORMATION WEBSITE POSTING POSTED ON WEBSITE
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Top ten holdings as of month end 15 days after month end Until posting of the following month's top
ten holdings
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Complete portfolio holdings as of 30 days after calendar quarter end For one year
calendar quarter end
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A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information, which is available at (http://www.aiminvestments.com).
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) 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.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; (iii) that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; (iv) 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; (v) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and (vi) that the defendants breached their fiduciary duties by failing to ensure that the funds participated in class action settlements in which they were eligible to participate.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2004, the advisor received compensation of 0.09% of average daily net assets.
PORTFOLIO MANAGER
Meggan M. Walsh, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. She has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1991.
She is assisted by the advisor's Diversified Dividend Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of her compensation structure, and information regarding other accounts she manages.
SALES CHARGES
Purchases of Class A shares of AIM Diversified Dividend 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 of both capital gains and ordinary income.
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
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 ended 2004 and 2003 and the fiscal period ended 2002 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. The Audit Committee of the Board of Trustees (the Board) of the fund has appointed a new independent registered public accounting firm for the fund's current fiscal year (2005). Such appointment was ratified and approved by the independent trustees of the Board. For information regarding the change in the independent registered public accounting firm, see the Statement of Additional Information.
AIM Diversified Dividend's Class R shares and Investor Class shares commenced operations on October 25, 2005 and July 18, 2005, respectively and therefore, financial information for such shares is not available.
CLASS A
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
Net asset value, beginning of period $ 11.48 $ 10.26 $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10(a) 0.14 0.06(b) (0.03)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.23 1.54 (1.27)
=========================================================================================================================
Total from investment operations 0.69 1.37 1.60 (1.30)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.15) (0.04) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.31) (0.15) (0.04) --
=========================================================================================================================
Net asset value, end of period $ 11.86 $ 11.48 $ 10.26 $ 8.70
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.98% 13.36% 18.39% (13.00)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,983 $63,513 $22,375 $ 7,834
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(d) 1.00% 1.51% 1.75%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.45%(d) 1.70% 2.12% 4.26%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.66%(a)(d) 1.27% 0.65% (0.34)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.09 and 1.38%, respectively.
(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 $90,314,821.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS B
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
Net asset value, beginning of period $ 11.38 $ 10.17 $ 8.65 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.21 1.53 (1.27)
=========================================================================================================================
Total from investment operations 0.65 1.28 1.53 (1.35)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
=========================================================================================================================
Net asset value, end of period $ 11.76 $ 11.38 $ 10.17 $ 8.65
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.67% 12.63% 17.67% (13.50)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,926 $45,700 $21,582 $ 7,100
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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 $59,416,500.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
Net asset value, beginning of period $ 11.37 $ 10.16 $ 8.65 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.58 1.21 1.52 (1.27)
========================================================================================================================
Total from investment operations 0.64 1.28 1.52 (1.35)
========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
========================================================================================================================
Net asset value, end of period $ 11.74 $ 11.37 $10.16 $ 8.65
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 5.59% 12.64% 17.55% (13.50)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,070 $15,316 $5,848 $ 1,116
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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 $22,915,866.
(e) Annualized.
(f) Not annualized for periods less than one year.
In addition to the fund, AIM serves as investment advisor to many other mutual funds (the funds). The following information is about all the funds.
CHOOSING A SHARE CLASS
Most of the funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. Certain classes have higher expenses than other classes which may lower the return on your investment relative to a less expensive class. In deciding which class of shares to purchase, you should consider, among other things, (i) the length of time you expect to hold your shares, (ii) the provisions of the distribution plan, if any, applicable to the class (iii) the eligibility requirements that apply to purchases of a particular class, and (iv) any services you may receive in making your investment determination. In addition, you should consider the other factors described below. Please contact your financial advisor to assist you in making your decision.
CLASS A(1) CLASS A3 CLASS B(4) CLASS C CLASS R INVESTOR CLASS
---------------------------------------------------------------------------------------------------------------
- Initial sales - No initial - No initial sales - No initial - No initial - No initial
charge sales charge charge sales charge sales charge sales 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) within six years within one
year(7)
- 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%(3)
service (12b-1)
fee than Class B,
Class C, Class K
or Class R shares
(See "Fee Table
and Expense
Example")(3)
- Does not - Converts to - Does not - Does not - Does not
convert to Class A shares convert to convert to convert to
Class A shares at the end of Class A shares Class A shares Class A shares
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 - Available only - Purchase orders - Generally more - Generally, - Closed to new
appropriate for for a limited limited to appropriate only available investors,
long-term number of amount less than for short-term to employee except as
investors funds $100,000(6) investors benefit described in
- Purchase plans(9) the
orders limited "Purchasing
to amount less Shares -- Grandfathered
than Investors"
$1,000,000(8) section of
your
prospectus
---------------------------------------------------------------------------------------------------------------
|
Certain funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for the Institutional Class shares 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) Class A shares of AIM Tax-Free Intermediate Fund and Investor Class shares of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio do not have a 12b-1 fee.
(4) Class B shares are not 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 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) Any purchase order for Class B shares in an amount equal to or in excess of $100,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation.
(7) 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 fund that are subject to a CDSC into AIM Short Term Bond Fund.
MCF--10/05
(8) Any purchase order for Class C shares in an amount equal to or in excess of $1,000,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares and AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio with respect to their Investor Class shares) has adopted 12b-1 plans that allow the fund to pay distribution fees to A I M Distributors, Inc. (ADI) 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 fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Sales charges on the 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 the 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 upon request free of charge.
INITIAL SALES CHARGES
The 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 fund is classified.
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION 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
------------------------------------------------------------------------------
|
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 or 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 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 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%.
MCF--10/05
Some retirement plans can purchase Class A shares at their net asset value per share. If ADI 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.
ADI may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
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 ADI 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 are redeeming 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 advisor 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 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 a fund with fund shares
currently owned (Class A, B, C or R) and investments in the AIM College Savings
Plan(SM) 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 the 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 funds; and
- when a merger, consolidation, or acquisition of assets of a fund occurs.
MCF--10/05
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 a 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 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 A, C or 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 A, C or Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a qualified retirement plan and redeem Class A, Class C or Class R shares in order to fund a distribution;
- if you participate in the Systematic Redemption Plan and withdraw up to 12% of the value of your shares that are subject to a CDSC in any twelve-month period;
- if you redeem shares to pay account fees;
- for redemptions following the death or post-purchase disability of a shareholder or beneficial owner;
- 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.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI or one or more of its corporate affiliates (collectively, ADI Affiliates) may make additional cash payments to financial advisors in connection with the promotion and sale of shares of the funds. These additional cash payments may include cash revenue sharing payments and other payments for certain administrative services, transaction processing services and certain other marketing support services. ADI Affiliates make these payments from their own resources, from ADI's retention of underwriting concessions and from payments to ADI under Rule 12b-1 plans. In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of the funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing the funds on the financial advisor's funds sales system, placing the funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including the funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. The revenue sharing payments ADI Affiliates make may be calculated on sales of shares of the 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 financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM funds attributable to that particular financial advisor (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. Sales-Based Payments primarily create incentives to make new sales of shares of the funds and Asset-Based Payments primarily create incentives to retain previously sold shares of the funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments.
ADI Affiliates also may make other payments to certain financial advisors for processing certain transactions or account maintenance activities (such as processing purchases, redemptions or exchanges or producing customer account statements) or for providing certain other marketing support services (such as financial assistance for conferences, seminars or sales or training programs at which ADI Affiliates personnel may make presentations on the funds to the financial advisor's sales force). Financial advisors may earn profits on these payments for these services, since the amount of the payment may exceed the cost of providing the service. Certain of these payments are subject to limitations under applicable law.
ADI Affiliates are motivated to make the payments described above since they promote the sale of fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of the funds or retain shares of the funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional Information about these payments and the services provided by financial advisors. In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you
MCF--10/05
additional fees or commissions other than those disclosed in this prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the funds, as well as about fees and/or commissions it charges.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. 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, thus interfering with the efficient management of such funds by causing them to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted. The Boards of Trustees have adopted policies and procedures designed to discourage excessive or short-term trading of fund shares for all funds except the money market funds. However, there is the risk that these funds' policies and procedures will prove ineffective in whole or in part to detect or prevent excessive or short-term trading. These funds may alter their policies at any time without prior notice to shareholders if the advisor believes the change would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards of Trustees of the funds.
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 long-term shareholder interests.
The Boards of Trustees of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio (the money market funds) have not adopted any policies and procedures that would limit frequent purchases and redemptions of such funds' shares. The Boards do not believe that it is appropriate to adopt any such policies and procedures for the money market funds for the following reasons:
- The money market funds are offered to investors as cash management vehicles. Investors must perceive an investment in such funds as an alternative to cash, and must be able to purchase and redeem shares regularly and frequently.
- One of the advantages of a money market fund as compared to other investment options is liquidity. Any policy that diminishes the liquidity of the money market funds will be detrimental to the continuing operations of such funds.
- The money market funds' portfolio securities are valued on the basis of amortized cost, and such funds seeks to maintain a constant net asset value. As a result, there are no price arbitrage opportunities.
- Because the money market funds seek to maintain a constant net asset value, investors expect to receive upon redemption the amount they originally invested in such funds. Imposition of redemption fees would run contrary to investor expectations.
The Boards considered the risks of not having a specific policy that limits frequent purchases and redemptions, and it determined that those risks are minimal, especially in light of the reasons for not having such a policy as described above. Nonetheless, to the extent that the fund must maintain additional cash and/or securities with short-term durations than may otherwise be required, the fund's yield could be negatively impacted.
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 will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the shareholder to take action to stop such activities or (ii) refusing to process future purchases or exchanges related to such activities in the shareholder's accounts other than exchanges into a money market fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the practical limitations described above.
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 or non-existent 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, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per calendar year, or a
MCF--10/05
fund or an AIM Affiliate 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 AIM Affiliates reserve the discretion to accept exchanges in excess of these guidelines on a case-by-case basis if they believe that granting such exceptions would be consistent with the best interests of shareholders. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. The movement out of one fund (redemption) and into one or more other funds (purchase) on the same day shall be counted as one exchange. Exchanges effected as part of programs that have been determined by an AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio rebalancing, or other automatic non-discretionary programs that involve exchanges, generally will not be counted toward the trading guidelines limitation of four exchanges out of a fund per calendar year.
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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to implement these trading guidelines and may be further limited by systems limitations applicable to those types of accounts.
Some investments in the funds are made indirectly through vehicles such as qualified tuition plans, variable annuity and insurance contracts, and funds of funds which use the funds as underlying investments (each a conduit investment vehicle). If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to impose exchange limitations on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, shares of certain funds within 30 days of purchase. 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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to assess such fees and may be further limited by systems limitations applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares of the fund held through omnibus accounts, retirement plan accounts, approved fee-based program accounts and conduit investment vehicles, see "Redeeming Shares -- Redemption Fee".
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more information.
MCF--10/05
PURCHASING SHARES
If you hold your shares through a broker/dealer or other financial institution, your eligibility to purchase those shares, the conditions for purchase and sale, and the minimum and maximum amounts allowed may differ depending on that institution's policies.
MINIMUM INVESTMENTS PER FUND ACCOUNT
There are no minimum investments with respect to Class R shares for fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for fund accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
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Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per fund investment for $25
403 and salary deferrals from
457 plans, and SEP, SARSEP and SIMPLE IRA plans) Employer-Sponsored Retirement
Plans)
Systematic Purchase Plan 50 50
IRA, Roth IRA or Coverdell ESA 250 25
All other accounts 1,000 50
ADI has the discretion to accept orders for lesser amounts.
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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 fund verify and record your identifying information.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
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Through a Financial Advisor Contact your financial advisor. 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 retirement accounts on the
internet.
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MCF--10/05
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 ADI (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 ADI 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) fund trustees, 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 funds by authorizing the
transfer agent 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 fund account to one or more other 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 day of the month you specify, in the
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through
the 31st of the month. The minimum amount you can exchange to another fund is
$50. You may participate in a dollar cost averaging program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Dollar Cost Averaging program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same fund. You may invest
your dividends and distributions per the rules listed in the "Permitted
Exchanges" section.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another fund:
(1) Your account balance (a) in the fund paying the dividend must be at least $5,000; and (b) in the fund receiving the dividend must be at least $500; and
(2) Both accounts must have identical registration information.
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 fund holdings should be rebalanced, on a percentage basis,
between two and ten of your funds on a quarterly, semiannual or annual basis.
Your portfolio will be rebalanced through the exchange of shares in one or more
of your funds for shares of the same class of one or more other funds in your
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your
stated allocation. 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. You may participate in a portfolio rebalancing program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Portfolio Rebalancing Program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
RETIREMENT PLANS
Shares of most of the 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, Solo 401(k) plans
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.
AIM Investment Services, Inc. assesses certain fees associated with the
maintenance of certain types of retirement plan accounts and the provision of
specialized recordkeeping services for those plan accounts. ADI assesses certain
fees associated with the maintenance of retirement plan documents for which it
acts as the prototype sponsor. Contact your financial advisor for details.
MCF--10/05
REDEEMING SHARES
REDEMPTION FEE
You may be charged a 2% redemption fee (on redemption proceeds) if you redeem, including redeeming by exchange, shares of the following funds 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 Core Equity Fund AIM European Small Company AIM International Growth Fund Fund AIM International Small Company Fund AIM Global Aggressive Growth AIM S&P 500 Index Fund Fund AIM Trimark Fund AIM Global Equity Fund AIM Global Growth Fund AIM Global Real Estate 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 generally 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 by funds of funds, qualified tuition plans maintained pursuant to Section 529 of the Code, and insurance company separate accounts which use the funds as underlying investments;
(5) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan established with the funds or a financial intermediary;
(6) 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;
(7) total or partial redemption of shares acquired through investment of dividends and other distributions; or
(8) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of shares of the above funds 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. 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 (1) through (8) above may impose a redemption fee that has different characteristics, which may be more or less restrictive, than those set forth above.
Some investments in the funds are made indirectly through conduit investment vehicles. If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to assess redemption fees on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle. In these cases, the applicability of redemption fees will be determined based on the aggregate holdings and redemptions of the conduit investment vehicle in a fund.
The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of losing its registered investment company qualification for tax purposes.
Your broker or financial advisor may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC) in addition to the redemption fee.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE
If you purchase $1,000,000 or more of Class A shares of any fund, or if you make additional purchases of Class A shares on and after
MCF--10/05
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
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(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.
Through a Financial Advisor Contact your financial advisor, including
your retirement plan or program sponsor.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered
owners/trustees; (2) the name of the 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 at 1-800-959-4246 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
retirement accounts and 403(b) plans, may
not be redeemed by telephone. For funds
other than Premier Portfolio, Premier
Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, 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. For Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, the
transfer agent must receive your call before
the last net asset value determination on a
business day 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 may 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. For funds other
than Premier Portfolio, Premier Tax-Exempt
Portfolio and Premier U.S. Government Money
Portfolio, 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. For Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, the
transfer agent must confirm your transaction
before the last net asset value
determination on a business day in order to
effect the redemption at that day's closing
price.
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MCF--10/05
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. Payment may be postponed in cases where the SEC declares an emergency or normal trading is halted.
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, but we 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, but we 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 $50. 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.
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND, AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND AND INVESTOR CLASS SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND, PREMIER PORTFOLIO, PREMIER TAX-EXEMPT PORTFOLIO AND
PREMIER U.S. GOVERNMENT MONEY PORTFOLIO ONLY)
You may redeem shares of these 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 funds generally intend to pay redemption proceeds solely in cash, the funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
REDEMPTIONS BY THE 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 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 the fund determines that you have not provided a correct Social Security or other tax ID number on your account application, or the fund is not able to verify your identity as required by law, the 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 fund for those of another fund. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. Before requesting an exchange, review the prospectus of the 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."
MCF--10/05
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another fund.
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EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
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Class A Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Class A Shares of AIM Limited Maturity Treasury Fund, X
AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate
Fund cannot be exchanged for Class A3 Shares of those
funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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Class A Class B, C, P, R or Institutional Class Shares. X
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Class A3 Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A3 Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund cannot be exchanged X
for Class A Shares of those funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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Class A3 Class B, C, P, R or Institutional Class Shares. X
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Class B Class B. Exceptions are:
- Class B Shares of other funds cannot be exchanged for X
Class B Shares of AIM Floating Rate Fund.
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Class B Class A, A3, C, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class Shares. X
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Class C Class C. Exceptions are:
- Class C shares of other funds cannot be exchanged for X
Class C shares of AIM Floating Rate Fund.
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Class C Class A, A3, B, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
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Class R Class R X
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Class R Class A, A3, B, C, P, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
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AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class shares.
Exceptions are:
- Class A shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Shares to be exchanged for Class B, C or R shares X
must not have been acquired by exchange from Class A
shares of any fund.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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AIM Cash Reserve Shares Class P or Institutional Class shares. X
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Institutional Class Institutional Class X
------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Class A, A3, B, C, P, R, AIM Cash Reserve Shares or
Investor Class shares. X
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Investor Class A, A3, or Investor Class. Exceptions are:
- Investor Class shares cannot be exchanged for Class A
shares of any fund which offers Investor Class shares.
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
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Investor Class Class B, C, P, R, AIM Cash Reserve Shares or
Institutional Class shares. X
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Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions
are:
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
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Class P Class B, C, R, Institutional or Investor Class shares. X
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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.
MCF--10/05
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 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 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 a 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; or
(5) Investor Class shares for Class A or Class A3 shares of any fund which does
not offer Investor Class shares.
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
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II 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 funds purchased at net asset value for Class
A shares of a Category I or II fund, Class A shares of AIM Short Term Bond
Fund;
(3) 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 fund, Class A shares of AIM Short Term
Bond 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
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
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C
shares of any fund or for Class A shares of any fund that are subject to a
CDSC, however, if you originally purchased Class A shares of a Category I or
II 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 fund or AIM
Short Term Bond Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- Shares of the 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 with the exception of dividends that are reinvested; 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, a 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 funds or the distributor may modify or terminate this privilege at any time. The fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by
MCF--10/05
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 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 fund's shares is the fund's net asset value per share. The funds value portfolio securities for which market quotations are readily available at market value. The funds value all other securities and assets for which market quotations are unavailable or unreliable at their fair value in good faith using procedures approved by the Boards of Trustees of the funds. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where AIM determines that the closing price of the security is unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
AIM may use indications of fair value from pricing services approved by the Boards of Trustees. In other circumstances, the AIM valuation committee may fair value securities in good faith using procedures approved by the Boards of Trustees. As a means of evaluating its fair value process, AIM routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Boards of Trustees.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. AIM also relies on a screening process from a pricing vendor to indicate the degree of
MCF--10/05
certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, normally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services 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, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service and independent quoted prices are unreliable, the AIM valuation committee will fair value the security using procedures approved by the Boards of Trustees.
Short-term Securities: The funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio value all 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.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Open-end Funds: To the extent a fund invests in other open-end funds, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
Each fund determines the net asset value of its shares on each day the NYSE is open for business (a business day), as of the close of the customary trading session, or 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 business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio determine the net asset value of their shares every fifteen minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net asset value determination on any business day for Premier Portfolio and Premier U.S. Government Money Portfolio will generally occur at 5:30 p.m. Eastern Time, and the last net asset value determination on any business day for Premier Tax-Exempt Portfolio will generally occur at 4:30 p.m. Eastern Time. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio are authorized not to open for trading on a day that is otherwise a business day if the Bond Market Association recommends that government securities dealers not open for trading and any such day will not be considered a business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio also may close early on a business day if the Bond Market Association recommends that government securities dealers close early. If Premier Portfolio, Premier Tax-Exempt Portfolio or Premier U.S. Government Money Portfolio uses its discretion to close early on a business day, the last net asset value calculation will occur as of the time of such closing.
TIMING OF ORDERS
For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day prior to the close of the customary trading session or any earlier NYSE closing time that day. For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase orders that are received and accepted before the close of the customary trading session or any earlier NYSE closing time on a business day generally are processed that day and settled on the next business day.
For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day, prior to the last net asset value determination on such business day; however, if your order is received and accepted after the close of the customary trading session or any earlier NYSE closing time that day, your order generally will be processed on the next business day and settled on the second business day following the receipt and acceptance of your order.
For all funds, you can exchange shares on each business day, prior to the close of the customary trading session or any earlier NYSE closing time that day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio therefore cannot exchange their shares after the close of the customary trading session or any earlier NYSE closing time on a particular day, even though these funds remain open after such closing time.
The funds price purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. Any applicable sales charges are applied at the time an order is processed. A 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
MCF--10/05
type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions. Every year, you will be sent information showing the amount of dividends and distributions you received from each fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of fund shares will be subject to federal income tax. Exchanges of shares for shares of another 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 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 fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401, 403, 408, 408A and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--10/05
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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
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 at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or
BY TELEPHONE: (800) 959-4246
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, SAIs, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, ARE ALSO AVAILABLE AT
WWW.AIMINVESTMENTS.COM.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q 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 Room, 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.
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AIM Diversified Dividend Fund
SEC 1940 Act file number: 811-1424
----------------------------------------
AIMinvestments.com DDI-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
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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) 959-4246
THIS STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 25, 2005, 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 28, 2005
AIM BLUE CHIP FUND FEBRUARY 28, 2005
AIM CAPITAL DEVELOPMENT FUND FEBRUARY 28, 2005
AIM CHARTER FUND FEBRUARY 28, 2005
AIM CONSTELLATION FUND FEBRUARY 28, 2005
AIM DIVERSIFIED DIVIDEND FUND OCTOBER 25, 2005
AIM LARGE CAP BASIC VALUE FUND FEBRUARY 28, 2005
AIM LARGE CAP GROWTH FUND FEBRUARY 28, 2005
AIM MID CAP GROWTH FUND FEBRUARY 28, 2005
AIM SELECT BASIC VALUE FUND FEBRUARY 28, 2005
AIM WEINGARTEN FUND FEBRUARY 28, 2005
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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.............................................................................. 7
Foreign Investments............................................................................. 7
Debt Investments................................................................................ 9
Other Investments.............................................................................. 10
Investment Techniques.......................................................................... 10
Derivatives.................................................................................... 15
Additional Securities or Investment Techniques................................................. 21
Fund Policies........................................................................................... 22
Temporary Defensive Positions........................................................................... 25
Portfolio Turnover...................................................................................... 25
Policies and Procedures for Disclosure of Fund Holdings................................................. 25
MANAGEMENT OF THE TRUST.......................................................................................... 28
Board of Trustees....................................................................................... 28
Management Information.................................................................................. 28
Trustee Ownership of Fund Shares............................................................... 31
Approval of Investment Advisory Agreements and Summary of Independent
Written Fee Evaluation........................................................................ 31
Approval of Sub-Advisory Agreement............................................................. 66
Compensation............................................................................................ 67
Retirement Plan For Trustees................................................................... 67
Deferred Compensation Agreements............................................................... 68
Purchases of Class A Shares of the Funds at Net Asset Value.................................... 68
Codes of Ethics......................................................................................... 68
Proxy Voting Policies................................................................................... 69
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................. 69
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................... 69
Investment Advisor...................................................................................... 69
Investment Sub-Advisor......................................................................... 72
Portfolio Managers............................................................................. 73
Securities Lending Arrangements................................................................ 73
Service Agreements...................................................................................... 73
Administrative Services Agreement.............................................................. 73
Other Service Providers................................................................................. 73
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................................................... 75
Brokerage Transactions.................................................................................. 75
Commissions............................................................................................. 75
Broker Selection........................................................................................ 75
Directed Brokerage (Research Services).................................................................. 78
Regular Brokers or Dealers.............................................................................. 78
Allocation of Portfolio Transactions.................................................................... 79
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Allocation of Equity Initial Public Offering ("IPO") Transactions....................................... 79
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................................................... 79
Purchase and Redemption of Shares....................................................................... 80
Offering Price.......................................................................................... 98
Redemptions In Kind..................................................................................... 100
Backup Withholding...................................................................................... 100
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS......................................................................... 101
Dividends and Distributions............................................................................. 101
Tax Matters............................................................................................. 101
DISTRIBUTION OF SECURITIES....................................................................................... 109
Distribution Plans...................................................................................... 109
Distributor............................................................................................. 112
CALCULATION OF PERFORMANCE DATA.................................................................................. 113
PENDING LITIGATION............................................................................................... 119
APPENDICES:
RATINGS OF DEBT SECURITIES......................................................................................A-1
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS
ON AN ONGOING BASIS...........................................................................................B-1
TRUSTEES AND OFFICERS...........................................................................................C-1
TRUSTEE COMPENSATION TABLE......................................................................................D-1
PROXY POLICIES AND PROCEDURES...................................................................................E-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................F-1
MANAGEMENT FEES.................................................................................................G-1
PORTFOLIO MANAGERS .............................................................................................H-1
ADMINISTRATIVE SERVICES FEES....................................................................................I-1
BROKERAGE COMMISSIONS...........................................................................................J-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF
REGULAR BROKERS OR DEALERS....................................................................................K-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS.........................................L-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS...................................................M-1
TOTAL SALES CHARGES.............................................................................................N-1
PERFORMANCE DATA................................................................................................O-1
PENDING LITIGATION..............................................................................................P-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 eleven separate portfolios: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Diversified Dividend 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), 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 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. Prior to September 15, 2004, AIM Select Basic Value Fund was known as AIM Basic Value II Fund. As of March 15, 2005, AIM Core Strategies Fund and AIM U.S. Growth Fund were liquidated. On July 18, 2005, AIM Aggressive Growth Fund acquired all the assets of AIM Emerging Growth Fund and AIM Weingarten Fund acquired all the assets of AIM Dent Demographic Trends Fund. In addition, on July 18, 2005, AIM Aggressive Growth Fund acquired the assets of AIM Libra Fund, a portfolio of AIM Investments Funds.
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, primarily on the basis of relative net assets, or other relevant factors.
Each share of each Fund represents an equal proportionate interest in that Fund with each other share and is entitled to such dividends and distributions out of the income belonging to such Fund as are declared by the Board.
Each Fund offers separate classes of shares as follows:
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
----------------------------------------------------------------------------------------------------------------------
AIM Aggressive Growth Fund x x x X X
----------------------------------------------------------------------------------------------------------------------
AIM Blue Chip Fund x x x X X X
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AIM Capital Development Fund X X X X X X
----------------------------------------------------------------------------------------------------------------------
AIM Charter Fund X X X X X
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AIM Constellation Fund X X X X X
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AIM Diversified Dividend Fund X X X X X X
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AIM Large Cap Basic Value Fund X X X X X X
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AIM Large Cap Growth Fund X X X X X X
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AIM Mid Cap Growth Fund X X X X X
----------------------------------------------------------------------------------------------------------------------
AIM Select Basic Value 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;
o platform sponsors with which A I M Distributors, Inc. ("AIM Distributors") has entered into an agreement; and
o proprietary asset allocation funds.
Each class of shares represents an interest 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's Bylaws generally provide 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.
Indemnification does not extend to judgements or amounts paid in settlement in
any actions by or in the right of the Trust. The Trust's Bylaws provide for the
advancement of payments to current and former trustees, officers and employees
or agents of the Trust, or anyone serving at their request, in connection with
the preparation and presentation of a defense to any claim, action, suit or
proceeding, expenses for which such person would be entitled to indemnification;
provided that any advancement of payments would be reimbursed unless it is
ultimately determined that such person is entitled to indemnification for such
expenses.
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 are "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
SECURITY/ AGGRESSIVE BLUE CAPITAL AIM AIM DIVERSIFIED
INVESTMENT GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION DIVIDEND
TECHNIQUE FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS
----------------------------------------------------------------------------------------------------------------------------------
Common Stock X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Convertible Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Alternative Entity Securities
X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
----------------------------------------------------------------------------------------------------------------------------------
Foreign Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Foreign Exchange Transactions X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUNDS
----------------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Investment Grade Corporate Debt Obligations X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Junk Bonds
----------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
----------------------------------------------------------------------------------------------------------------------------------
REITs X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Other Investment
Companies X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Defaulted Securities
----------------------------------------------------------------------------------------------------------------------------------
Municipal Forward Contracts
----------------------------------------------------------------------------------------------------------------------------------
Variable or Floating Rate Instruments
----------------------------------------------------------------------------------------------------------------------------------
Indexed Securities
----------------------------------------------------------------------------------------------------------------------------------
Zero-Coupon and Pay-in-Kind Securities
----------------------------------------------------------------------------------------------------------------------------------
Synthetic Municipal Instruments
----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------------------------------------
Delayed Delivery Transactions X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
When-Issued Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
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 Portfolio Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
FUND AIM
LARGE AIM AIM
CAP LARGE MID AIM
SECURITY/ BASIC CAP CAP SELECT AIM
INVESTMENT VALUE GROWTH GROWTH BASIC WEINGARTEN
TECHNIQUE FUND FUND FUND VALUE FUND FUND
--------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS
--------------------------------------------------------------------------------------------------------
Common Stock X X X X X
--------------------------------------------------------------------------------------------------------
Preferred Stock X X X X X
--------------------------------------------------------------------------------------------------------
Convertible Securities X X X X X
--------------------------------------------------------------------------------------------------------
Alternative Entity Securities
X X X X X
--------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
--------------------------------------------------------------------------------------------------------
Foreign Securities X X X X X
--------------------------------------------------------------------------------------------------------
Foreign Government Obligations X X X X X
--------------------------------------------------------------------------------------------------------
Foreign Exchange Transactions X X X X X
--------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUND
--------------------------------------------------------------------------------------------------------
U.S. Government Obligations X X X X X
--------------------------------------------------------------------------------------------------------
Liquid Assets X X X X X
--------------------------------------------------------------------------------------------------------
Investment Grade Corporate Debt Obligations X X X X X
--------------------------------------------------------------------------------------------------------
Junk Bonds
--------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
--------------------------------------------------------------------------------------------------------
REITs X X X X X
--------------------------------------------------------------------------------------------------------
Other Investment
Companies X X X X X
--------------------------------------------------------------------------------------------------------
Defaulted Securities
--------------------------------------------------------------------------------------------------------
Municipal Forward Contracts
--------------------------------------------------------------------------------------------------------
Variable or Floating Rate Instruments
--------------------------------------------------------------------------------------------------------
Indexed Securities
--------------------------------------------------------------------------------------------------------
Zero-Coupon and Pay-in-Kind Securities
--------------------------------------------------------------------------------------------------------
Synthetic Municipal Instruments
--------------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
--------------------------------------------------------------------------------------------------------
Delayed Delivery Transactions X X X X X
--------------------------------------------------------------------------------------------------------
When-Issued Securities X X X X X
--------------------------------------------------------------------------------------------------------
Short Sales X X X X X
--------------------------------------------------------------------------------------------------------
Margin Transactions
--------------------------------------------------------------------------------------------------------
Swap Agreements X X X X X
--------------------------------------------------------------------------------------------------------
Interfund Loans X X X X X
--------------------------------------------------------------------------------------------------------
Borrowing X X X X X
--------------------------------------------------------------------------------------------------------
Lending Portfolio Securities X X X X X
--------------------------------------------------------------------------------------------------------
|
FUND
AIM AIM AIM AIM
SECURITY/ AGGRESSIVE BLUE CAPITAL AIM AIM DIVERSIFIED
INVESTMENT GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION DIVIDEND
TECHNIQUE FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements X X
----------------------------------------------------------------------------------------------------------------------------------
Dollar Rolls
----------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Rule 144A Securities X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Unseasoned Issuers X X X
----------------------------------------------------------------------------------------------------------------------------------
Sale of Money Market Securities
----------------------------------------------------------------------------------------------------------------------------------
Standby Commitments
----------------------------------------------------------------------------------------------------------------------------------
DERIVATIVES
----------------------------------------------------------------------------------------------------------------------------------
Equity-Linked Derivatives X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Put Options X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Call Options X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Straddles X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Warrants X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Futures Contracts and Options on Futures
Contracts X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Forward Currency Contracts X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
Cover X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------------------------------------
Special Situations X
----------------------------------------------------------------------------------------------------------------------------------
Privatizations
----------------------------------------------------------------------------------------------------------------------------------
Commercial Bank Obligations
----------------------------------------------------------------------------------------------------------------------------------
Master Limited Partnerships X
----------------------------------------------------------------------------------------------------------------------------------
Investments in Entities with Relationships with
the Funds/Advisor X X X X X X
----------------------------------------------------------------------------------------------------------------------------------
FUND AIM
LARGE AIM AIM
CAP LARGE MID AIM
SECURITY/ BASIC CAP CAP SELECT AIM
INVESTMENT VALUE GROWTH GROWTH BASIC WEINGARTEN
TECHNIQUE FUND FUND FUND VALUE FUND FUND
------------------------------------------------------------------------------------------------------------
Repurchase Agreements X X X X X
------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements X X
------------------------------------------------------------------------------------------------------------
Dollar Rolls X
------------------------------------------------------------------------------------------------------------
Illiquid Securities X X X X X
------------------------------------------------------------------------------------------------------------
Rule 144A Securities X X X X X
------------------------------------------------------------------------------------------------------------
Unseasoned Issuers X X
------------------------------------------------------------------------------------------------------------
Sale of Money Market Securities
------------------------------------------------------------------------------------------------------------
Standby Commitments
------------------------------------------------------------------------------------------------------------
DERIVATIVES
------------------------------------------------------------------------------------------------------------
Equity-Linked Derivatives X X X X X
------------------------------------------------------------------------------------------------------------
Put Options X X X X X
------------------------------------------------------------------------------------------------------------
Call Options X X X X X
------------------------------------------------------------------------------------------------------------
Straddles X X X X X
------------------------------------------------------------------------------------------------------------
Warrants X X X X X
------------------------------------------------------------------------------------------------------------
Futures Contracts and Options on Futures
Contracts X X X X X
------------------------------------------------------------------------------------------------------------
Forward Currency Contracts X X X X X
------------------------------------------------------------------------------------------------------------
Cover X X X X X
------------------------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
------------------------------------------------------------------------------------------------------------
Special Situations
------------------------------------------------------------------------------------------------------------
Privatizations X
------------------------------------------------------------------------------------------------------------
Commercial Bank Obligations X
------------------------------------------------------------------------------------------------------------
Master Limited Partnerships
------------------------------------------------------------------------------------------------------------
Investments in Entities with Relationships with
the Funds/Advisor X X X X X
------------------------------------------------------------------------------------------------------------
|
Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund. AIM Blue Chip Fund does not intend to invest more than 10% of its total assets in convertible securities.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets in foreign securities, except that each of AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund may invest up to 20% of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the
U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
Risks of Developing Countries. Each Fund may invest up to 5% of 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, in which case, if the issuer were to default, the Funds holding securities of such issuer might not be able to recover their investment from the U.S. Government.
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, 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 the 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," received from or paid to 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.
INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISOR. Each Fund may invest in securities issued, sponsored or guaranteed by the following types of entities or their affiliates: (i) entities that sell shares of the AIM Funds; (ii) entities that rate or rank the AIM Funds; (iii) exchanges on which the AIM Funds buy or sell securities; and (iv) entities that provide services to the AIM Funds (e.g., custodian banks). The Funds will decide whether to invest in or sell securities issued by these entities based on the merits of the specific investment opportunity.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares. Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) shall not be considered to be violated unless an excess over or a deficiency under the percentage occurs immediately after, and is caused by, an acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt obligations issued by governments or political subdivisions of governments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds has this flexibility, the Board 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.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other AIM Funds, 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 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 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 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) 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.
PORTFOLIO TURNOVER
The variations in the portfolio turnover rates for AIM Charter Fund and AIM Weingarten Fund for the fiscal year 2004 as compared to the prior two fiscal years were due to the repositioning of the Funds in 2002, resulting in decreased portfolio turnover and decreased commissions. The variations in the portfolio turnover rates for AIM Weingarten Fund for the fiscal year 2004 as compared to fiscal year 2002 was due to the repositioning of the Fund in 2002, resulting in decreased portfolio turnover.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). AIM and the Board may amend the Holdings Disclosure Policy at any time without prior notice. Details of the Holdings Disclosure Policy and a description of the basis on which employees of AIM and its affiliates may release information about portfolio securities in certain contexts are provided below.
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following portfolio holdings information on www.aiminvestments.com1:
APPROXIMATE DATE OF WEBSITE INFORMATION REMAINS POSTED ON
INFORMATION POSTING WEBSITE
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Top ten holdings as of month end 15 days after month end Until replaced with the
following month's top ten
holdings
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Select holdings included in the 29 days after calendar quarter end Until replaced with the
Fund's Quarterly Performance following quarter's Quarterly
Update Performance Update
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Complete portfolio holdings as of 30 days after calendar quarter end For one year
calendar quarter end
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Complete portfolio holdings as of 60-70 days after fiscal quarter For one year
fiscal quarter end end
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These holdings are listed along with the percentage of the Fund's net assets they represent. Generally, employees of AIM and its affiliates may not disclose such portfolio holdings until one day after they have been posted on http://www.aiminvestments.com. You may also obtain the publicly available portfolio holdings information described above by contacting us at 1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE AGREEMENT. Employees of AIM and its affiliates may disclose non-public full portfolio holdings on a selective basis only if the Internal Compliance Controls Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management") approves the parties to whom disclosure of non-public full portfolio holdings will be made. The ICCC must determine that the proposed selective disclosure will be made for legitimate business
purposes of the applicable Fund and address any perceived conflicts of interest between shareholders of such Fund and AIM or its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund portfolio holdings by (1) overseeing the implementation and enforcement of the Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief Compliance Officer (or her designee) of AIM and the AIM Funds and (2) considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended) that may arise in connection with the Holdings Disclosure Policy. Pursuant to the Holdings Disclosure Policy, the Board reviews the types of situations in which AIM provides selective disclosure and approves situations involving perceived conflicts of interest between shareholders of the applicable Fund and AIM or its affiliates brought to the Board's attention by AIM.
AIM discloses non-public full portfolio holdings information to the following persons in connection with the day-to-day operations and management of the AIM Funds:
o Attorneys and accountants;
o Securities lending agents;
o Lenders to the AIM Funds;
o Rating and rankings agencies;
o Persons assisting in the voting of proxies;
o AIM Funds' custodians;
o The AIM Funds' transfer agent(s) (in the event of a redemption in kind);
o Pricing services, market makers, or other persons who provide systems or software support in connection with AIM Funds' operations (to determine the price of securities held by an AIM Fund);
o Financial printers;
o Brokers identified by the AIM Funds' portfolio management team who provide execution and research services to the team; and
o Analysts hired to perform research and analysis to the AIM Funds' portfolio management team.
In many cases, AIM will disclose current portfolio holdings on a daily basis to these persons. In these situations, AIM has entered into non-disclosure agreements which provide that the recipient of the portfolio holdings will maintain the confidentiality of such portfolio holdings and will not trade on such information ("Non-disclosure Agreements"). Please refer to Appendix B for a list of examples of persons to whom AIM provides non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules or regulations, or by regulatory authorities having jurisdiction over AIM and its affiliates or the Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive or accept any compensation (including compensation in the form of the maintenance of assets in any Fund or other mutual fund or account managed by AIM or one of its affiliates) for the selective disclosure of portfolio holdings information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the Funds, and the Funds' subadvisors, if applicable, and each of their employees may receive or have access to portfolio holdings as part of the day to day operations of the Funds.
From time to time, employees of AIM and its affiliates may express their views orally or in writing on one or more of the Funds' portfolio securities or may state that a Fund has recently purchased or sold, or continues to own, one or more securities. The securities subject to these views and statements may
be ones that were purchased or sold since a Fund's most recent quarter-end and therefore may not be reflected on the list of the Fund's most recent quarter-end portfolio holdings disclosed on the website. Such views and statements may be made to various persons, including members of the press, brokers and other financial intermediaries that sell shares of the Funds, shareholders in the applicable Fund, persons considering investing in the applicable Fund or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers, and other entities for which AIM or its affiliates provides or may provide investment advisory services. The nature and content of the views and statements provided to each of these persons may differ.
From time to time, employees of AIM and its affiliates also may provide oral or written information ("portfolio commentary") about a Fund, including, but not limited to, how the Fund's investments are divided among various sectors, industries, countries, investment styles and capitalization sizes, and among stocks, bonds, currencies and cash, security types, bond maturities, bond coupons and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to Fund performance. AIM may also provide oral or written information ("statistical information") about various financial characteristics of a Fund or its underlying portfolio securities including, but not limited to, alpha, beta, R-squared, coefficient of determination, duration, maturity, information ratio, sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about a Fund may be based on the Fund's portfolio as of the most recent quarter-end or the end of some other interim period, such as month-end. The portfolio commentary and statistical information may be provided to various persons, including those described in the preceding paragraph. The nature and content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM and its affiliates may disclose one or more of the portfolio securities of a Fund when purchasing and selling securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities, or in connection with litigation involving the Funds' portfolio securities. AIM does not enter into formal Non-disclosure Agreements in connection with these situations; however, the Funds would not continue to conduct business with a person who AIM believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGER PRODUCTS. AIM and its affiliates manage products sponsored by companies other than AIM, including investment companies, offshore funds, and separate accounts. In many cases, these other products are managed in a similar fashion to certain AIM Funds (as defined herein) and thus have similar portfolio holdings. The sponsors of these other products managed by AIM and its affiliates may disclose the portfolio holdings of their products at different times than AIM discloses portfolio holdings for the AIM Funds.
AIM provides portfolio holdings information for portfolios of AIM Variable Insurance Funds (the "Insurance Funds") to insurance companies whose variable annuity and variable life insurance accounts invest in the Insurance Funds ("Insurance Companies"). AIM may disclose portfolio holdings information for the Insurance Funds to Insurance Companies with which AIM has entered into Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's disclosure of similar portfolio holdings information for other AIM Funds on http://www.aiminvestments.com. AIM provides portfolio holdings information for the Insurance Funds to such Insurance Companies to allow them to disclose this information on their websites at approximately the same time that AIM discloses portfolio holdings information for the other AIM Funds on its website. AIM manages the Insurance Funds in a similar fashion to certain other AIM Funds and thus the Insurance Funds and such other AIM Funds have similar portfolio holdings. AIM does not disclose the portfolio holdings information for the Insurance Funds on its website, and not all Insurance Companies disclose this information on their websites.
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. The Board 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. Certain trustees and officers of the Trust are affiliated with AIM and A I M 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 C.
The standing committees of the Board are the Audit Committee, the Compliance Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Market Timing Litigation Committee.
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's primary purposes are to: (i) assist the Board in oversight of the independent auditor's qualifications, independence and performance; (ii) appoint independent auditors for the Funds; (iii) to the extent required by Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible non-audit services that are provided to Funds by their independent auditors; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Funds' independent auditors to the Funds' investment adviser and certain other affiliated entities; (v) to oversee the financial reporting process for the Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to prepare an audit committee report for inclusion in any proxy statement issued by a Fund; (vii) assist the Board's oversight of the performance of the Funds' internal audit function to the extent an internal audit function exists; (viii) assist the Board's oversight of the integrity of the Funds' financial statements; and (ix) assist the Board's oversight of the Funds' compliance with legal and regulatory requirements. During the fiscal year ended October 31, 2004, the Audit Committee held eight meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance
Committee is responsible for: (i) recommending to the Board and the independent
trustees the appointment, compensation and removal of the Funds' Chief
Compliance Officer; (ii) recommending to the independent trustees the
appointment, compensation and removal of the Funds' Senior Officer appointed
pursuant to the terms of the Assurances of Discontinuance entered into by the
New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii)
recommending to the independent trustees the appointment and removal of AIM's
independent Compliance Consultant (the "Compliance Consultant") and reviewing
the report prepared by the Compliance Consultant upon its compliance review of
AIM (the "Report") and any objections made by AIM with respect to the Report;
(iv) reviewing any report prepared by a third party who is not an interested
person of AIM, upon the conclusion by such third party of a compliance review of
AIM; (v) reviewing all reports on compliance matters from the Funds' Chief
Compliance Officer, (vi) reviewing all recommendations made by the Senior
Officer regarding AIM's compliance procedures, (vii) reviewing all reports from
the Senior Officer of any violations of state and federal securities laws, the
Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund
shareholders and of AIM's Code of Ethics; (viii) overseeing all of the
compliance policies and procedures of the Funds and their service providers
adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to
the Board whether or not to approve such matters; (x) receiving and reviewing
quarterly reports on the activities of AIM's Internal Compliance Controls
Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer;
(xii) reviewing
and recommending to the independent trustees whether to approve procedures to investigate matters brought to the attention of AIM's ombudsman; (xiii) risk management oversight with respect to the Funds and, in connection therewith, receiving and overseeing risk management reports from AMVESCAP PLC that are applicable to the Funds or their service providers; and (xiv) overseeing potential conflicts of interest that are reported to the Compliance Committee by the AIM, the Chief Compliance Officer, the Senior Officer and/or the Compliance Consultant. During the fiscal year ended October 31, 2004, the Compliance Committee held one meeting.
The members of the Governance Committee are Messrs. Bayley, Crockett,
Dowden (Chair), Jack M. Fields (Vice Chair) and Gerald J. Lewis. The Governance
Committee is responsible for: (i) nominating persons who will qualify as
independent trustees for (a) election as trustees in connection with meetings of
shareholders of the Funds that are called to vote on the election of trustees,
(b) appointment by the Board as trustees in connection with filling vacancies
that arise in between meetings of shareholders; (ii) reviewing the size of the
Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring
the composition of the Board and each committee of the Board, and monitoring the
qualifications of all trustees; (v) recommending persons to serve as members of
each committee of the Board (other than the Compliance Committee), as well as
persons who shall serve as the chair and vice chair of each such committee; (vi)
reviewing and recommending the amount of compensation payable to the independent
trustees; (vii) overseeing the selection of independent legal counsel to the
independent trustees; (viii) reviewing and approving the compensation paid to
independent legal counsel and other advisers, if any, to the Audit Committee of
the Board; (ix) reviewing and approving the compensation paid to counsel and
other advisers, if any, to the Audit Committee of the Board; and (x) reviewing
as they deem appropriate administrative and/or logistical matters pertaining to
the operations of the Board.
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, 2004, the Governance Committee held seven meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of the 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 (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Lewis, Pennock, Soll, and Carl Frischling, and Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary purposes are to: (i) assist the Board in its oversight of the investment management services provided by AIM as well as any sub-advisers; and (ii) review all proposed and existing advisory, sub-advisory and distribution arrangements for the Funds, and to recommend what action the full Boards and the independent trustees take regarding the approval of all such proposed arrangements and the continuance of all such existing arrangements. During the fiscal year ended October 31, 2004, the Investments Committee held seven meetings.
The Investments Committee has established three Sub-Committees. The
Sub-Committees are responsible for: (i) reviewing the performance, fees and
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee
takes such action directly; (ii) reviewing with the applicable portfolio
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,
sub-advisory and distribution arrangements in effect or proposed for the
Designated Funds, unless the Investments Committee takes such action directly;
(iv) being familiar
with the registration statements and periodic shareholder reports applicable to their Designated Funds; and (v) such other investment-related matters as the Investments Committee may delegate to the Sub-Committee from time to time.
The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice Chair), Soll, and Mark Williamson (Chair) and Miss Quigley. The Valuation Committee is responsible for: (i) developing a sufficient knowledge of the valuation process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the "Pricing Procedures") in order to carry out their responsibilities; (ii) periodically reviewing information provided by AIM or other advisers regarding industry developments in connection with valuation and pricing, and making recommendations to the Board with respect to the Pricing Procedures based upon such review; (iii) reviewing the reports described in the Pricing Procedures and other information from AIM regarding fair value determinations made pursuant to the Pricing Procedures by AIM's internal valuation committee, and reporting to and making recommendations to the Board in connection with such reports; (iv) receiving the reports of AIM's internal valuation committee requesting approval of any changes to pricing vendors or pricing methodologies as required by the Pricing Procedures, receiving the annual report of AIM evaluating the pricing vendors, and approving changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures and recommending the pricing vendors for approval by the Board annually; (v) upon request of AIM, assisting AIM's internal valuation committee and/or the Board in resolving particular fair valuation issues; (vi) receiving any reports of concerns by AIM's internal valuation committee regarding actual or potential conflicts of interest by investment personnel or others that could color their input or recommendations regarding pricing issues, and receiving information from AIM disclosing differences between valuation and pricing procedures used for the Funds and private funds, if any, advised by AIM for which AIM Fund Administration has exclusive accounting responsibility, and the reasons for such differences; and (vii) in each of the foregoing areas, making regular reports to the Board. During the fiscal year ended October 31, 2004, the Valuation Committee held one meeting.
The members of the Special Market Timing Litigation Committee are
Messrs. Crockett, Dowden (Vice Chair), Dunn and Lewis (Chair). The Special
Market Timing Litigation Committee is responsible: (i) for receiving reports
from time to time from management, counsel for management, counsel for the AIM
Funds and special counsel for the independent trustees, as applicable, related
to (a) the civil lawsuits, including purported class action and shareholder
derivative suits, that have been filed against the AIM Funds concerning alleged
excessive short term trading in shares of the AIM Funds ("market timing") and
(b) the civil enforcement actions and investigations related to market timing
activity in the AIM Funds that were settled with certain regulators, including
without limitation the SEC, the New York Attorney General and the Colorado
Attorney General, and for recommending to the independent trustees what actions,
if any, should be taken by the AIM Funds in light of all such reports; (ii) for
overseeing the investigation(s) on behalf of the independent trustees by special
counsel for the independent trustees and the independent trustees' financial
expert of market timing activity in the AIM Funds, and for recommending to the
independent trustees what actions, if any, should be taken by the AIM Funds in
light of the results of such investigation(s); (iii) for (a) reviewing the
methodology developed by AIM's Independent Distribution Consultant (the
"Distribution Consultant") for the monies ordered to be paid under the
settlement order with the SEC, and making recommendations to the independent
trustees as to the acceptability of such methodology and (b) recommending to the
independent trustees whether to consent to any firm with which the Distribution
Consultant is affiliated entering into any employment, consultant,
attorney-client, auditing or other professional relationship with AIM, or any of
its present or former affiliates, directors, officers, employees or agents
acting in their capacity as such for the period of the Distribution Consultant's
engagement and for a period of two years after the engagement; and (iv) for
taking reasonable steps to ensure that any AIM Fund which the Special Market
Timing Litigation Committee determines was harmed by improper market timing
activity receives what the Special Market Timing Litigation Committee deems to
be full restitution. During the fiscal year ended October 31, 2004, the Special
Market Timing Litigation Committee held eight meetings.
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 C.
Approval of Investment Advisory Agreements and Summary of Independent Written Fee Evaluation
The Board oversees the management of each Fund and, as required by law, determines annually whether to approve the continuance of each Fund's advisory agreement with AIM. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between each Fund and AIM for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of each Fund's Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of each Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
One of the responsibilities of the Senior Officer of the Funds, who is independent of AIM and AIM's affiliates, is to manage the process by which the Funds' proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation.
The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of each Fund's Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that each Fund's Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under each Fund's Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations.
AIM AGGRESSIVE GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period, comparable to such Index for the three year period, and above such Index for the five year period. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for four unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The
Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for
research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM BLUE CHIP FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that, effective July 1, 2005, AIM will change the Fund's
portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to further change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large Cap Core Index. The Board noted that the Fund's performance in such periods was below the performance of such Index. The Board noted that, effective July 1, 2005, AIM will change the Fund's portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to further change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for three unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a
breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. The Board noted that, effective July 1, 2005, AIM will change the Fund's portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. The Board also considered the Senior Officer's recommendation that the Board consider an additional advisory fee waiver for the Fund due to the Fund's under-performance. The Board concluded that such a fee waiver was not appropriate for the Fund at this time and that, rather than requesting such a fee waiver from AIM, the Board should closely monitor the Fund's performance under the new portfolio management team.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM CAPITAL DEVELOPMENT FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM CHARTER FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one and five year periods and above such median performance for the three year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period, above such Index for the three year period, and below such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate (i) was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for an unaffiliated mutual fund for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual fund were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was above the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one and five year periods and above such median performance for the three year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period, above such Index for the three year period, and below such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
AIM CONSTELLATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one year period and above such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper
Large-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate (i) was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was lower than the advisory fee rates for an offshore fund advised by an AIM affiliate with investment strategies comparable to those of the Fund; (iii) was higher than the sub-advisory fee rates for three unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fun; and (iv) was higher than the advisory fee rates for three separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels
under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by
AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The
Board noted that the Fund's performance was below the median performance of such comparable funds for the one year period and above such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
AIM DIVERSIFIED DIVIDEND FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the
Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one and three calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one and three calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance in such periods was above the performance of such Index. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through October 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund that is lower than the contractual agreement. The
Board considered the contractual and voluntary nature of these fee waivers/expense limitations and noted that the contractual agreement remains in effect until October 31, 2005 and that the voluntary agreement can be terminated at any time by AIM without further notice to investors. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its
financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM LARGE CAP BASIC VALUE FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for the one and three year periods was below the median performance of such comparable funds and above such median performance for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Value Index. The Board noted that the Fund's performance for the one and three year periods was below the performance of such Index and above such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through June 30, 2006 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through June 30, 2006. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which
the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM LARGE CAP GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance for such periods was above the performance of such Index. Based on this review, the Board concluded that no
changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was higher than the sub-advisory fee rates for two unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by one of these unaffiliated mutual funds were higher than the advisory fee rate for the Fund (data on the total management fees paid by the other unaffiliated mutual fund was unavailable); (iii) was lower than the advisory fee rates for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund; and (iv) was higher than the advisory fee rates for six separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through June 30, 2006 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through June 30, 2006. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which
the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MID CAP GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that AIM has acknowledged that the Fund continues to require a long-term solution to its under-performance, and that management is continuing to closely monitor the performance of the Fund and analyze various possible long-term solutions. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was below the
performance of such Index for the one and three year periods and comparable to such Index for the five year period. The Board noted that AIM has acknowledged that the Fund continues to require a long-term solution to its under-performance, and that management is continuing to closely monitor the performance of the Fund and analyze various possible long-term solutions. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was higher than the sub-advisory fee rates for an unaffiliated mutual fund for which an AIM affiliate serves as sub-advisor, and noted that total management fees paid by such unaffiliated mutual fund were lower than the advisory fee rate for the Fund; (ii) was higher than the advisory fee rates for a collective trust portfolio for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund; and (iii) was lower than the advisory fee rates for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the voluntary nature of this fee waiver/expense limitation and noted that it can be terminated at any time by AIM without further notice to investors. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes a
breakpoint. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory
Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM SELECT BASIC VALUE FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one year ended March 31, 2005 against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in period was below the median performance of such comparable funds. The Board noted that, because the Fund has recently commenced operations, comparative performance information was only available for one year and that more time was needed to adequately assess whether the Fund was under-performing. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past year ended March 31, 2005 against the performance of the Lipper Multi-Cap Value Index. The Board noted that the Fund's performance in such period was below the performance of such Index. The Board noted that, because the Fund has recently commenced operations, comparative performance information was only available for one year and that more time was needed to adequately assess whether the Fund was under-performing. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive fees and to limit the Fund's total operating expenses, as discussed below. The Board also noted that the Fund is currently in incubation and has no public shareholders. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board also noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the voluntary nature of this fee waiver/expense limitation and noted that it can be terminated at any time by AIM without further notice to investors. The Board also noted that the Fund is currently in incubation and has no public shareholders. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes
breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was
beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM WEINGARTEN FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was above the median performance of such comparable funds for the one year period and below such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and below such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund
attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates,
including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the board's ongoing oversight of the fund. in their deliberations, the board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was above the median performance of such comparable funds for the one year period and below such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and below such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
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 trustee of other AIM Funds. Each such trustee receives a fee, allocated among the AIM Funds for which he or she serves as a trustee, which consists of an annual retainer component and a meeting fee component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive additional compensation for their services.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2004 is found in Appendix D.
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. Notwithstanding the foregoing, the amount of benefits will exclude any additional compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain committees, whether such amounts are paid directly to the Trustee or deferred. 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. Crockett, Dunn, Fields, Frischling and Sklar and Drs. Mathai-Davis and Soll (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 and deemed to be invested in one or more AIM Funds selected by the Deferring Trustees. 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 Board, in its sole discretion, may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's retirement benefits commence under the Plan. The Board, in its sole discretion, also may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's termination of service as a trustee of the Trust. If a Deferring Trustee dies prior to the distribution of amounts in his or her deferral account, the balance of the deferral account will be distributed to his or her designated beneficiary. The Compensation Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase
Class A shares of the 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 and A I M Capital 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 including personal trading in most of the funds within the AIM Family of Funds--Registered Trademark-- ("affiliated funds"). Personal trading, including personal trading involving securities that may be purchased or held by a Fund, and in affiliated funds, 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 AIM, the Fund's investment advisor. AIM 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 E.
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 their portfolio securities during the 12 months ended June 30, 2005 is available at our website, http://www.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 F. 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. AMVESCAP 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 to the Funds are not exclusive and AIM and the sub-advisor 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 annual rates indicated in the second column below, based on the average daily net assets of each Fund during the year.
Effective January 1, 2005, the advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by each Fund do not exceed the maximum advisory fee rate set forth in the third column below. The maximum advisory fee rates are effective through the Committee Until Date set forth in the fourth column.
MAXIMUM ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE AFTER RATES COMMITTED UNTIL
FUND NAME PER ADVISORY AGREEMENT JANUARY 1, 2005 DATE
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AIM Aggressive Growth Fund 0.80% of first $150M 0.745% of first $250M June 30, 2006
0.625% of amount over $150M 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
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AIM Blue Chip Fund 0.75% of first $350M 0.695% of first $250M December 31, 2009
0.625% of amount over $350M 0.67% of next $250M
0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Capital Development Fund 0.75% of first $350M 0.745% of first $250M June 30, 2006
0.625% of amount over $350M 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Charter Fund 1.00% of first $30M 0.75% of first $150M December 31, 2009
0.75% of next $120M 0.615% of next $4.85B
0.625% of amount over $150M 0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
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MAXIMUM ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE AFTER RATES COMMITTED UNTIL
FUND NAME PER ADVISORY AGREEMENT JANUARY 1, 2005 DATE
------------------------------------------------------------------------------------------------------------------------------------
AIM Constellation Fund 1.00% of first $30M 0.75% of first $150M December 31, 2009
0.75% of next $120M 0.615% of next $4.85B
0.625% of amount over $150M 0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Diversified Dividend Fund 0.75% of first $1B 0.695% of first $250M June 30, 2006
0.70% of next $1B 0.67% of next $250M
0.625% of amount over $2B 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Basic Value Fund 0.60% of first $1B N/A N/A
0.575% of next $1B
0.55% of amount over $2B
------------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund 0.75% of first $1B 0.695% of first $250M December 31, 2009
0.70% of next $1B 0.67% of next $250M
0.625% of amount over $2B 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Growth Fund 0.80% of first $1B 0.745% of first $250M December 31, 2009
0.75% of amount over $1B 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
AIM Select Basic Value Fund 0.75% of first $1B 0.695% of first $250M June 30, 2006
0.70% of next $1B 0.67% of next $250M
0.65% of amount over $2B 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
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MAXIMUM ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE AFTER RATES COMMITTED UNTIL
FUND NAME PER ADVISORY AGREEMENT JANUARY 1, 2005 DATE
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AIM Weingarten Fund 1.00% of first $30M 0.695% of first $250M December 31, 2009
0.75% of next $320M 0.67% of next $250M
0.625% of amount over $350M 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
------------------------------------------------------------------------------------------------------------------------------------
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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. See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies."
AIM has contractually agreed to waive advisory fees and/or reimburse expenses (excluding (i) interest; (ii) taxes; (iii) dividend expenses on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board; and (v) expenses related to a merger or reorganization as approved by the Fund's Board; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement for AIM Diversified Dividend Fund's Class A, Class B, Class C, Class R and Investor Class shares to the extent necessary to limit the total operating expenses to 1.40%, 2.15%, 2.15%, 1.65% and 1.40%, respectively. Such contractual fee waivers or reductions are set forth in the Fee Table to each Fund's prospectus and may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM and the Fund.
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 the 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.
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 G.
Portfolio Managers. Appendix H contains the following information regarding the portfolio managers identified in each Fund's prospectus:
o The dollar range of the manager's investments in each Fund.
o A description of the manager's compensation structure.
o Information regarding other accounts managed by the manager and potential conflicts of interest that might arise from the management of multiple accounts.
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 Board, 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. 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 I.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment 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 (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain shareholder services for the Funds. For servicing accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares, the TA Agreement provides that
the Trust on behalf of the Funds will pay AIS at a rate of $17.08 per open shareholder account plus certain out of pocket expenses, whether such account is serviced directly by AIS or by a third party pursuant to a sub-transfer agency, omnibus account service, sub-accounting, or networking agreement. This fee is paid monthly at the rate of 1/12 of the annual fee and is based upon the number of open shareholder accounts during each month.
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, 2 Hanson Place, Brooklyn, New York 11217-1431, 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. Ernst & Young LLP, 5 Houston Center, 1401 McKinney, Suite 1200, Houston, Texas 77010-4035, the Funds' independent registered public accounting firm, is responsible for auditing the financial statements of the Funds. The Audit Committee of the Board has appointed PriceWaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002, as the independent registered public accounting firm of the Funds for fiscal year ended October 31, 2005. Such appointment was ratified and approved by the independent trustees of the Board.
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
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor makes decisions to buy and sell securities for each Fund, selects broker-dealers (each, a "Broker"), 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 best execution, which AIM defines as prompt and efficient execution of the transaction at the best obtainable price with payment of commissions, mark-ups or mark-downs which are reasonable in relation to the value of the brokerage services provided by the Broker. 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 on a principle basis at net prices without commissions, but which include compensation to the Broker 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, including electronic communication networks. Purchases of underwritten issues include a commission or concession paid by the issuer (not the Funds) to the underwriter. Purchases of money market instruments may be made directly from issuers without the payment of commissions.
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 J.
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 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.
BROKER SELECTION
AIM's primary consideration in selecting Brokers to execute portfolio transactions for a Fund is to obtain best execution. In selecting a Broker to execute a portfolio transaction in equity securities for a Fund, AIM considers the full range and quality of a Broker's services, including the value of research and/or brokerage services provided, execution capability, commission rate, willingness to commit capital, anonymity and responsiveness. AIM's primary consideration when selecting a Broker to execute a portfolio transaction in fixed income securities for a Fund is the Broker's ability to deliver or sell the relevant fixed income securities; however, AIM will also consider the various factors listed above. In each case, the determinative factor is not the lowest commission or spread available but whether the
transaction represents the best qualitative execution for the Fund. AIM will not select Brokers based upon their promotion or sale of Fund shares.
In choosing Brokers to execute portfolio transactions for the Funds, AIM may select Brokers that provide brokerage and/or research services ("Soft Dollar Products") to the Funds and/or the other accounts over which AIM and its affiliates have investment discretion. Section 28(e) of the Securities Exchange Act of 1934, as amended, 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, a Fund may pay a Broker higher commissions than those available from another Broker in recognition of such Broker's provision of Soft Dollar Products to AIM.
AIM faces a potential conflict of interest when it uses client trades to obtain Soft Dollar Products. This conflict exists because AIM is able to use the Soft Dollar Products to manage client accounts without paying cash for the Soft Dollar Products, which reduces AIM's expenses to the extent that AIM would have purchased such products had they not been provided by Brokers. Section 28(e) permits AIM to use Soft Dollar Products for the benefit of any account it manages. Certain AIM-managed accounts may generate soft dollars used to purchase Soft Dollar Products that ultimately benefit other AIM-managed accounts, effectively cross subsidizing the other AIM-managed accounts that benefit directly from the product. AIM may not use all of the Soft Dollar Products provided by Brokers through which a Fund effects securities transactions in connection with managing such Fund.
AIM and certain of its affiliates presently engage in the following instances of cross-subsidization:
1. Fixed income funds normally do not generate soft dollar commissions to pay for Soft Dollar Products. Therefore, soft dollar commissions used to pay for Soft Dollar Products which are used to manage the fixed income AIM Funds are generated entirely by equity AIM Funds and other equity client accounts managed by AIM or AIM Capital, a subsidiary of AIM. In other words, the fixed income AIM Funds are cross-subsidized by the equity AIM Funds, in that the fixed income AIM Funds receive the benefit of Soft Dollar Products services for which they do not pay.
2. The investment models used to manage many of the AIM Funds are also used to manage other accounts of AIM and/or AIM Capital. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the AIM Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by both of these advisory affiliates.
This type of cross-subsidization occurs in both directions. For example, soft dollar commissions generated by transactions of the AIM Funds and/or other accounts managed by AIM are used for Soft Dollar Products which may benefit those AIM Funds and/or accounts as well as accounts managed by AIM Capital. Additionally, soft dollar commissions generated by transactions of accounts managed by AIM Capital are used for Soft Dollar Products which may benefit those accounts as well as accounts managed by AIM. In certain circumstances, AIM Capital accounts may indicate that their transactions should not be used to generate soft dollar commissions but may still receive the benefits of Soft Dollar Products received by AIM or AIM Capital.
3. Some of the common investment models used to manage various Funds and other accounts of AIM and/or AIM Capital are also used to manage accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM subsidiary. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the Funds and/or other accounts
managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by AIM, AIM Capital and APAM. This cross-subsidization occurs in only one direction. Most of APAM's accounts do not generate soft dollar commissions which can be used to purchase Soft Dollar Products. The soft dollar commissions generated by transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used for Soft Dollar Products which may benefit the accounts managed by AIM, AIM Capital and APAM; however, APAM does not provide any soft dollar research benefit to the Funds and/or other accounts managed by AIM or AIM Capital.
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts of interest concerning the use of Soft Dollar Products by directing client trades for Soft Dollar Products only if AIM and AIM Capital conclude that the Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a hard dollar basis; other Soft Dollar Products are available only through Brokers in exchange for soft dollars. AIM uses soft dollars to purchase two types of Soft Dollar Products:
o proprietary research created by the Broker executing the trade, and
o other products created by third parties that are supplied to AIM through the Broker executing the trade.
Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in house research staffs of broker-dealer firms. This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information and assistance. AIM periodically rates the quality of proprietary research produced by various Brokers. Based on the evaluation of the quality of information that AIM receives from each Broker, AIM develops an estimate of each Broker's share of AIM clients' commission dollars. AIM attempts to direct trades to the firms to meet these estimates.
AIM also uses soft dollars to acquire products from third parties that are supplied to AIM through Brokers executing the trades or other Brokers who "step in" to a transaction and receive a portion of the brokerage commission for the trade. AIM may from time to time instruct the executing Broker to allocate or "step out" a portion of a transaction to another Broker. The Broker to which AIM has "stepped out" would then settle and complete the designated portion of the transaction, and the executing Broker would settle and complete the remaining portion of the transaction that has not been "stepped out." Each Broker may receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes.
Soft Dollar Products received from Brokers supplement AIM's own research (and the research of certain of its affiliates), and may include the following types of products and services:
o Database Services - comprehensive databases containing current and/or historical information on companies and industries and indices. Examples include historical securities prices, earnings estimates and financial data. These services may include software tools that allow the user to search the database or to prepare value-added analyses related to the investment process (such as forecasts and models used in the portfolio management process).
o Quotation/Trading/News Systems - products that provide real time market data information, such as pricing of individual securities and information on current trading, as well as a variety of news services.
o Economic Data/Forecasting Tools - various macro economic forecasting tools, such as economic data or currency and political forecasts for various countries or regions.
o Quantitative/Technical Analysis - software tools that assist in quantitative and technical analysis of investment data.
o Fundamental/Industry Analysis - industry specific fundamental investment research.
o Fixed Income Security Analysis - data and analytical tools that pertain specifically to fixed income securities. These tools assist in creating financial models, such as cash flow projections and interest rate sensitivity analyses, which are relevant to fixed income securities.
o Other Specialized Tools - other specialized products, such as consulting analyses, access to industry experts, and distinct investment expertise such as forensic accounting or custom built investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it also serves functions that do not assist the investment decision-making or trading process), AIM will allocate the costs of such service or product accordingly in its reasonable discretion. AIM will allocate brokerage commissions to Brokers only for the portion of the service or product that AIM determines assists it in the investment decision-making or trading process and will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM tend to provide more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. In addition, such services provide AIM with a diverse perspective on financial markets. Some Brokers 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 in the execution of transactions in portfolio securities. In some cases, Soft Dollar Products are available only from the Broker providing them. In other cases, Soft Dollar Products may be obtainable from alternative sources in return for cash payments. AIM believes that because Broker research supplements rather than replaces AIM's research, the receipt of such research tends to improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. To the extent the Funds' portfolio transactions are used to obtain Soft Dollar Products, the brokerage commissions obtained by the Funds might exceed those that might otherwise have been paid.
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 may be effected through Brokers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients, provided that AIM believes such Brokers provide best execution and such transactions are executed in compliance with AIM's policy against using directed brokerage to compensate Brokers for promoting or selling AIM Fund shares. 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, 2004 are found in Appendix K.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular Brokers during the last fiscal year ended October 31, 2004 is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other 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 other accounts. However, the position of each account in the same security and the length of time that each account may hold its investment in the same security 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 other accounts, and is considered at or about the same time, AIM will 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.
ALLOCATION OF EQUITY INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in equity IPOs. Purchases of equity IPOs by one AIM Fund or other accounts may also be considered for purchase by one or more other AIM Funds or accounts. AIM shall combine indications of interest for equity IPOs for all AIM Funds and accounts participating in purchase transactions for that equity IPO. When the full amount of all equity IPO orders for such AIM Funds and accounts cannot be filled completely, AIM shall 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 equity IPO by reviewing a number of factors, including market capitalization/liquidity suitability and sector/style suitability of the investment with the AIM Fund's or account's investment objective, policies, strategies and current holdings, AIM will allocate of securities issued in equity IPOs to eligible AIM Funds and accounts on a pro rata basis based on order size.
PURCHASE, REDEMPTION AND PRICING OF SHARES
TRANSACTIONS THROUGH FINANCIAL INTERMEDIARIES. If you are investing indirectly in a Fund through a financial intermediary such as a broker-dealer, a bank (including a bank trust department), an insurance company separate account, an investment advisor, an administrator or trustee of a retirement plan or a qualified tuition plan or a sponsor of a fee-based program that maintains a master account (an omnibus account) with the Fund for trading on behalf of its customers, different guidelines and restrictions may apply than if you held your shares of the Fund directly. These differences may include, but are not limited to: (i) different eligibility standards to purchase and sell shares, different eligibility exchange shares by telephone; (ii) different minimum and maximum initial and subsequent purchase amounts: and (iii) system inability to provide Letter of Intent privileges. The financial intermediary through whom you are investing may also choose to impose a redemption fee that has different characteristics, which maybe less or more restrictive, than the redemption fee currently imposed on certain Funds.
If the financial intermediary is managing your account, you may also be charged a transaction or other fee by such financial intermediary, including service fees for handling redemption transactions. Consult with your financial intermediary (or, in the case of a retirement plan, your plan sponsor) to determine what fees, guidelines, conditions and restrictions, including any of the above, may be applicable to you.
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) is grouped into one of three categories to determine the applicable initial sales charge for its Class A Shares. Additionally, Class A shares of AIM Short Term Bond Fund are subject to an initial sales charge of 2.50%. 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 Advantage Health Sciences Fund AIM Large Cap Growth Fund AIM Aggressive Growth Fund AIM Leisure Fund AIM Asia Pacific Growth Fund AIM Mid Cap Basic Value Fund AIM Basic Value Fund AIM Mid Cap Core Equity Fund AIM Blue Chip Fund AIM Mid Cap Growth Fund AIM Capital Development Fund AIM Moderate Allocation Fund AIM Charter Fund AIM Moderate Growth Allocation Fund AIM Conservative Allocation Fund AIM Moderately Conservative Allocation Fund AIM Constellation Fund AIM Multi-Sector Fund AIM Diversified Dividend Fund AIM Opportunities I Fund AIM Dynamics Fund AIM Opportunities II Fund AIM Energy Fund AIM Opportunities III Fund AIM European Growth Fund AIM Premier Equity Fund AIM AIM European Small Company Fund Select Equity Fund AIM Financial Services Fund AIM Small Cap Equity Fund AIM Global Real Estate Fund AIM Small Cap Growth Fund AIM Global Value Fund AIM Small Company Growth Fund AIM Gold & Precious Metals Fund AIM Technology Fund AIM Growth Allocation Fund AIM Trimark Endeavor Fund AIM Income Allocation Fund AIM Trimark Fund AIM International Allocation Fund AIM Trimark Small Companies Fund AIM International Core Equity Fund AIM Utilities Fund AIM International Growth Fund AIM AIM Weingarten Fund International Small Company Fund AIM Large Cap Basic Value 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 $ 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 |
CATEGORY II FUNDS
AIM Basic Balanced Fund AIM High Income Municipal Fund AIM Developing Markets Fund AIM High Yield Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Global Equity Fund AIM Intermediate Government Fund AIM Global Growth Fund AIM Municipal Bond Fund AIM Global Health Care Fund AIM Real Estate 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
|
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
|
AIM Short Term 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 $ 100,000 2.50% 2.56% 2.00%
$100,000 but less than $ 250,000 2.00 2.04 1.50
$250,000 but less than $ 500,000 1.50 1.52 1.25
$500,000 but less than $1,000,000 1.25 1.27 1.0
|
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 and Class A Shares of AIM Short Term Bond 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 Class A Shares of AIM Short Term Bond Fund 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 and Class A Shares of AIM Short Term Bond Fund, however, each share will generally be subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems those shares within 18 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 or AIM Short
Term Bond Fund 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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 of a Category I or II Fund or AIM Short Term Bond Fund on and after November 15, 2001 and through October 31, 2002 and 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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. For purchases of Class A shares of Category I and II Funds and AIM Short Term Bond Fund, 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. Employer-sponsored retirement plans, with the exception of Solo 401(k) plans and SEP plans, are not eligible for a 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 and AIM Short Term Bond Fund 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 or AIM Short Term Bond 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, trustee or employee (and members of their Immediate Family) of AIM Management, its affiliates or The AIM Family of Funds--Registered Trademark--, and any foundation, trust, employee benefit plan or deferred compensation 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 Insurance company separate accounts;
o 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) if:
a. such plan is funded by a rollover of assets from an Employer-Sponsored Retirement Plan;
b. the account being funded by such rollover is to be maintained by the same trustee, custodian or administrator that maintained the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof; and
c. the dealer of record with respect to the account being funded by such rollover is the same as the dealer of record with respect to the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof.
o Transfers to IRAs that are attributable to AIM Fund investments held in 403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and
o Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPs, Money Purchase Plans, and Profit Sharing Plans if the assets are transferred to an AIM IRA.
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 as more fully described in the Prospectus; 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.
The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, AIM Distributors or one or more of its corporate affiliates (collectively, the "ADI Affiliates") may make additional cash payments to financial advisors in connection with the promotion and sale of shares of AIM Funds. ADI Affiliates make these payments from their own resources, from AIM Distributors' retention of underwriting concessions and from payments to AIM Distributors under Rule 12b-1 plans. These additional cash payments are described below. The categories described below are not mutually exclusive. The same financial advisor may receive payments under more than one or all categories. Most financial advisors that sell shares of AIM Funds receive one or more types of these cash payments. Financial advisors negotiate the cash payments to be paid on an individual basis. Where services are provided, the costs of providing the services and the overall package of services provided may vary from one financial advisor to another. ADI Affiliates do not make an independent assessment of the cost of providing such services.
In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with AIM.
REVENUE SHARING PAYMENTS. ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of AIM Funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing AIM Funds on the financial advisor's funds sales system, placing AIM Funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including AIM Funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. In addition, payments typically apply only to retail sales, and may not apply to other types of sales or assets (such as sales to retirement plans, qualified tuition programs, or fee based advisor programs - some of which may be generate certain other payments described below.)
The revenue sharing payments ADI Affiliates make 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 financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM Funds attributable to that particular financial advisor ("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. Sales-Based Payments primarily create incentives to make new sales of shares of AIM Funds and Asset-Based Payments primarily create incentives to retain previously sold shares of AIM Funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments.
ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts. Payments for these services typically do not exceed 0.25% of average annual assets or $19 per annum per shareholder account. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares in connection with client account maintenance support, statement preparation and transaction processing. The types of payments that ADI Affiliates may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial advisor, payment of networking fees of up to $12 per shareholder account maintained on certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial advisor's mutual fund trading systems.
OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at their expense, may provide additional compensation to financial advisors which sell or arrange for the sale of shares of the Fund. Such compensation provided by ADI Affiliates may include financial assistance to financial advisors that enable ADI Affiliates to participate in an/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other financial advisor-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as the NASD, Inc. ("NASD"). ADI Affiliates make payments for entertainment events they deem appropriate, subject to ADI Affiliate guidelines and applicable law. These payments may vary depending upon the nature of the event or the relationship.
ADI Affiliates are motivated to make the payments described above since they promote the sale of AIM Fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of AIM Funds or retain shares of AIM Funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the AIM Funds with respect to those assets.
In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this Statement of
Additional Information. You can ask your financial advisor about any payments it receives from ADI Affiliates or the AIM Funds, as well as about fees and/or commissions it charges.
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 K Shares
Class K 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 K shares are subject to a 0.70% 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 K shares, AIM Distributors may make the following payments to dealers of record:
PERCENT OF CUMULATIVE PURCHASE
-------------------------------------------------------------- 0.70% of the first $5 million -------------------------------------------------------------- plus 0.45% of amounts in excess of $5 million -------------------------------------------------------------- |
If the dealer of record receives the above payments, the trail commission will be paid out beginning in the 13th month. If no additional fee is paid to financial intermediaries, the trail commission will begin to accrue 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 or AIM Short Term Bond Fund, 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.
Purchases of Institutional Class Shares
Institutional Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSC.
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 Class A shares, 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 and AIM Short Term Bond Fund, 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 K or 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, IIorIII Fund or AIM Short Term Bond 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 or AIM Short Term Bond Fund 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, AIM Cash Reserve Shares of AIM Money Market Fund or AIM Short Term Bond Fund acquired by exchange from Class A shares of a Category I or II Fund or AIM Short Term Bond 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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, 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, 2002unless 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 or AIM Short Term Bond Fund 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 or AIM Short Term Bond Fund, unless the Category I or II Fund or AIM Short Term Bond Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds or AIM Short Term Bond Fund shares;
o Redemptions of Category I or II Funds or AIM Short Term Bond Fund 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 or AIM Short Term Bond Fund 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 a 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 Fund and the original purchase was subject to a CDSC.
CDSCs will not apply to the following redemptions of Class K shares:
o Class K 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.
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 a 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.
AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept purchase and redemption orders that are in good form on behalf of the AIM Funds. In certain cases, these authorized agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received the purchase or redemption order when the Fund's authorized agent or its designee accepts the order. The order will be priced at the net asset value next determined after the order is accepted by the Fund's authorized agent or its designee.
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, 2004, AIM Aggressive Growth Fund - Class A shares had a net asset value per share of $9.62. The offering price, assuming an initial sales charge of 5.50%, therefore was $10.18.
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, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the NYSE. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the
mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statement due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
Each equity 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 equity 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 vendors 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. Debt securities (including convertible bonds) are fair valued using an evaluated quote on the basis of prices provided by an independent pricing vendor. Evaluated quotes provided by the pricing vendor 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 available, including situations where market quotations are unreliable, are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in accordance with procedures approved by the Board. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of a Fund's shares are determined at such times. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE. If AIM believes a development/event has actually caused a closing price to no longer reflect current market value, the closing price may be adjusted to reflect the fair value of the affected security as of the close of the NYSE as determined in good faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Trading in certain 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. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. Issuer specific events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing vendor to determine the
fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Multiple factors may be considered by the pricing vendor 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 value of the portfolio securities of a Fund that invests in foreign securities may be significantly affected on days when an investor cannot exchange or redeem shares of the Fund.
REDEMPTIONS IN KIND
Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). For instance, a Fund may make a redemption in kind, if a cash redemption would disrupt its operations or performance. Securities that will be delivered as payment in redemptions in kind will be valued using the same methodologies that the Fund typically utilizes in valuing such securities. Shareholders receiving such securities are likely to incur transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. The Trust, on behalf of the Funds, has made an election under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore, the Trust, on behalf of a 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. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.
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 generally 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.
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.
Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it has been incurred in the succeeding year.
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), 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
and (for Fund taxable years beginning after October 22, 2004) net income derived
from certain publicly traded partnerships (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), of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses or of securities of certain publicly traded partnerships (for Fund taxable years beginning after October 22, 2004).
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 unless a Fund
elects to treat them as capital gain 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 or be less than 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 only 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. As described below, 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.
Dividends paid by a Fund will not be eligible for the dividends received deduction when received by a corporation that has not held its shares of the Fund for at least 46 days during the 91-day period beginning 45 days before the date on which the shares become ex-dividend and will not be treated as qualified dividend income when received by an individual or other noncorporate shareholder who has not held its shares of the Fund for at least 61 days during the 121-day period beginning 60 days before the date on which the shares become ex-dividend.
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 are not made from 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 ex-dividend 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 and short-term capital gain and of certain types of interest income) 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.
As a consequence of the enactment of the American Jobs Creation Act of 2004, such a foreign shareholder will also generally be exempt from U.S. federal income tax on distributions that a Fund designates as "short-term capital gain dividends" or as "interest-related dividends" for Fund taxable years beginning after December 31, 2004 and before January 1, 2008. The aggregate amount that may be designated as short-term capital gain dividends for a Fund's taxable year is generally equal to the excess (if any) of the Fund's net short-term capital gain over its net long-term capital loss. The aggregate amount designated as interest-related dividends for any Fund taxable year is generally limited to the excess of the amount of "qualified interest income" of the Fund over allocable expenses. Qualified interest income is generally equal to the sum of a Fund's U.S.-source income that constitutes (1) bank deposit interest; (2) short-term original issue discount that is exempt from withholding tax; (3) interest on a debt obligation which is in registered form, unless it is earned on a debt obligation issued by a corporation or partnership in which the Fund holds a 10-percent ownership interest or its payment is contingent on certain events; and (4) interest-related dividends received from another regulated investment company.
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, short-term capital gain
dividends, interest-related 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 (as defined below), 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. Estates of foreign shareholder decedents dying after December 31, 2004 and before January 1, 2008 will be able to exempt from federal estate tax the proportion of the value of a Fund's shares attributable to "qualifying assets" held by the Fund at the end of the quarter immediately preceding the decedent's death (or such other time as the Internal Revenue Service may designate in regulations). Qualifying assets include bank deposits and other debt obligations that pay interest or accrue original issue discount that is exempt from withholding tax, debt obligations of a domestic corporation that are treated as giving rise to foreign source income, and other investments that are not treated for tax purposes as being within the United States. Shareholders will be advised annually of the portion of a Fund's assets that constituted qualifying assets at the end of each quarter of its taxable year.
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 February 21, 2005. 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 and Class R Plans, as applicable, and each of AIM Blue Chip Fund, AIM Capital Development Fund, AIM Diversified Dividend Fund and AIM Large Cap Basic Value Fund, pursuant to its Investor Class Plan, 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 0.25% 1.00% 1.00% 0.50% 0.25%
AIM Capital Development Fund 0.25% 1.00% 1.00% 0.50% 0.25%
AIM Charter Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Constellation Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Diversified Dividend Fund 0.25% 1.00% 1.00% 0.50% 0.25%
AIM Large Cap Basic Value Fund 0.25% 1.00% 1.00% 0.50% 0.25%
AIM Large Cap Growth Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Mid Cap Growth Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Select Basic Value Fund 0.25% 1.00% 1.00% N/A N/A
AIM Weingarten Fund 0.25% 1.00% 1.00% 0.50% N/A
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AIM Diversified Dividend Fund and AIM Large Cap Growth Fund, pursuant to its Investor Class Plan, pays 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 and Class R Plans and amounts payable by AIM Blue Chip Fund, AIM Capital Development Fund, AIM Diversified Dividend Fund and AIM Large Cap Basic Value Fund, under its Investor Class Plan 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 Diversified Dividend Fund and AIM Large Cap Growth Fund under their Investor Class Plans are directly related to the expenses incurred by AIM Distributors on behalf of each Fund, as these Plans obligate each Fund to reimburse AIM Distributors for their 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 each 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 Diversified Dividend Fund and 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 NASD.
See Appendix L 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, 2004 and Appendix M 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, 2004.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service Agreements were approved by the Board, 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, 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 N.
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 October 31 are found in Appendix O.
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.
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Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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The cumulative total returns for each Fund, with respect to its 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 October 31 are found in Appendix O.
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 Diversified Dividend 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 made at
D 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 October 31 are found in Appendix O.
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 at
DR the beginning of the one, five, or ten year periods
(or since inception, if applicable) at the end of the
one, five, or ten year periods (or since inception,
if applicable), after taxes on fund distributions and
redemption.
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Standardized average annual total return (after taxes on distributions and redemption) for: (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 October 31 are found in Appendix O.
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.
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 Pension World Barron's Fortune Pensions & Investments Best's Review Hartford Courant Personal Investor Bloomberg Inc Philadelphia Inquirer Broker World Institutional Investor The Bond Buyer Business Week Insurance Forum USA Today Changing Times Insurance Week U.S. News & World Report Christian Science Monitor Investor's Business Daily Wall Street Journal Consumer Reports Journal of the American Washington Post Economist Society of CLU & ChFC CNN FACS of the Week Kiplinger Letter CNBC Financial Planning Money PBS Financial Product News Mutual Fund Forecaster Financial Services Week Nation's Business Financial World New York Times |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Standard & Poor's Bloomberg Stanger Donoghue's Strategic Insight FactSet Data Systems Thompson Financial Lipper, Inc. Weisenberger Mutual Fund Values (Morningstar) |
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 Mid Cap 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 MSCI World Index Standard & Poor's 500 Index Russell 1000 --Registered Trademark-- Growth Index Standard & Poor's Mid Cap 400 Index Russell 1000 --Registered Trademark-- Index |
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
PENDING LITIGATION
Regulatory Action Alleging Market Timing
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed a civil lawsuit against AIM, INVESCO Funds Group, Inc. ("IFG")
(the former investment advisor to certain AIM Funds) and ADI, as well as
numerous unrelated mutual fund complexes and financial institutions. None of the
AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint,
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties;
a writ of quo warranto against the defendants; pre-judgment and post-judgment
interest; costs and expenses, including counsel fees; and other relief.
If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment adviser for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP PLC ("AMVESCAP"), from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There is not assurance that such exemptive relief will be granted.
On May 31, 2005, the defendants removed this lawsuit to the U.S. District Court for the Northern District of West Virginia at Wheeling. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court. On June 29, 2005 the WVAG filed a Notice of Opposition to this Conditional Transfer Order. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix P-1.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings, with one exception. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. A list identifying the amended complaints in the MDL Court is included in Appendix M-1. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. One lawsuit based on allegations of market timing, late trading and related issues has not been transferred to the MDL court. These lawsuits are identified in Appendix P-1.
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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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, AIM, the AIM Funds
or related entities, or for which service of process has been waived, as of
August 19, 2005 is set forth in Appendix P-2.
Private Civil Actions Alleging Excessive Advisory and/or 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/or 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix P-3.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including 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 Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix P-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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix P-5.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
A civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, A I M Capital Management, Inc. ("Aim Capital") and the trustees of the Aim funds alleging that the defendants breached their fiduciary duties by failing to ensure that the Aim funds participated in class action settlements in which they were eligible to participate. This lawsuit alleges as theories of recovery: (i) violation of various provisions of the federal securities laws; (ii) common law breach of fiduciary duty; and (iii) common law negligence. This lawsuit has been filed in federal court and seeks such remedies as compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and attorneys' fees. Such lawsuit, which was dismissed by the Court on August 12, 2005, is set forth in Appendix P-6.
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 are as 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
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF JULY 27, 2005)
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel
Foley & Lardner LLP Legal Counsel (for certain AIM Funds)
Kramer, Levin Naftalis & Frankel LLP Legal Counsel
Ernst & Young LLP Independent Registered Public Accounting Firm (for
certain AIM Funds)
PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm (for
certain AIM Funds)
Brown Brothers Harriman & Co. Securities Lender (for certain AIM Funds)
Fitch, Inc. Rating & Ranking Agency (for certain AIM Funds)
iMoneyNet Ranking Agency (for certain AIM funds)
Lipper Inc. Rating & Ranking Agency (for certain AIM Funds)
Moody's Investors Service Rating & Ranking Agency (for certain AIM Funds)
Institutional Shareholder Services, Inc. Proxy Voting Service
State Street Bank and Trust Company Custodian (for certain AIM Funds), Software Provider,
Securities Lender (for certain AIM Funds)
The Bank of New York Custodian (for certain AIM Funds)
AIM Investment Services, Inc. Transfer Agent
Bloomberg System Provider (for certain AIM Funds)
Reuters America Inc. Pricing Service (for certain AIM Funds)
The MacGregor Group, Inc. Software Provider
Thomson Financial, Inc. Software Provider
Xcitek Solutions Software Provider
Plus
Bowne & Co., Inc. Financial Printer
CENVEO Financial Printer
Classic Printers Inc. Financial Printer
Color Dynamics Financial Printer
Earth Color Houston Financial Printer
EMCO Press Financial Printer
Grover Printing Financial Printer
Gulfstream Graphics Corp. Financial Printer
Signature Financial Printer
Southwest Precision Printers, Inc. Financial Printer
ABN Amro Financial Services, Inc. Broker (for certain AIM Funds)
BB&T Capital Markets Broker (for certain AIM Funds)
Belle Haven Investments L.P. Broker (for certain AIM Funds)
BOSC, Inc. Broker (for certain AIM Funds)
Cabrera Capital Markets Broker (for certain AIM Funds)
|
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Coastal Securities, LP Broker (for certain AIM Funds)
Duncan-Williams, Inc. Broker (for certain AIM Funds)
Fidelity Investments Broker (for certain AIM Funds)
First Albany Capital Broker (for certain AIM Funds)
First Tryon Securities Broker (for certain AIM Funds)
Anglemyer & Co. Analyst (for certain AIM Funds)
Empirical Research Partners Analyst (for certain AIM Funds)
Factset Research Systems, Inc. Analyst (for certain AIM Funds)
Global Trend Alert Analyst (for certain AIM Funds)
J.P. Morgan Chase Analyst (for certain AIM Funds)
Kevin Dann & Partners Analyst (for certain AIM Funds)
Muzea Insider Consulting Services, LLC Analyst (for certain AIM Funds)
Noah Financial, LLC Analyst (for certain AIM Funds)
Piper Jaffray Analyst (for certain AIM Funds)
|
APPENDIX C
TRUSTEES AND OFFICERS
As of July 31, 2005
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 None
Trustee, Vice Chair and Group Inc. (financial services holding
President company); 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 None
Trustee and Executive Vice Officer, A I M Management Group Inc.;
President Director, Chairman and President, A I M
Advisors, Inc.; Director, A I M Capital
Management, Inc. and A I M Distributors,
Inc.; Director and Chairman, AIM Investment
Services, Inc., Fund Management Company 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, Inc.; President and Chief Executive
Officer, INVESCO Distributors, Inc.; Chief
Executive Officer, AMVESCAP PLC -
Managed Products
|
(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
------------------------- ------- ------------------------------------------- --------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett(3) -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited
Trustee and Chair (technology consulting company) (insurance company);
and Captaris, Inc.
(unified messaging
provider)
Bob R. Baker -- 1936 2003 Retired None
Trustee
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc.
Trustee (registered investment
Formerly: Partner, law firm of Baker & company)
McKenzie (2 portfolios)
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning & None
Trustee Bunch Ltd. (investment banking firm); and
Director, Policy Studies, Inc. and Van
Gilder Insurance Corporation
Albert R. Dowden -- 1941 2000 Director of a number of public and private None
Trustee business corporations, including the Boss
Group, Ltd. (private investment and
management); Cortland Trust, Inc. (Chairman)
(registered investment company (3
portfolios)); Annuity and Life Re
(Holdings), Ltd (insurance company); and
CompuDyne Corporation (provider of products
and services to the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo; and
director of various affiliated Volvo companies
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
|
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
Owner, Dos Angelos Ranch, L.P. Education Fund
(non-profit)
Formerly: Chief Executive Officer, Texana
Timber LP (sustainable forestry company)
Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis Cortland Trust, Inc.
Trustee and Frankel LLP (registered
investment company)
(3 portfolios)
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of None
Trustee the USA
Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper None
Trustee
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
Larry Soll -- 1942 2003 Retired None
Trustee
|
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
------------------------- ------- ------------------------------------------- --------------------
OTHER OFFICERS
Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M Management Group N/A
Senior Vice President and Chief Inc.; Senior Vice President and Chief
Compliance Officer Compliance Officer, A I M Advisors, Inc.;
Vice President and Chief Compliance Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Distributors, Inc., AIM
Investment Services, Inc., and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware Investments
Family of Funds; and Chief Compliance
Officer, A I M Distributors, Inc.
Russell C. Burk(5) -- 1958 2005 Formerly: Director of Compliance and Assistant N/A
Senior Vice President General Counsel, ICON Advisers, Inc.;
(Senior Officer) Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS
Mutual Funds, Inc.
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 and A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.; Vice
President, A I M Capital Management, Inc. and
AIM Investment Services, Inc.; Director, Vice
President and General Counsel, Fund Management
Company; and Senior Vice President, A I M
Distributors, Inc., and Director, Fund Management
Company
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.;
Senior Vice President and General Counsel,
Liberty Funds Group, LLC; and Vice
President, A I M Distributors, Inc.
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President and Treasurer Advisors, Inc.
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice President,
A I M Distributors, Inc.
|
(5) Mr. Burk was elected Senior Vice President of the Trust effective February 15, 2005.
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
------------------------- ------- ------------------------------------------- --------------------
J. Philip Ferguson(6) -- 1945 2005 Senior Vice President and Chief Investment N/A
Vice President Officer, A I M Advisors Inc.; Director,
Chairman, Chief Executive Officer, President
and Chief Investment Officer, A I M Capital
Management, Inc; Executive Vice President,
A I M Management Group Inc.
Formerly: Senior Vice President, AIM Private
Asset Management, Inc.; Chief Equity Officer,
and Senior Investment Officer, A I M Capital
Management, Inc.; and Managing Partner,
Beutel, Goodman Capital Management
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director 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.
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2004
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES COMPANIES OVERSEEN BY TRUSTEE
NAME OF TRUSTEE PER FUND IN THE AIM FAMILY OF 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
Diversified Dividend Over $100,000
Emerging Growth 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 Large Cap Growth $50,001 - $100,000 Over $100,000
Bob R. Baker -0- Over $100,000
Frank S. Bayley Charter $10,001 - $50,000 Over $100,000
Mid Cap Growth $10,001 - $50,000
James T. Bunch Blue Chip $1 - $10,000 Over $100,000
Large Cap Basic Value $50,001 - $100,000
Large Cap Growth $1 - $10,000
Bruce L. Crockett Aggressive Growth $1 - $10,000 $50,001- $100,000(7)
Charter $1 - $10,000
Constellation $1 - $10,000
Weingarten $1 - $10,000
|
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES COMPANIES OVERSEEN BY TRUSTEE
NAME OF TRUSTEE PER FUND IN THE AIM FAMILY OF FUNDS--Registered Trademark--
--------------- --------------------------------- --------------------------------------------------
Blue Chip $10,001 - $50,000 Over $100,000
Albert R. Dowden
Emerging Growth $10,001 - $50,000
Edward K. Dunn, Jr. Capital Development Over $100,000 Over $100,0007
Jack M. Fields Blue Chip $1 - $10,000 Over $100,000(7)
Charter Over $100,000
Constellation Over $100,000
Weingarten Over $100,000
Carl Frischling Aggressive Growth Over $100,000 Over $100,000(7)
Blue Chip $50,001 - $100,000
Capital Development Over $100,000
Charter Over $100,000
Mid Cap Growth $10,001 - $50,000
Weingarten $50,001 - $100,000
Gerald J. Lewis Blue Chip $1 - $10,000 Over $100,000
Capital Development $10,001 - $50,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
Prema Mathai-Davis -0- $1- $10,000(7)
Lewis F. Pennock Capital Development $1 - $10,000 Over $100,000
Charter $10,001 - $50,000
Diversified Dividend $1 - $10,000
Large Cap Basic Value $1 - $10,000
Ruth H. Quigley -0- $10,001 - $50,000
Larry Soll Blue Chip $1 - $10,000 Over $100,000(7)
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
|
(7) 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 Funds.
APPENDIX D
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, 2004:
ESTIMATED
ANNUAL
RETIREMENT BENEFITS
AGGREGATE BENEFITS UPON TOTAL
COMPENSATION ACCRUED RETIREMENT COMPENSATION
FROM THE BY ALL FROM ALL FROM ALL AIM
TRUSTEE TRUST(1)(2) AIM FUNDS(3) AIM FUNDS(4) FUNDS (5)(6)
------- ----------- ------------ ------------ ------------
Bob R. Baker $ 26,824 $ 198,871 $ 144,786 $ 189,750
Frank S. Bayley 26,774 175,241 112,500 193,500
James T. Bunch 26,824 143,455 112,500 186,000
Bruce L. Crockett 26,774 75,638 112,500 223,500
Albert R. Dowden 26,634 93,210 112,500 192,500
Edward K. Dunn, Jr. 26,774 133,390 112,500 193,500
Jack M. Fields 26,774 48,070 112,500 186,000
Carl Frischling(7) 26,616 62,040 112,500 185,000
Gerald J. Lewis 26,824 143,455 112,500 186,000
Prema Mathai-Davis 26,774 55,768 112,500 189,750
Lewis F. Pennock 26,774 80,777 112,500 186,000
Ruth H. Quigley 26,774 154,767 112,500 189,750
Louis S. Sklar(8) 26,774 115,160 101,250 186,000
Larry Soll 26,824 184,356 130,823 186,000
|
(1) Amounts shown are based on the fiscal year ended October 31, 2004. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended October 31, 2004, including earnings, was $97,262.
(2) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Aggregate Compensation From the Trust" above does not include $6,777 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the fiscal year ended October 31, 2004.
(3) During the fiscal year ended October 31, 2004, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $197,215.
(4) These amounts represent the estimated annual benefits payable by the AIM Funds upon the trustee's retirement and assumes each trustee serves until his or her normal retirement date.
(5) All trustees currently serve as trustees of 18 registered investment companies advised by AIM.
(6) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Total Compensation From All AIM Funds" above does not include $44,000 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the calendar year ended December 31, 2004.
(7) During the fiscal year ended October 31, 2004 the Trust paid $140,199 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.
(8) Mr. Sklar retired effective December 31, 2004.
APPENDIX E
PROXY POLICIES AND PROCEDURES
(AS AMENDED SEPTEMBER 16, 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 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 F
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 August 15, 2005.
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
---------------- ---------- ---------- ---------- ---------- -------------
AMVESCAP National Trust
Company Trustee
Frost FBO B&O Management Co. -- -- -- 6.17% --
Discretionary Contribution Pl
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 7th Fl 6.01% -- -- -- --
333 West 34th St
New York, NY 10001-2402
JC Penney Company Inc Savings
PS & Stock Ownership Pl Tr -- -- -- -- 97.58%
105 Rosemont Rd
Westwood, MA 02090-2318
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers 7.03% -- 8.29% -- --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
|
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
---------------- ---------- ---------- ---------- ---------- -------------
Wilmington Trust Comp.
Cust. FBO
Olson International
Employee 401(k) -- -- -- 5.84% --
Salary Plan
c/o Mutual Funds
P. O. Box 8971
Wilmington, DE 19899-8971
|
AIM BLUE CHIP FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AMVESCAP National Trust
Co. Trustee
FBO The McDevitt Co. -- -- -- 24.11% -- --
Employees 401(k) Plan
PO Box 105779
Atlanta, GA 30348-5779
Capital Bank & Trust Co. FBO
Government Micro Resources
Inc. 401(k)
C/O Planpremier/FASCORP -- -- -- 7.35% -- --
8515 E Orchard Rd #2T2
Greenwood Village, CO
80111-5002
Charles Schwab & Co. Inc.
Special Custody FBO
Customers (SIM) -- -- -- -- -- 7.76%
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta -- 6.21% 7.01% -- -- --
7th Floor
333 West 34th Street
New York, NY 10001-2402
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
MCB Trust Services Cust. FBO
Fresh Meadow Mechanical Corp. -- -- -- 6.06% -- --
700 17th St. Ste 300
Denver, CO 80202-3531
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 5.38% 5.78% 11.95% -- -- --
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246-6484
Wells Fargo Bank NA FBO
WF Wealthbuilder Growth
Balanced PO -- -- -- -- 50.86% --
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO
WF Wealthbuilder Equity
Portfolio -- -- -- -- 25.80% --
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO
WF Wealthbuildertactical
Equity PO -- -- -- -- 11.45% --
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO
WF Wealthbuilder Growth
Allocation POR -- -- -- -- 5.02% --
P. O. Box 1533
Minneapolis, MN 55480-1533
|
AIM CAPITAL DEVELOPMENT FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AIM Moderate Asset
Allocation Fund
Omnibus Account
c/o AIM Advisors -- -- -- -- 72.36% --
11 E Greenway Plz Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust Co.
TTEE FBO Equator
Technologies, Inc. 401(k) -- -- -- 8.04% -- --
Retirement Plan
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co.
TTEE
FBO Palmer & Cay Inc. Ret Plan -- -- -- -- 17.78% --
P. O. Box 105779
Atlanta, GA 30348-5779
Capital Bank & Trust Co.
Trustee FBO Sakson & Taylor
Inc. 401(k) PSP
C/O Planpremier/FASCORP -- -- -- 11.59% -- --
8515 E Orchard Rd Ste 2T2
Greenwood Village, CO
80111-5002
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta -- 6.08% -- -- -- --
7th Floor
333 West 34th St
New York, NY 10001-2402
Coastgear & Company
State Street Bank & Trust
Attn: Kevin Smith -- -- 8.12% -- -- --
105 Rosemont Avenue
Westwood, MA 02090-2318
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
FTB&T Trustee for Defined
Contribution Services
401(k) FBO
North Pointe Financial -- -- -- 11.63% -- --
Services, Inc.
Attn: Securities Settlement
3555 Data Dr.
Rancho Cordova, CA 95670-7312
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 5.54% 6.82% 12.08% -- -- --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
MG Trustco TTEE
SONITEK 401k PL -- -- -- 5.64% - --
700 17th St. Ste. 300
Denver, CO 80202-3531
|
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
------------------- ---------- ---------- ---------- ---------- ------------
AIM Conservative Asset
Allocation Fund Omnibus Acct
C/O AIM Advisors -- -- -- -- 6.36%
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust
Co. TTEE FBO Equator
Technologies, Inc.
401(k) Retirement Plan -- -- -- 9.70% --
PO Box 105779
Atlanta, GA 30348-5779
|
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 Hartman-Walsh Corp. -- -- -- 5.10% --
401(k)
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 6.10% -- 7.12% -- --
7th Floor
333 West 34th Street
New York, NY 10001-2402
First Command Bank Trust
Attention: Trust Department -- -- -- -- 90.78%
P.O. Box 901075
Fort Worth, TX 76101-2075
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 7.57% 5.11% 11.70% -- --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Reliance Trust Company Custodian
FBO Morley Incentives 401(k)
Profit Sharing Plan & Trust -- -- -- 18.80% --
PO Box 48529
Atlanta, GA 30362-1529
|
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
------------------- ---------- ---------- ---------- ---------- ------------
American Express Trust
American Express -- -- -- -- 8.08%
996 AXP Financial Ctr
Minneapolis, MN 55474-0009
AMVESCAP National Trust
Co. Trustee
FBO Guys Inc. 401(k) Plan -- -- -- 7.86% --
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust
Co. Trustee
FBO Speidel Inc. 401(k) Plan -- -- -- 7.36% --
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets
House Account
Attn: Cindy Tempesta 5.92% -- 6.29% -- --
7th Floor
333 West 34th Street
New York, NY 10001-2402
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 8.79% -- 13.91% - 22.19%
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Ohio Public
Employees Deferred Compensation
Plan -- -- -- -- 54.63%
250 Civic Center Dr, Ste 350
Columbus, OH 43215-5450
Wells Fargo Bank West NA
Custodian
City of Houston
457 Deferred Compensation Plan -- -- -- -- 9.32%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-0000
|
AIM DIVERSIFIED DIVIDEND FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES*
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AMVESCAP National
Trust Co.
FBO AMVESCAP 7.07% -- -- -- -- --
401(k) Plan
P.O. Box 105779
Atlanta, GA 30348-5779
Charles Schwab & Co., Inc.
Special Custody FBO
Customers (SIM)
Attn. Mutual Funds 5.41% -- -- -- -- --
101 Montgomery St.
San Francisco, CA
94104-4122
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund -- 9.19% 7.16% -- -- --
Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL
32246-6484
Morgan Stanley DW
Attn: Mutual Funds
Operations -- -- 5.98% -- -- --
3 Harborside PL FL 6
Jersey City, NJ 07311-3907
|
* Investor Class shares commenced operations on July 18, 2005. Class R shares and Institutional Class shares commenced operations on October 25, 2005.
AIM LARGE CAP BASIC VALUE FUND
INVESTOR
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AIM Growth Allocation
Fund Omnibus Acct
C/O AIM Advisors -- -- -- -- 39.22% --
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AIM Moderate Asset
Allocation Fund
Omnibus Acct -- -- -- -- 40.56% --
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust
Co. FBO Itasca Bank & Trust
Co. 401(k) Plan -- -- -- 10.52% -- --
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust
Co. TTEE
FBO Palmer & Cay Inc. -- -- -- -- 10.16% --
Ret Plan
P. O. Box 105779
Atlanta, GA 30348-5779
Charles Schwab & Co. Inc.
Special Custody FBO
Customers (SIM) -- -- -- -- -- 7.54%
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
Federated Lighting Inc.
401(k) Profit Sharing Plan
1600 Trade Zone Ave. -- -- -- 13.96% -- --
Ste 406
Upper Marlboro, MD
20774-8789
INVESCO Trust Co.
FBO Hanger Orthopedic
Group Inc. & Sel.
Sub Tax Deferred
Savings Plan Trust 401(k) -- -- -- -- -- 6.88%
400 Colony Sq, Ste 2200
1201 Peachtree, Ste NE
Atlanta, GA 30361-6302
|
INVESTOR
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
INVESCO Trust Co. Trustee
Magellan Health Services
Retirement Savings Plan
Trust 401(k) -- -- -- -- -- 25.59%
PO Box 105779
Atlanta, GA 30348-5779
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 15.65% 13.49% 17.23% -- -- --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Reliance Trust Company
Custodian FBO Rosin
Optical Co. Inc. -- -- -- 9.56% -- --
Profit Sharing Plan
PO Box 48529
Atlanta, GA 30362-1529
|
AIM LARGE CAP GROWTH FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AIM Growth Allocation
Fund Omnibus Acct
C/O AIM Advisors -- -- -- -- 33.41% --
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AIM Moderate Asset
Allocation Fund
Omnibus Acct
C/O AIM Advisors -- -- -- -- 37.80% --
11 E Greenway Plz,
Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust
Co.
FBO AMVESCAP 401(k)
Plan -- -- -- -- 17.24% --
P.O. Box 105779
Atlanta, GA 30348-5779
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------- ----------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------- ----------
AMVESCAP National Trust
Co.
FBO AMVESCAP Money
Purchase Plan -- -- -- -- 5.21% --
P.O. Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust
Co. Trustee
FBO Spiedel, Inc. -- -- -- 5.01% -- --
401(k)
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta -- 5.83% 10.49% -- -- --
7th Floor
333 West 34th Street
New York, NY 10001-2402
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers -- 10.05% 10.49% -- -- --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
Reliance Trust Company
Custodian FBO Continental
Products Inc. 401(k) Plan -- -- -- 8.97% -- --
PO Box 48529
Atlanta, GA 30362-1529
Reliance Trust Company
Custodian FBO Morley
Incentives 401(k) Profit -- -- -- 28.10% -- --
Sharing Plan & Trust
PO Box 48529
Atlanta, GA 30362-1529
RR-USA Inc. 401k
Carlo Pecorari TTEE
Omnibus Account -- -- -- 6.51% -- --
8 Creek Pkwy
Boothwyn, PA 19061-3132
|
AIM MID CAP GROWTH FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ------------
A I M Advisors, Inc.(1)
Attn: Corporate Comptroller -- -- -- -- 100.00%
11 E. Greenway Plz ,Ste 100
Houston, TX 77046-1103
AMVESCAP National Trust Co.
FBO West Boylston Insurance
Agency Inc. -- -- -- 9.69% --
401(k) Plan
PO Box 105779
Atlanta, GA 30348-5779
MCB Trust Services Custodian
FBO Sandberg Gonzalez &
Creeden PC -- -- -- 6.26% --
700 17th St, Ste 300
Denver, CO 80202-3531
MCB Trust Services Custodian
FBO Standard Tool & Die, Inc.
Employees 401k Plan -- -- -- 14.74% --
700 17th St, Ste 300
Denver, CO 80202-3531
Merrill Lynch Pierce Fenner &
Smith FBO The Sole Benefit of
Customers
Attn: Fund Administration 6.39% 6.80% 15.21% -- --
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
|
(1) Owned of record and beneficially.
AIM SELECT BASIC VALUE FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------- ---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
------------------- ---------------- ---------------- ----------------
Citigroup Global Markets House Acct.
Attn: Cindy Tempesta
7th Floor 5.11% -- --
333 W. 34th St.
New York, NY 10001-2402
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 5.42% 5.29% 6.21%
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
|
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
------------------- ---------- ---------- ---------- ---------- -------------
AIM Foundation
Attn: Patricia Lewis -- -- -- -- 29.08%
11 Greenway Plz, Ste 2600
Houston, TX 77046-1100
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta 7.34% 6.99% 8.73% -- --
7th Floor
333 West 34th Street
New York, NY 10001-2483
City of Cambridge, Trustee
FBO City of Cambridge 457
Deferred Compensation Plan -- -- -- -- 8.63%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
City of Springfield, Trustee
FBO City of Springfield 457
DCP -- -- -- -- 7.70%
C/O Great West,
Recordkeeper
8515 E Orchard Rd. 2T2
Engelwood, CO 80111-5002
|
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 -- -- -- 5.40% --
912 Tamer Ln
Glenview, IL 60025-3767
David Leary, Trustee
FBO Town of Weymouth
457 Deferred Compensation Plan -- -- -- -- 10.54%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
First Command Bank Trust
Attn: Trust Department -- -- -- -- 6.67%
PO Box 901075
Fort Worth, TX 76101-2075
Macquarium Inc. 401(k)
Louis K or
Mark F Adler Trustees -- -- -- 9.22% --
Omnibus Acct
910 Travis St, Ste 1950
Houston, TX 77002-5806
MCB Trust Services
Custodian FBO Harmony
Printing & Development -- -- -- 15.63% --
700 17th St, Ste 300
Denver, CO 80202-3531
Merrill Lynch Pierce Fenner
& Smith
FBO The Sole Benefit of
Customers 8.92% 5.76% 14.85% 15.11% --
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
Reginald B Berka or William
Nichtberger Trustees FBO
Aphelion Inc. Employees
Savings Trust -- -- -- 6.75% --
1100 Nasa Rd 1, Ste 606
Houston, TX 77058-3325
|
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
------------------- ---------- ---------- ---------- ---------- -------------
Town of Watertown, Trustee
FBO Town of Watertown
457 Deferred Compensation Plan -- -- -- -- 5.32%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
William Wilson Assoc
Architects 401(k)
James Leslie TTEE -- -- -- 7.02% --
Omnibus Acct
374 Congress St, Ste 400
Boston, MA 02210-1807
|
MANAGEMENT OWNERSHIP
As of August 15, 2005, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund.
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended October 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2004 2003 2002
------------------------------------- ------------------------------------ -------------------------------------
NET NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- ----------
AIM
Aggressive
Growth Fund $14,026,309 $ 12,113 $14,014,196 $13,458,191 $ 16,521 $13,441,670 $17,081,494 $ 16,400 $17,065,094
AIM Blue
Chip Fund 18,508,235 11,809 18,496,426 17,924,075 21,702 17,902,373 24,803,281 26,519 24,776,762
AIM Capital
Development
Fund 7,018,923 8,699 7,010,224 6,014,863 11,378 6,003,485 7,368,692 11,465 7,357,227
AIM Charter
Fund 20,136,790 44,820 20,091,970 20,917,533 71,387 20,846,146 29,583,893 58,255 29,525,638
AIM
Constellation
Fund 46,243,987 623,391 45,620,596 46,349,081 638,100 45,710,981 63,117,935 1,334,866 61,783,069
AIM Diversified
Dividend Fund 600,345 531,230 69,115 215,768 175,090 40,678 44,236 44,236 -0-
AIM Large
Cap Basic
Value Fund $ 2,109,274 $ 2,312 $ 2,106,962 $ 1,211,828 $ 1,844 $ 1,209,984 $ 1,168,281 $ 793 $ 1,167,488
AIM Large Cap
Growth Fund 5,663,512 3,368 5,660,144 1,987,347 1,994 1,985,353 2,371,037 3,052 2,367,985
AIM Mid Cap
Growth
Fund 1,780,749 2,147 1,778,602 1,343,201 2,625 1,340,576 1,620,211 2,679 1,617,532
|
FUND NAME 2004 2003 2002
------------------------------------- ------------------------------------ -------------------------------------
NET NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- ----------
AIM Select
Basic
Value Fund(1) 9,586 9,586 -0- 7,610 7,610 $-0- 1,164 1,164 -0-
AIM Weingarten
Fund 17,028,857 5,987 17,022,870 17,030,956 8,168 17,022,788 26,086,537 28,985 26,057,552
|
(1) Commenced operations on August 30, 2002
APPENDIX H
PORTFOLIO MANAGERS
As of October 31, 2004
INVESTMENTS IN EACH FUND
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
------------------------- -----------------------------------------
AIM AGGRESSIVE GROWTH FUND
Jay K. Rushin $50,001 - $100,000
AIM BLUE CHIP FUND
Kirk L. Anderson $1.00 - $10,000
AIM CAPITAL DEVELOPMENT FUND
Paul J. Rasplicka $100,001 - $500,000
AIM CHARTER FUND
Ronald S. Sloan $500,001 - $1,000,000
AIM CONSTELLATION FUND
Christian A. Costanzo $100,001 - $500,000
Robert J. Lloyd None
Bryan A. Unterhalter $10,001 - $50,000
Kenneth A. Zschappel $100,001 - $500,000
AIM DIVERSIFIED DIVIDEND FUND
Meggan M. Walsh $100,001 - $500,000
|
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
------------------------- -----------------------------------------
AIM LARGE CAP BASIC VALUE FUND
R. Canon Coleman II $50,001 - $100,000
Matthew W. Seinsheimer $10,001 - $50,000
Michael J. Simon $10,001 - $50,000
Bret W. Stanley $500,001 - $1,000,000
AIM LARGE CAP GROWTH FUND
Geoffrey V. Keeling $100,001 - $500,000
Robert L. Shoss $100,001 - $500,000
AIM MID CAP GROWTH FUND
Karl Farmer $50,001 - $100,000
Paul Rasplicka(2) $1.00 - $10,000
AIM SELECT BASIC VALUE FUND3
R. Canon Coleman II None
Matthew W. Seinsheimer None
Michael J. Simon None
Bret W. Stanley None
AIM WEINGARTEN FUND
James G. Birdsall $100,001 - $500,000
Lanny H. Sachnowitz $500,001 - $1,000,000
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DESCRIPTION OF COMPENSATION STRUCTURE
AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements:
(2) Mr. Rasplicka began serving as portfolio manager on AIM Mid Cap Growth Fund on April 29, 2005. Ownership information has been provided as of March 31, 2005.
(3) The Fund is not currently open to investors.
> BASE SALARY. Each portfolio manager is paid a base salary. In setting
the base salary, AIM's intention is to be competitive in light of the
particular portfolio manager's experience and responsibilities.
> ANNUAL BONUS. Each portfolio manager is eligible to receive an annual
cash bonus which has quantitative and non-quantitative components.
Generally, 70% of the bonus is quantitatively determined, based
typically on a four-year rolling average of pre-tax performance of all
registered investment company accounts for which a portfolio manager
has day-to-day management responsibilities versus the performance of a
pre-determined peer group. In instances where a portfolio manager has
responsibility for management of more than one fund, an asset weighted
four-year rolling average is used.
High fund performance (against applicable peer group) would deliver
compensation generally associated with top pay in the industry
(determined by reference to the third-party provided compensation
survey information) and poor fund performance (versus applicable peer
group) could result in no bonus. The amount of fund assets under
management typically have an impact on the bonus potential (for
example, managing more assets increases the bonus potential); however,
this factor typically carries less weight than relative performance.
The remaining 30% portion of the bonus is discretionary as determined
by AIM and takes into account other subjective factors.
> EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to
purchase common shares and/or granted restricted shares of AMVESCAP
stock from pools determined from time to time by the Remuneration
Committee of the AMVESCAP Board of Directors. Awards of equity-based
compensation typically vest over time, so as to create incentives to
retain key talent.
> PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are
provided life insurance coverage in the form of a group variable
universal life insurance policy, under which they may make additional
contributions to purchase additional insurance coverage or for
investment purposes.
> PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are
eligible to participate in a non-qualified deferred compensation plan,
which affords participating employees the tax benefits of deferring the
receipt of a portion of their cash compensation.
|
Portfolio managers also participate in benefit plans and programs available generally to all employees.
OTHER MANAGED ACCOUNTS
As of October 31, 2004
AIM's portfolio managers develop investment models which are used in connection with the management of certain AIM funds as well as other mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals. The following chart reflects information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) mutual funds, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
------------------------- --------------------------------------------------------
AIM AGGRESSIVE GROWTH FUND
Jay K. Rushin 10 Registered Mutual Funds with $1,832,566,185 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $14,146,084 in total assets
under management
2 Other Accounts with $302,491 in total assets under management(4)
AIM BLUE CHIP FUND
Kirk L. Anderson 16 Registered Mutual Funds with $5,446,066,160 in total assets under
management
4 Unregistered Pooled Investment Vehicle with $403,532,853 in total assets
under management
AIM CAPITAL DEVELOPMENT FUND
Paul J. Rasplicka 6 Registered Mutual Funds with $3,195,133,930 in total assets under
management
1 Other Account with $1,722,818 in total assets under management
AIM CHARTER FUND
Ronald S. Sloan 10 Registered Mutual Funds with $14,243,823,980 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $54,820,135 in total assets
under management
7,696 Other Accounts with $1,605,249,642 in total assets under management(4)
|
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
------------------------- --------------------------------------------------------
AIM CONSTELLATION FUND
Christian A. Costanzo 4 Registered Mutual Funds with $1,771,220,355 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(4)
Robert J. Lloyd 5 Registered Mutual Funds with $3,853,316,960 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(4)
Bryan A. Unterhalter 13 Registered Mutual Funds with $4,169,122,766 in total assets under
management
5 Unregistered Pooled Investment Vehicles with $441,234,148 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(4)
Kenneth A. Zschappel 5 Registered Mutual Funds with $3,853,316,960 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(4)
AIM DIVERSIFIED DIVIDEND FUND
Meggan M. Walsh 3 Registered Mutual Funds with $1,211,843,828 in total assets under
management
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NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
------------------------- --------------------------------------------------------
AIM LARGE CAP BASIC VALUE FUND
R. Canon Coleman II 8 Registered Mutual Funds with $10,090,324,076 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
Matthew W. Seinsheimer 8 Registered Mutual Funds with $10,090,324,076 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
Michael J. Simon 12 Registered Mutual Funds with $11,384,494,170 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
Bret W. Stanley 11 Registered Mutual Funds with $20,628,926,879 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
AIM LARGE CAP GROWTH FUND
Geoffrey V. Keeling 2 Registered Mutual Funds with $147,937,233 in total assets under management
1 Unregistered Pooled Investment Vehicle with $12,348,024 in total assets
under management
12 Other Accounts with $3,182,749 in total assets under management(4)
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NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
------------------------- --------------------------------------------------------
Robert L. Shoss 2 Registered Mutual Funds with $147,937,233 in total assets under management
1 Unregistered Pooled Investment Vehicle with $12,348,024 in total assets
under management
12 Other Accounts with $3,182,749 in total assets under management(4)
AIM MID CAP GROWTH FUND
Karl Farmer 7 Registered Mutual Funds with $2,849,187,575 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $14,146,084 in total assets
under management
2 Other Accounts with $302,491 in total assets under management(4)
Paul J. Rasplicka(5) 7 Registered Mutual Funds with $3,712,416,204 in total assets under
management
1 Other Account with $2,239,001 in total assets under management(4)
|
(5) Mr. Rasplicka began serving as portfolio manager on AIM Mid Cap Growth Fund on April 29, 2005. Ownership information has been provided as of March 31, 2005.
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
------------------------- --------------------------------------------------------
AIM SELECT BASIC VALUE FUND
R. Canon Coleman II 8 Registered Mutual Funds with $10,445,528,127 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management
Matthew W. Seinsheimer 8 Registered Mutual Funds with $10,445,528,127 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
Michael J. Simon 12 Registered Mutual Funds with $11,739,698,220 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management(4)
3577 Other Accounts with $969,329,361 in total assets under management
Bret W. Stanley 11 Registered Mutual Funds with $20,984,130,930 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(4)
AIM WEINGARTEN FUND
James G. Birdsall 5 Registered Mutual Funds with $1,842,889,409 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $18,369,509 in total assets
under management
Lanny H. Sachnowitz 6 Registered Mutual Funds with $9,453,773,386 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $18,369,509 in total assets
under management
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POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically,
portfolio managers who manage multiple Funds and /or other accounts may be presented with one or more of the following potential conflicts:
> The management of multiple Funds and/or other accounts may result in a
portfolio manager devoting unequal time and attention to the management
of each Fund and/or other account. AIM seeks to manage such competing
interests for the time and attention of portfolio managers by having
portfolio managers focus on a particular investment discipline. Most
other accounts managed by a portfolio manager are managed using the
same investment models that are used in connection with the management
of the Funds.
> If a portfolio manager identifies a limited investment opportunity
which may be suitable for more than one Fund or other account, a Fund
may not be able to take full advantage of that opportunity due to an
allocation of filled purchase or sale orders across all eligible Funds
and other accounts. To deal with these situations, AIM and the Funds
have adopted procedures for allocating portfolio transactions across
multiple accounts.
> With respect to securities transactions for the Funds, AIM determines
which broker to use to execute each order, consistent with its duty to
seek best execution of the transaction. However, with respect to
certain other accounts (such as mutual funds for which AIM or an
affiliate acts as sub-advisor, other pooled investment vehicles that
are not registered mutual funds, and other accounts managed for
organizations and individuals), AIM may be limited by the client with
respect to the selection of brokers or may be instructed to direct
trades through a particular broker. In these cases, trades for a Fund
in a particular security may be placed separately from, rather than
aggregated with, such other accounts. Having separate transactions with
respect to a security may temporarily affect the market price of the
security or the execution of the transaction, or both, to the possible
detriment of the Fund or other account(s) involved.
> Finally, the appearance of a conflict of interest may arise where AIM
has an incentive, such as a performance-based management fee, which
relates to the management of one Fund or account but not all Funds and
accounts with respect to which a portfolio manager has day-to-day
management responsibilities.
AIM and the Funds have adopted certain compliance procedures which are
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designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended October 31:
FUND NAME 2004 2003 2002
--------- ---- ---- ----
AIM Aggressive Growth Fund $476,287 $453,825 $383,159
AIM Blue Chip Fund 575,871 540,113 441,011
AIM Capital Development Fund 282,196 240,864 205,580
AIM Charter Fund 585,397 574,103 468,551
AIM Constellation Fund 710,711 696,174 629,514
AIM Diversified Dividend Fund 50,000 50,000 41,781
AIM Large Cap Basic Value Fund 125,883 50,000 50,000
AIM Large Cap Growth Fund 218,708 91,795 87,337
AIM Mid Cap Growth Fund 86,224 50,000 50,000
AIM Select Basic Value Fund(1) 50,000 50,000 8,493
AIM Weingarten Fund 533,540 519,857 450,564
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(1) Commenced operations on August 30, 2002.
APPENDIX J
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 2004 2003 2002
---- ---- ---- ----
AIM Aggressive Growth Fund(2) $ 7,102,771 $ 5,139,873 $ 5,920,899
AIM Blue Chip Fund(3) 2,264,163 2,832,412 4,014,589
AIM Capital Development Fund(4) 2,240,761 3,101,168 4,525,600
AIM Charter Fund(5) 3,381,601 3,525,696 12,272,154
AIM Constellation Fund(6) 10,626,009 13,209,426 16,936,943
AIM Diversified Dividend Fund 67,689 66,926 17,394
AIM Large Cap Basic Value Fund(7) 149,169 280,781 300,919
AIM Large Cap Growth Fund(8) 2,273,002 1,051,689 864,959
AIM Mid Cap Growth Fund 1,108,221 1,267,594 1,118,766
AIM Select Basic Value Fund(9) 431 570 1,313
AIM Weingarten Fund(10) 6,145,868 12,206,561 23,824,701
|
(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 AIM Aggressive Growth Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to the realignment of the Fund's portfolio to fit the investment process of the current management team that assumed management of the Fund in April of 2004.
(3) The variation in brokerage commissions paid by AIM Blue Chip Fund for the fiscal year ended October 31, 2003, as compared to the prior fiscal year was due to a decrease in the average net assets of the Fund.
(4) The variation in brokerage commissions paid by AIM Capital Development Fund for the fiscal year ended October 31, 2003, as compared to the prior fiscal year was due to decrease in portfolio turnover.
(5) The variation in brokerage commissions paid by AIM Charter Fund for the fiscal year ended October 31, 2003, as compared to the two prior fiscal years was due to the repositioning of the Fund in 2002, resulting in decreased portfolio turnover and decreased commissions.
(6) The variation in brokerage commissions paid by AIM Constellation Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
(7) The variation in brokerage commissions paid by AIM Large Cap Basic Value Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
(8) The variation in brokerage commissions paid by AIM Large Cap Growth Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to increased trading costs as a result of acquiring additional assets from the acquisition of INVESCO Growth Fund.
(9) Commenced operations on August 30, 2002.
(10) The variation in brokerage commissions paid by AIM Weingarten Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2004, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions(1) Brokerage Commissions(1)
---- --------------- ------------------------
AIM Aggressive Growth Fund $3,661,519,389.34 $ 7,930,626.33
AIM Blue Chip Fund 1,648,521,328.82 1,915,196.70
AIM Capital Development Fund 1,005,659,315.62 4,761,859.73
AIM Charter Fund 2,131,213,461.20 3,018,888.70
AIM Constellation Fund 6,012,345,994.81 12,147,962.04
AIM Diversified Dividend Fund 91,049,675.43 91,950.71
AIM Large Cap Basic Value Fund 156,558,434.56 129,622.91
AIM Large Cap Growth Fund 1,537,684,180.51 2,048,160.67
AIM Mid Cap Growth Fund 571,548,936.58 1,201,521.39
AIM Select Basic Value Fund 307,888.28 329.61
AIM Weingarten Fund 3,324,018,528.77 5,983,786.10
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(1) Amount is inclusive of commissions paid to, and brokerage transactions placed with, certain brokers that provide execution, research and other services.
During the last fiscal year ended October 31, 2004, 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, 2004)
----------- -------- -------------------------------------
AIM Aggressive Growth Fund
Edwards (A.G), Inc. Common Stock $ 9,065,000
Legg Mason, Inc. Common Stock 28,669,500
Lehman Brothers Holdings Inc. Common Stock 14,376,250
AIM Blue Chip Fund
Goldman Sachs Group, Inc. (The) Common Stock 30,989,700
JP Morgan Chase & Co. Common Stock 52,882,000
Merrill Lynch & Co., Inc. Common Stock 29,667,000
Morgan Stanley Common Stock 25,545,000
AIM Charter Fund
Morgan Stanley Common Stock 29,747,152
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Fund/Issuer Security Market Value (as of October 31, 2004)
----------- -------- -------------------------------------
AIM Constellation Fund
Goldman Sachs Group, Inc. (The) Common Stock $ 24,595,000
JP Morgan Chase & Co. Common Stock 57,900,000
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AIM Diversified Dividend Fund Morgan Stanley Common Stock 2,166,216 AIM Large Cap Basic Value Fund JP Morgan Chase & Co. Common Stock 12,481,542 Merrill Lynch & Co., Inc. Common Stock 6,893,532 Morgan Stanley Common Stock 8,276,580 AIM Mid Cap Growth Fund Legg Mason, Inc. Common Stock 2,357,270 AIM Select Basic Value Fund JP Morgan Chase & Co. Common Stock 45,355 Merrill Lynch & Co., Inc. Common Stock 43,152 AIM Weingarten Fund Goldman Sachs Group, Inc. (The) Common Stock 39,352,000 JP Morgan Chase & Co. Common Stock 38,600,000 Lehman Brothers Holdings Inc. Common Stock 24,645,000 Merrill Lynch & Co., Inc. Common Stock 26,970,000 |
APPENDIX L
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, 2004 follows:
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
FUND SHARES SHARES SHARES SHARES SHARES
---- ------- ------- ------- ------- --------
AIM Aggressive Growth Fund $ 4,656,901 $ 2,595,972 $ 763,418 $ 11,194 $N/A
AIM Blue Chip Fund 4,938,054 11,670,174 2,664,429 27,995 88,542
AIM Capital Development Fund(1) 2,031,361 3,967,972 729,633 14,320 N/A
AIM Charter Fund 5,883,153 10,549,491 1,572,686 11,195 N/A
AIM Constellation Fund 19,016,041 6,702,181 1,845,072 24,911 N/A
AIM Diversified Dividend Fund(2) 134,282 318,360 98,436 N/A N/A
AIM Large Cap Basic Value Fund 525,588 893,755 314,386 3,976 188,897
AIM Large Cap Growth Fund 606,542 1,205,821 499,243 12,219 888,532
AIM Mid Cap Growth Fund 394,349 802,204 291,132 2,920 N/A
AIM Select Basic Value Fund 1,790 3,834 3,834 N/A N/A
AIM Weingarten Fund 6,122,534 5,114,549 873,155 5,355 N/A
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(1) Investor Class shares of AIM Capital Development Fund commenced operations on November 30, 2004.
(2) Investor Class shares of AIM Diversified Dividend Fund commenced operations on April 29, 2005. Class R Shares commenced operations on October 25, 2005.
APPENDIX M
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, 2004, follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATED
ADVERTISING MAILING COMPENSATION COMPENSATION SEMINARS TO MARKETING PERSONNEL
----------- ---------- ------------ ------------ -------- -------------- ----------
AIM Aggressive Growth Fund $ 0 $ 0 $ 0 $ 4,656,901 $ 0 $ 0 $ 0
AIM Blue Chip Fund 133,285 16,266 0 3,930,015 73,185 29,274 756,029
AIM Capital Development Fund 56,996 6,445 0 1,615,541 30,778 10,678 310,923
AIM Charter Fund 97,951 11,901 0 5,153,353 52,383 20,851 546,714
AIM Constellation Fund 310,717 37,958 0 16,677,007 169,055 67,798 1,753,505
AIM Diversified Dividend Fund 3,458 442 0 107,272 2,149 614 20,257
AIM Large Cap Basic Value Fund 14,465 1,658 0 417,799 8,291 3,224 80,151
AIM Large Cap Growth Fund 15,889 1,950 0 481,666 9,557 3,823 93,657
AIM Mid Cap Growth Fund 10,579 1,281 0 313,107 5,930 2,372 61,080
AIM Select Basic Value Fund 0 0 0 0 0 0 0
AIM Weingarten Fund 100,601 12,309 0 5,362,915 55,129 22,264 569,316
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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, 2004, follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATED
ADVERTISING MAILING COMPENSATION COMPENSATION SEMINARS TO MARKETING PERSONNEL
----------- ---------- ------------ ------------ -------- -------------- ---------
AIM Aggressive Growth Fund $ 6,447 $ 789 $ 1,946,979 $ 600,967 $ 3,509 $ 1,316 $ 35,965
AIM Blue Chip Fund 18,222 2,245 8,752,631 2,779,864 9,914 3,998 103,300
AIM Capital Development Fund 5,299 647 2,975,979 952,311 2,904 1,244 29,588
AIM Charter Fund 11,523 1,430 7,912,118 2,549,516 6,354 2,444 66,106
AIM Constellation Fund 13,284 1,631 5,026,636 1,574,918 7,174 2,832 75,706
AIM Diversified Dividend Fund 961 0 238,770 69,332 962 321 8,014
AIM Large Cap Basic Value Fund 1,931 291 670,316 208,498 1,211 404 11,104
AIM Large Cap Growth Fund 2,745 333 904,366 281,134 1,437 616 15,190
AIM Mid Cap Growth Fund 2,075 313 601,653 184,703 1,303 434 11,723
AIM Select Basic Value Fund 0 0 0 0 0 0 0
AIM Weingarten Fund 8,774 1,082 3,835,912 1,212,991 4,844 1,837 49,109
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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, 2004, follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATED
ADVERTISING MAILING COMPENSATION COMPENSATION SEMINARS TO MARKETING PERSONNEL
----------- ---------- ------------ ------------ -------- -------------- ---------
AIM Aggressive Growth Fund $ 3,463 $ 419 $ 89,293 $ 651,350 $ 1,553 $ 776 $ 16,564
AIM Blue Chip Fund 5,948 735 174,327 2,445,731 3,342 1,300 33,046
AIM Capital Development Fund 2,522 289 71,083 640,277 1,406 602 13,454
AIM Charter Fund 2,905 352 85,471 1,465,562 1,628 651 16,117
AIM Constellation Fund 5,592 668 171,114 1,630,368 3,246 1,391 32,693
AIM Diversified Dividend Fund 734 0 30,803 59,931 733 6,234
AIM Large Cap Basic Value Fund 1,133 53 42,686 261,029 889 296 8,300
AIM Large Cap Growth Fund 3,496 436 93,456 381,894 1,815 907 17,239
AIM Mid Cap Growth Fund 1,680 130 53,209 224,530 1,086 362 10,135
AIM Select Basic Value Fund 0 0 0 0 0 0 0
AIM Weingarten Fund 2,830 343 72,966 781,577 1,269 634 13,536
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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, 2004, follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATED
ADVERTISING MAILING COMPENSATION COMPENSATION SEMINARS TO MARKETING PERSONNEL
----------- ---------- ------------ ------------ -------- -------------- ---------
AIM Aggressive Growth Fund $ 191 $ 25 $ 0 $ 9,681 $ 102 $ 31 $ 1,164
AIM Blue Chip Fund 439 66 0 24,229 244 57 2,960
AIM Capital Development Fund 260 32 0 12,293 156 66 1,513
AIM Charter Fund 213 26 0 9,622 110 32 1,192
AIM Constellation Fund 472 55 0 21,565 236 100 2,483
AIM Diversified Dividend Fund(1) 0 0 0 0 0 0 0
AIM Large Cap Basic Value Fund 78 10 0 3,294 51 18 524
AIM Large Cap Growth Fund 187 25 0 10,710 112 37 1,148
AIM Mid Cap Growth Fund 81 9 0 2,381 39 19 391
AIM Select Basic Value Fund 0 0 0 0 0 0 0
AIM Weingarten Fund 164 16 0 4,365 71 35 705
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(1) Class R Shares of AIM Diversified Dividend Fund commenced operations on October 25, 2005.
An estimate by category of the allocation of actual fees paid by Investor Class shares of the Funds during the fiscal year ended October 31, 2004, follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATED
ADVERTISING MAILING COMPENSATION COMPENSATION SEMINARS TO MARKETING PERSONNEL
----------- ---------- ------------ ------------ -------- -------------- ---------
AIM Aggressive Growth Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
AIM Blue Chip Fund 4,156 0 0 52,523 2,771 1,385 27,707
AIM Capital Development Fund(1) 0 0 0 0 0 0 0
AIM Charter Fund 0 0 0 0 0 0 0
AIM Constellation Fund 0 0 0 0 0 0 0
AIM Diversified Dividend Fund(2) 0 0 0 0 0 0 0
AIM Large Cap Basic Value Fund 4,014 509 0 161,469 1,979 566 20,360
AIM Large Cap Growth Fund 39,359 4,731 0 610,418 21,198 4,240 208,586
AIM Mid Cap Growth Fund 0 0 0 0 0 0 0
AIM Select Basic Value Fund 0 0 0 0 0 0 0
AIM Weingarten Fund 0 0 0 0 0 0 0
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(1) Investor Class shares of AIM Capital Development Fund commenced operations on November 30, 2004.
(2) Investor Class shares of AIM Diversified Dividend Fund commenced operations on July 18, 2005.
APPENDIX N
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:
2004 2003 2002
----------------------- ----------------------- ------------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
---------- ---------- ---------- -------- ---------- ----------
AIM Aggressive Growth Fund $1,278,331 $ 227,703 $ 1,477,466 $247,028 $2,490,945 $ 401,540
AIM Blue Chip Fund 2,001,577 330,881 2,166,217 345,660 3,369,955 524,961
AIM Capital Development Fund 1,053,950 171,202 650,576 104,786 1,081,325 167,124
AIM Charter Fund 1,424,204 234,197 1,630,264 266,509 2,445,644 387,132
AIM Constellation Fund 4,354,421 743,284 5,079,332 829,628 7,869,917 1,272,976
AIM Diversified Dividend Fund 392,983 64,410 229,293 36,213 70,911 11,277
AIM Large Cap Basic Value Fund 464,545 78,339 350,376 57,471 447,812 72,325
AIM Large Cap Growth Fund 497,494 83,801 388,322 64,104 567,190 89,304
AIM Mid Cap Growth Fund 457,622 77,275 324,066 51,252 456,202 70,433
AIM Select Basic Value Fund(1) N/A N/A N/A N/A N/A N/A
AIM Weingarten Fund 1,486,620 252,306 1,731,309 286,925 2,965,221 482,681
|
(1) 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:
2004 2003 2002
----------- ---------- -----------
AIM Aggressive Growth Fund $ 62,248 $ 63,023 $ 88,844
AIM Blue Chip Fund 124,827 47,754 107,445
AIM Capital Development Fund 31,883 8,033 15,360
AIM Charter Fund 70,086 15,403 69,358
AIM Constellation Fund 115,355 17,015 183,857
AIM Diversified Dividend Fund 10,486 593 83
AIM Large Cap Basic Value Fund 17,199 5,191 10,512
AIM Large Cap Growth Fund 18,165 4,838 19,917
AIM Mid Cap Growth Fund 16,576 3,045 16,428
AIM Select Basic Value Fund(1) N/A N/A N/A
AIM Weingarten Fund 64,694 11,387 61,852
|
(1) Commenced operations on August 30, 2002
APPENDIX O
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -3.12% -9.25% 6.22% N/A 05/01/1984
AIM Blue Chip Fund -5.43 -10.20 6.48 N/A 02/04/1987
AIM Capital Development Fund -1.17 -0.80 N/A 8.52% 06/17/1996
AIM Charter Fund -1.51 -7.62 7.60 N/A 11/26/1968
AIM Constellation Fund -4.45 -9.97 5.53 N/A 04/30/1976
AIM Diversified Dividend 2.6 N/A N/A 4.82 12/31/2001
AIM Large Cap Basic Value Fund -2.02 3.31 N/A 4.34 06/30/1999
AIM Large Cap Growth Fund -4.35 -12.07 N/A -2.07 03/01/1999
AIM Mid Cap Growth Fund -5.64 -10.74 N/A -2.49 11/01/1999
AIM Select Basic Value Fund -3.67 N/A N/A 9.10 08/30/2002
AIM Weingarten Fund -3.42 -15.98 3.70 N/A 06/17/1969
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
-------------------------------------------------------------------------
INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -3.22% -9.21% N/A 2.85% 03/01/1999
AIM Blue Chip Fund -5.55 -10.14 N/A 3.68 10/01/1996
AIM Capital Development Fund -0.87 -0.62 N/A 7.33 10/01/1996
AIM Charter Fund -1.45 -7.58 N/A 6.84 06/26/1995
AIM Constellation Fund -4.59 -9.88 N/A 0.16 11/03/1997
AIM Diversified Dividend 2.99 N/A N/A 5.40 12/31/2001
AIM Large Cap Basic Value Fund -2.08 N/A N/A 3.06 08/01/2000
AIM Large Cap Growth Fund -4.43 -12.00 N/A -3.50 04/05/1999
AIM Mid Cap Growth Fund -5.64 -10.68 N/A -2.34 11/01/1999
AIM Select Basic Value Fund -2.95 N/A N/A 10.48 08/30/2002
AIM Weingarten Fund -3.45 -15.90 N/A 2.77 06/26/1995
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
---------------------------------------------------------------------------
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE
------- ------- -------- --------------- --------------
AIM Aggressive Growth Fund 0.78% -8.92% N/A 2.85% 03/01/1999
AIM Blue Chip Fund -1.57 -9.77 N/A 0.08 08/04/1997
AIM Capital Development Fund 2.90 -0.32 N/A 5.62 08/04/1997
AIM Charter Fund 2.45 -7.23 N/A 1.75 08/04/1997
AIM Constellation Fund -0.55 -9.58 N/A 0.04 08/04/1997
AIM Diversified Dividend 6.91 N/A N/A 5.88 12/31/2001
AIM Large Cap Basic Value Fund 2.01 N/A N/A 3.44 08/01/2000
AIM Large Cap Growth Fund -0.55 -11.64 N/A -3.50 04/05/1999
AIM Mid Cap Growth Fund -1.67 -10.33 N/A -2.16 11/01/1999
AIM Select Basic Value Fund 0.94 N/A N/A 11.43 08/30/2002
AIM Weingarten Fund 0.55 -15.61 N/A -2.72 08/04/1997
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
---------------------------------------------------------------------------
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE(3)
------ ------- -------- --------------- ---------------
AIM Aggressive Growth Fund(1) 2.36% -8.47% 6.54% N/A 05/01/1984
AIM Blue Chip Fund(1) -0.18 -9.32 6.92 N/A 02/04/1987
AIM Capital Development Fund(1) 4.41 0.17 N/A 9.04% 06/17/1996
AIM Charter Fund(1) 4.00 -6.79 7.98 N/A 11/26/1968
AIM Constellation Fund(1) 0.90 -9.07 5.96 N/A 04/30/1976
AIM Diversified Dividend Fund(2) 8.47 N/A N/A 6.45 12/31/2001
AIM Large Cap Basic Value Fund(1) 3.42 4.30 N/A 5.18 06/30/1999
AIM Large Cap Growth Fund(1) 1.10 -11.18 N/A -1.29 03/01/1999
AIM Mid Cap Growth Fund(1) -0.22 -9.88 N/A -1.65 11/01/1999
AIM Weingarten Fund(1) 2.03 -15.19 4.08 N/A 06/17/1969
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2003 and the restated historical performance of the Funds' Class A shares (for the 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.
(2) The returns shown for these periods are the restated historical performance of AIM Diversified Dividend Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of Class R shares for all funds except AIM Diversified Dividend Fund is June 3, 2002. The inception date for Class R share of AIM Diversified Dividend is October 25, 2005.
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 are as follows:
PERIODS ENDED APRIL 30, 2005
---------------------------------------------------------------------------
INVESTOR SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE(4)
------ ------- -------- --------------- ---------------
AIM Blue Chip Fund(1) 0.09% -9.15% 7.10% N/A 02/04/1987
AIM Capital Development Fund(2) 4.63 0.35 N/A 9.22% 06/17/1996
AIM Diversified Dividend Fund(3) 3.72 4.51 N/A 5.38 12/31/2001
AIM Large Cap Basic Value Fund(1) 1.42 -10.97 N/A -1.07 06/30/1999
AIM Large Cap Growth Fund(1) 0.09 -9.15 7.10 N/A 03/01/1999
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance 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 Class A shares' 12b-1 fee.
(2) The returns shown for these periods are the blended returns of the historical performance of AIM Capital Development Funds' Investor Class shares since November 30, 2004 and the restated historical performance of the Fund's Class A shares (for periods prior to November 30, 2004) at net asset value, and reflect the Class A shares' 12b-1 fee.
(3) The returns shown for these periods are the blended returns of the historical performance of AIM Diversified Dividend Funds Investor Class shares since April 29, 2005 and the restated historical performance of the Fund's Class A shares (for periods prior to April 29, 2005) at net asset value, and reflect the Class A shares' 12b-1 fee.
(4) 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 and AIM Diversified Dividend Fund) is September 30, 2003. The inception date of the Investor Class shares of AIM Capital Development Fund is November 30, 2004. The inception date of the Investor Class shares of AIM Diversified Dividend Fund is July 18, 2005.
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 are as follows:
PERIODS ENDED APRIL 30, 2005
--------------------------------------------------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE
------ ------- -------- --------------- --------------
AIM Aggressive Growth Fund -3.12% -38.45% 82.83% N/A 05/01/1984
AIM Blue Chip Fund -5.43 -41.62 87.33 N/A 02/04/1987
AIM Capital Development Fund -1.17 -3.91 N/A 106.43% 06/17/1996
AIM Charter Fund -1.51 -32.72 108.08 N/A 11/26/1968
AIM Constellation Fund -4.45 -40.86 71.37 N/A 04/30/1976
AIM Diversified Dividend 2.61 N/A N/A 16.96 12/31/2001
AIM Large Cap Basic Value Fund -2.02 17.71 N/A 28.16 06/30/1999
AIM Large Cap Growth Fund -4.35 -47.44 N/A -12.08 03/01/1999
AIM Mid Cap Growth Fund -5.64 -43.32 N/A -12.95 11/01/1999
AIM Select Basic Value Fund -3.67 N/A N/A 26.13 08/30/2002
AIM Weingarten Fund -3.42 -58.12 43.77 N/A 06/17/1969
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
-----------------------------------------------------------------------
INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -3.22% -38.33% N/A 18.89% 03/01/1999
AIM Blue Chip Fund -5.55 -41.41 N/A 36.31 10/01/1996
AIM Capital Development Fund -0.87 -3.05 N/A 83.52 10/01/1996
AIM Charter Fund -1.45 -32.56 N/A 91.91 06/26/1995
AIM Constellation Fund -4.59 -40.55 N/A 1.23 11/03/1997
AIM Diversified Dividend 2.99 N/A N/A 19.15 12/31/2001
AIM Large Cap Basic Value Fund -2.08 N/A N/A 15.38 08/01/2000
AIM Large Cap Growth Fund -4.43 -47.23 N/A -19.42 04/05/1999
AIM Mid Cap Growth Fund -5.64 -43.15 N/A -12.19 11/01/1999
AIM Select Basic Value Fund -2.95 N/A N/A 30.45 08/30/2002
AIM Weingarten Fund -3.45 -57.93 N/A 30.86 06/26/1995
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund 0.78% -37.31% N/A 18.91% 03/01/1999
AIM Blue Chip Fund -1.57 -40.21 N/A 0.60 08/04/1997
AIM Capital Development Fund 2.90 -1.60 N/A 52.64 08/04/1997
AIM Charter Fund 2.45 -31.29 N/A 14.36 08/04/1997
AIM Constellation Fund -0.55 -39.56 N/A 0.31 08/04/1997
AIM Diversified Dividend 6.91 N/A N/A 20.95 12/31/2001
AIM Large Cap Basic Value Fund 2.01 N/A N/A 17.38 08/01/2000
AIM Large Cap Growth Fund -0.55 -46.15 N/A -19.42 04/05/1999
AIM Mid Cap Growth Fund -1.67 -42.03 N/A -11.30 11/01/1999
AIM Select Basic Value Fund 0.94 N/A N/A 33.45 08/30/2002
AIM Weingarten Fund 0.55 -57.20 N/A -19.20 08/04/1997
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE(3)
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund(1) 2.36% -35.76% 88.47% N/A 05/01/1984
AIM Blue Chip Fund(1) -0.18 -38.69 95.28 N/A 02/04/1987
AIM Capital Development Fund(1) 4.41 0.86 N/A 115.43% 06/17/1996
AIM Charter Fund(1) 4.00 -29.65 115.40 N/A 11/26/1968
AIM Constellation Fund(1) 0.90 -37.83 78.38 N/A 04/30/1976
AIM Diversified Dividend Fund(2) 8.47 N/A N/A 23.12 12/31/2001
AIM Large Cap Basic Value Fund(1) 3.42 23.45 N/A 34.28 06/30/1999
AIM Large Cap Growth Fund(1) 1.10 -44.73 N/A -7.71 03/01/1999
AIM Mid Cap Growth Fund(1) -0.22 -40.55 N/A -8.76 11/01/1999
AIM Weingarten Fund(1) 2.03 -56.12 49.15 N/A 06/17/1969
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2003 and the restated historical performance of the Funds' Class A shares (for the 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.
(2) The returns shown for these periods are the restated historical performance of AIM Diversified Dividend Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of Class R shares for all funds except AIM Diversified Dividend Fund is June 3, 2002. The inception date for Class R share of AIM Diversified Dividend is October 25, 2005.
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 are as follows:
PERIODS ENDED APRIL 30, 2005
--------------------------------------------------------------------------
INVESTOR SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE(4)
------ ------- -------- --------------- ---------------
AIM Blue Chip Fund(1) 0.09% -38.11% 98.63% N/A 02/04/1987
AIM Capital Development Fund(2) 4.63 1.74 N/A 118.53% 06/17/1996
AIM Diversified Dividend Fund(3) 3.72 24.70 N/A 35.81 12/31/2001
AIM Large Cap Basic Value Fund(1) 1.42 -44.07 N/A -6.45 06/30/1999
AIM Large Cap Growth Fund(1) 0.09 -38.11 98.63 N/A 03/01/1999
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance 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 Class A shares' 12b-1 fee.
(2) The returns shown for these periods are the blended returns of the historical performance of AIM Capital Development Funds' Investor Class shares since November 30, 2004 and the restated historical performance of the Fund's Class A shares (for periods prior to November 30, 2004) at net asset value, and reflect the Class A shares' 12b-1 fee.
(3) The returns shown for these periods are the blended returns of the historical performance of AIM Diversified Dividend Funds Investor Class shares since April 29, 2005 and the restated historical performance of the Fund's Class A shares (for periods prior to April 29, 2005) at net asset value, and reflect the Class A shares' 12b-1 fee.
(4) 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 and AIM Diversified Dividend Fund) is September 30, 2003. The inception date of the Investor Class shares of AIM Capital Development Fund is November 30, 2004. The inception date of the Investor Class shares of AIM Diversified Dividend Fund is July 18, 2005.
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -3.12% -10.02% 5.22% N/A 05/01/1984
AIM Blue Chip Fund -5.43 -10.20 5.74 N/A 02/04/1987
AIM Capital Development Fund -2.26 -1.92 N/A 7.82% 06/17/1996
AIM Charter Fund -1.63 -7.85 6.11 N/A 11/26/1968
AIM Constellation Fund -4.45 -10.72 4.48 N/A 04/30/1976
AIM Dent Demographic Fund -4.80 -13.90 N/A -4.75 06/07/1999
AIM Diversified Dividend 1.96 N/A N/A 4.56 12/31/2001
AIM Emerging Growth Fund -3.86 -8.14 N/A -8.66 03/31/2000
AIM Large Cap Basic Value Fund -2.02 3.27 N/A 4.09 06/30/1999
AIM Large Cap Growth Fund -4.35 -12.07 N/A -2.07 03/01/1999
AIM Mid Cap Growth Fund -5.64 -10.74 N/A -2.49 11/01/1999
AIM Select Basic Value Fund -4.31 N/A N/A 8.64 08/30/2002
AIM Weingarten Fund -3.42 -16.47 1.71 N/A 06/17/1969
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -3.22% -10.01% N/A 1.78% 03/01/1999
AIM Blue Chip Fund -5.55 -10.14 N/A 3.31 10/01/1996
AIM Capital Development Fund -2.09 -1.81 N/A 6.60 10/01/1996
AIM Charter Fund -1.47 -7.79 N/A 5.44 06/26/1995
AIM Constellation Fund -4.59 -10.66 N/A -0.95 11/03/1997
AIM Dent Demographic Fund -4.87 -13.84 N/A -4.62 06/07/1999
AIM Diversified Dividend 2.46 N/A N/A 5.22 12/31/2001
AIM Emerging Growth Fund -4.03 -8.07 N/A -8.41 03/31/2000
AIM Large Cap Basic Value Fund -2.08 N/A N/A 3.02 08/01/2000
AIM Large Cap Growth Fund -4.43 -12.00 N/A -3.50 04/05/1999
AIM Mid Cap Growth Fund -5.64 -10.68 N/A -2.34 11/01/1999
AIM Select Basic Value Fund -3.63 N/A N/A 10.01 08/30/2002
AIM Weingarten Fund -3.45 -16.43 N/A 0.74 06/26/1995
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
------------------------------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund 0.78% -9.70% N/A 1.79% 03/01/1999
AIM Blue Chip Fund -1.57 -9.77 N/A 0.00 08/04/1997
AIM Capital Development Fund 1.69 -1.50 N/A 4.81 08/04/1997
AIM Charter Fund 2.43 -7.44 N/A 0.76 08/04/1997
AIM Constellation Fund -0.55 -10.35 N/A -1.03 08/04/1997
AIM Dent Demographic Fund -0.87 -13.49 N/A -4.46 06/07/1999
AIM Diversified Dividend 6.38 N/A N/A 5.70 12/31/2001
AIM Emerging Growth Fund -0.03 -7.69 N/A -8.23 03/31/2000
AIM Large Cap Basic Value Fund 2.01 N/A N/A 3.40 08/01/2000
AIM Large Cap Growth Fund -0.55 -11.64 N/A -3.50 04/05/1999
AIM Mid Cap Growth Fund -1.67 -10.33 N/A -2.16 11/01/1999
AIM Select Basic Value Fund 0.26 N/A N/A 10.96 08/30/2002
AIM Weingarten Fund 0.55 -16.13 N/A -4.15 08/04/1997
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
--------------------------------------------------------------------------
INVESTOR SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE(4)
------ ------- -------- --------------- ---------------
AIM Blue Chip Fund(1) 0.09% -9.15% 6.36% N/A 02/04/1987
AIM Capital Development Fund(2) 3.48 -0.80 N/A 8.51% 06/17/1996
AIM Diversified Dividend Fund(3) 3.72 4.47 N/A 5.13 12/31/2001
AIM Large Cap Basic Value Fund(1) 1.42 -10.97 N/A -1.07 06/30/1999
AIM Large Cap Growth Fund(1) 0.09 -9.15 6.36 N/A 03/01/1999
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance 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 Class A shares' 12b-1 fee.
(2) The returns shown for these periods are the blended returns of the historical performance of AIM Capital Development Funds' Investor Class shares since November 30, 2004 and the restated historical performance of the Fund's Class A shares (for periods prior to November 30, 2004) at net asset value, and reflect the Class A shares' 12b-1 fee.
(3) The returns shown for these periods are the blended returns of the historical performance of AIM Diversified Dividend Funds Investor Class shares since April 29, 2005 and the restated historical performance of the Fund's Class A shares (for periods prior to April 29, 2005) at net asset value, and reflect the Class A shares' 12b-1 fee.
(4) 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 and AIM Diversified Dividend Fund) is September 30, 2003. The inception date of the Investor Class shares of AIM Capital Development Fund is November 30, 2004. The inception date of the Investor Class shares of AIM Diversified Dividend Fund is July 18, 2005.
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 are as follows:
PERIODS ENDED APRIL 30, 2005
----------------------------------------------------------------------
INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -2.02% -7.66% 5.22% N/A 05/01/1984
AIM Blue Chip Fund -3.53 -8.36 5.24 N/A 02/04/1987
AIM Capital Development Fund 0.81 -1.09 N/A 7.25% 06/17/1996
AIM Charter Fund -0.81 -6.33 5.88 N/A 11/26/1968
AIM Constellation Fund -2.90 -8.20 4.61 N/A 04/30/1976
AIM Dent Demographic Fund -3.12 -11.20 N/A -3.96 06/07/1999
AIM Diversified Dividend 2.16 N/A N/A 4.06 12/31/2001
AIM Emerging Growth Fund -2.51 -6.63 N/A -7.04 03/31/2000
AIM Large Cap Basic Value Fund -1.31 2.82 N/A 3.57 06/30/1999
AIM Large Cap Growth Fund -2.83 -9.81 N/A -1.74 03/01/1999
AIM Mid Cap Growth Fund -3.66 -8.78 N/A -2.10 11/01/1999
AIM Select Basic Value Fund -1.48 N/A N/A 7.69 08/30/2002
AIM Weingarten Fund -2.22 -12.67 2.57 N/A 06/17/1969
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
----------------------------------------------------------------------
INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund -2.09% -7.61% N/A 2.37% 03/01/1999
AIM Blue Chip Fund -3.60 -8.31 N/A 2.98 10/01/1996
AIM Capital Development Fund 1.20 -0.96 N/A 6.16 10/01/1996
AIM Charter Fund -0.93 -6.30 N/A 5.27 06/26/1995
AIM Constellation Fund -2.99 -8.11 N/A 0.02 11/03/1997
AIM Dent Demographic Fund -3.16 -11.15 N/A -3.86 06/07/1999
AIM Diversified Dividend 2.36 N/A N/A 4.59 12/31/2001
AIM Emerging Growth Fund -2.62 -6.56 N/A -6.83 03/31/2000
AIM Large Cap Basic Value Fund -1.35 N/A N/A 2.60 08/01/2000
AIM Large Cap Growth Fund -2.88 -9.75 N/A -2.93 04/05/1999
AIM Mid Cap Growth Fund -3.66 -8.73 N/A -1.97 11/01/1999
AIM Select Basic Value Fund -0.96 N/A N/A 8.89 08/30/2002
AIM Weingarten Fund -2.24 -12.59 N/A 1.80 06/26/1995
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
-----------------------------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION DATE
------ ------- -------- --------------- ----------
AIM Aggressive Growth Fund 0.51% -7.37% N/A 2.38% 03/01/1999
AIM Blue Chip Fund -1.02 -8.02 N/A 0.03 08/04/1997
AIM Capital Development Fund 3.65 -0.70 N/A 4.58 08/04/1997
AIM Charter Fund 1.61 -6.02 N/A 1.08 08/04/1997
AIM Constellation Fund -0.35 -7.87 N/A -0.08 08/04/1997
AIM Dent Demographic Fund -0.56 -10.89 N/A -3.72 06/07/1999
AIM Diversified Dividend 4.91 N/A N/A 5.00 12/31/2001
AIM Emerging Growth Fund -0.02 -6.26 N/A -6.69 03/31/2000
AIM Large Cap Basic Value Fund 1.30 N/A N/A 2.92 08/01/2000
AIM Large Cap Growth Fund -0.36 -9.48 N/A -2.93 04/05/1999
AIM Mid Cap Growth Fund -1.08 -8.46 N/A -1.82 11/01/1999
AIM Select Basic Value Fund 1.57 N/A N/A 9.72 08/30/2002
AIM Weingarten Fund 0.36 -12.38 N/A -2.39 08/04/1997
|
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 are as follows:
PERIODS ENDED APRIL 30, 2005
--------------------------------------------------------------------------
INVESTOR SHARES: 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE(4)
------ ------- -------- --------------- ---------------
AIM Blue Chip Fund(1) 0.06% -7.53% 5.81% N/A 02/04/1987
AIM Capital Development Fund(2) 4.67 -0.13 N/A 7.88% 06/17/1996
AIM Diversified Dividend Fund(3) 2.42 3.86 N/A 4.48 12/31/2001
AIM Large Cap Basic Value Fund(1) 0.92 -8.96 N/A -0.91 06/30/1999
AIM Large Cap Growth Fund(1) 0.06 -7.53 5.81 N/A 03/01/1999
|
(1) The returns shown for the five and ten year periods and since inception, as applicable, are the blended returns of the historical performance 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 Class A shares' 12b-1 fee.
(2) The returns shown for these periods are the blended returns of the historical performance of AIM Capital Development Funds' Investor Class shares since November 30, 2004 and the restated historical performance of the Fund's Class A shares (for periods prior to November 30, 2004) at net asset value, and reflect the Class A shares' 12b-1 fee.
(3) The returns shown for these periods are the blended returns of the historical performance of AIM Diversified Dividend Funds Investor Class shares since April 29, 2005 and the restated historical performance of the Fund's Class A shares (for periods prior to April 29, 2005) at net asset value, and reflect the Class A shares' 12b-1 fee.
(4) 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 and AIM Diversified Dividend Fund) is September 30, 2003. The inception date of the Investor Class shares of AIM Capital Development Fund is November 30, 2004. The inception date of the Investor Class shares of AIM Diversified Dividend Fund is July 18, 2005.
APPENDIX P-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 Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived as of August 19, 2005 (with the exception of the Sayegh lawsuit discussed below).
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.
ANNE G. PERENTESIS (WIDOW) v. AIM INVESTMENTS, ET AL (INVESCO FUNDS
GROUP, INC.), in the District Court of Maryland for Baltimore County
(Case No. 080400228152005), filed on July 21, 2005. This claim alleges
financial losses, mental anguish and emotional distress as a result of
unlawful market timing and related activity by the defendants. The
plaintiff in this case is seeking damages and costs and expenses.
Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits
(with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc.
et al., Mike Sayegh v. Janus Capital Corporation, et al. and Anne G. Perentesis
(widow) v. AIM Investments, et al.) consolidated their claims for pre-trial
purposes into three amended complaints against various AIM- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds (the Lepera lawsuit discussed below);
(ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on
behalf of the AIM Funds and fund registrants (the Essenmacher lawsuit discussed
below); and (iii) an Amended Class Action Complaint for Violations of the
Employee Retirement Income Securities Act ("ERISA") purportedly brought on
behalf of participants in AMVESCAP's 401(k) plan (the Calderon lawsuit discussed
below). The plaintiffs in the Vonder Haar and Sayegh lawsuits continue to seek
remand of their lawsuits to state court. Set forth below is detailed information
about these three amended complaints.
RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS
MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND FUNDS, AIM SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO DISTRIBUTORS, INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY J. MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN GOLDBERG, MICHAEL GRADY, CITIGROUP, INC., CITIGROUP GLOBAL MARKETS HOLDINGS, INC., SALOMON SMITH BARNEY, INC., MORGAN STANLEY DW, ANNA BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO. SECURITIES INC., SECURITY TRUST COMPANY, N.A., GRANT D. SEEGER, JB OXFORD HOLDINGS, INC., NATIONAL CLEARING CORPORATION,
JAMES G. LEWIS, KRAIG L. KIBBLE, JAMES Y. LIN, BANK OF AMERICA
CORPORATION, BANC OF AMERICA SECURITIES LLC, THEODORE C. SIHPOL, III,
BEAR STEARNS & CO., INC., BEAR STEARNS SECURITIES CORP., CHARLES SCHWAB
& CO., CREDIT SUISSE FIRST BOSTON (USA) INC., PRUDENTIAL FINANCIAL,
INC., PRUDENTIAL SECURITIES, INC., CANADIAN IMPERIAL BANK OF COMMERCE,
JP MORGAN CHASE AND CO., AND JOHN DOE DEFENDANTS 1-100, in the MDL
Court (Case No. 04-MD-15864; No. 04-CV-00814-JFM) (originally in the
United States District Court for the District of Colorado), filed on
September 29, 2004. This lawsuit alleges violations of Sections 11,
12(a) (2), and 15 of the Securities Act; Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder; Section 20(a) of the
Exchange Act; Sections 34(b), 36(a), 36(b) and 48(a) of the Investment
Company Act; breach of fiduciary duty/constructive fraud; aiding and
abetting breach of fiduciary duty; and unjust enrichment. The
plaintiffs in this lawsuit are seeking: compensatory damages, including
interest; and other costs and expenses, including counsel and expert
fees.
CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS
CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY,
SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN,
HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON
SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY
SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND
CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V.
AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC.,
INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED,
INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC.,
AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS,
INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R.
CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL
BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H.
BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL,
RONALD L. GROOMS, WILLIAM J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S.
BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M.
FIELDS, CARL FRISCHILING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H.
QUIGLEY, LOUIS S. SKLAR, OWEN DALY II, AURUM SECURITIES CORP., AURUM
CAPITAL MANAGEMENT CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF
AMERICA CORP., BANC OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A.,
BEAR STEARNS & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL
PARTNERS, LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN,
CANADIAN IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN
GOLDBERG, MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE
& CO., OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA
MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE
INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND CORPORATIONS THAT
COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT WERE MANAGED BY INVESCO
AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No.
04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This lawsuit
alleges violations of Sections 206 and 215 of the Investment Advisers
Act; Sections 36(a), 36(b) and 47 of the Investment Company Act;
control person liability under Section 48 of the Investment Company
Act; breach of fiduciary duty; aiding and abetting breach of fiduciary
duty; breach of contract; unjust enrichment; interference with
contract; and civil conspiracy. The plaintiffs in this lawsuit are
seeking: removal of director defendants; removal of adviser,
sub-adviser and distributor defendants; rescission of management and
other contracts between the Funds and defendants; rescission of 12b-1
plans; disgorgement of management fees and other compensation/profits
paid to adviser
defendants; compensatory and punitive damages; and fees and expenses, including attorney and expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL
TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F.
MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R.
CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on
September 29, 2004. This lawsuit alleges violations of ERISA Sections
404, 405 and 406. The plaintiffs in this lawsuit are seeking:
declaratory judgment; restoration of losses suffered by the plan;
disgorgement of profits; imposition of a constructive trust; injunctive
relief; compensatory damages; costs and attorneys' fees; and equitable
restitution.
APPENDIX P-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM 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 August 19, 2005.
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 these cases are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. The Third Judicial Circuit Court for Madison County, Illinois has issued an order severing the claims of plaintiff Parthasarathy from the claims of the other plaintiffs against AIM and other defendants. As a result, AIM is a defendant in the following severed action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and the relief sought in the Woodbury lawsuit are identical to those in the Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury lawsuit removed the action to Federal Court (U.S. District Court, Southern District of Illinois, No. 05-CV-302-DRH). Based on a recent Federal appellate court decision (the "Kircher" case), AIM and the other defendants in the Woodbury lawsuit removed the action to Federal court (U.S. District Court, Southern District of Illinois, Cause No. 05-CV-302-DRH) on April 22, 2005. On April 26, 2005, AIM and the other defendants filed their Motion to Dismiss the plaintiffs' state law based claims. On June 10, 2005, the Court dismissed the Woodbury lawsuit based upon the Kircher ruling and ordered the court clerk to close this case. Plaintiffs filed a Motion to Amend the Judgment arguing that the Kircher ruling does not apply to require the dismissal of the claims against AIM in the Woodbury lawsuit. On July 7, 2005, the Court denied this Motion.
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. This lawsuit has been transferred to the MDL Court by order of
the United States District Court, Southern District of Illinois (East
St. Louis).
APPENDIX P-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR 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/or 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 August 19, 2005.
All of the lawsuits discussed below 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. By order of the United States District Court for the Southern District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed below have been consolidated for pre-trial purpose into the Berdat lawsuit discussed below and administratively closed.
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 P-4
PENDING LITIGATION ALLEGING IMPROPER CHARGING OF DISTRIBUTION FEES
ON LIMITED OFFERING FUNDS OR SHARE CLASSES
The following civil lawsuits, including shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, ADI and/or certain of the trustees of the AIM Funds and allege that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of August 19, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the Lieber lawsuit discussed below has been consolidated for pre-trial purposes into the Zucker lawsuit discussed below and administratively closed.
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. In March 2005, the parties
entered a Stipulation whereby, among other things, the plaintiff agreed
to dismiss without prejudice all claims against all of the individual
defendants and his claims based on state law causes of action. This
effectively limits this case to alleged violations of Section 36(b)
against ADI.
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, INVESCO 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. In
March 2005, the parties entered a Stipulation whereby, among other
things, the plaintiff agreed to dismiss without prejudice all claims
against all of the individual defendants and his claims based on state
law causes of action. This effectively limits this case to alleged
violations of Section 36(b) against ADI.
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 P-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 Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM 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 August 19, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On June 7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they make substantially identical allegations to those of the individual underlying lawsuits. However, the City of Chicago Deferred Compensation Plan has been joined as an additional plaintiff in the Consolidated Amended Complaint. Plaintiffs added defendants, including current and former directors/trustees of the AIM Funds formerly advised by IFG.
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.
APPENDIX P-6
PENDING LITIGATION ALLEGING FAILURE TO ENSURE PARTICIPATION IN
CLASS ACTION SETTLEMENTS
The following civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, AIM Capital and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate. This lawsuit was dismissed by the Court on August 12, 2005.
AVO HOGAN AND JULIAN W. MEADOWS, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, V. BOB R. BAKER, FRANK S. BAYLEY, JAMES T. BUNCH, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, ROBERT H. GRAHAM, GERALD J. LEWIS, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, LARRY SOLL, PH.D, MARK H. WILLIAMSON, AIM INVESTMENTS, LTD., AIM ADVISORS, INC., AIM CAPITAL MANAGEMENT, INC., INVESCO INSTITUTIONAL (N.A.), INC. AND JOHN DOES NO. 1 THROUGH 100, in the United States District Court, Northern District of Texas (Civil Action No. 3:05-CV-73-P), filed on January 11, 2005. This claim alleges violations of Sections 36(a), 36(b) and 47(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty and negligence. The plaintiffs in this case are seeking: compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and counsel fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X, unaudited financials for the period ended April 30, 2005, for Registrant's portfolios have been included in addition to the portfolios' audited financials for the period ended October 31, 2004. 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 REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS-95.48%
ADVERTISING-1.94%
Lamar Advertising Co.-Class A(a)(b) 350,000 $ 14,497,000
---------------------------------------------------------------------------
Omnicom Group Inc. 300,000 23,670,000
===========================================================================
38,167,000
===========================================================================
AIRLINES-0.80%
Southwest Airlines Co. 1,000,000 15,770,000
===========================================================================
APPAREL RETAIL-3.93%
Aeropostale, Inc.(a)(c) 475,000 14,986,250
---------------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 500,000 11,230,000
---------------------------------------------------------------------------
Foot Locker, Inc. 500,000 12,200,000
---------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)(b) 490,800 15,254,064
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a)(c) 1,000,000 23,440,000
===========================================================================
77,110,314
===========================================================================
APPLICATION SOFTWARE-4.15%
Amdocs Ltd. (United Kingdom)(a) 625,000 15,718,750
---------------------------------------------------------------------------
Citrix Systems, Inc.(a)(b) 750,000 18,097,500
---------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 450,000 17,779,500
---------------------------------------------------------------------------
Mercury Interactive Corp.(a) 425,000 18,457,750
---------------------------------------------------------------------------
Synopsys, Inc.(a) 700,000 11,368,000
===========================================================================
81,421,500
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-5.61%
Affiliated Managers Group, Inc.(a)(b) 300,000 16,752,000
---------------------------------------------------------------------------
Investors Financial Services Corp.(b) 1,100,000 42,339,000
---------------------------------------------------------------------------
Legg Mason, Inc.(b) 450,000 28,669,500
---------------------------------------------------------------------------
T. Rowe Price Group Inc. 400,000 22,308,000
===========================================================================
110,068,500
===========================================================================
BIOTECHNOLOGY-2.79%
Amylin Pharmaceuticals, Inc.(a)(b) 675,000 14,377,500
---------------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 235,000 9,973,400
---------------------------------------------------------------------------
Invitrogen Corp.(a) 300,000 17,370,000
---------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a)(b) 200,000 12,996,000
===========================================================================
54,716,900
===========================================================================
BROADCASTING & CABLE TV-2.09%
Radio One, Inc.-Class D(a) 1,000,000 14,690,000
---------------------------------------------------------------------------
Univision Communications Inc.-Class A(a)(b) 850,000 26,316,000
===========================================================================
41,006,000
===========================================================================
BUILDING PRODUCTS-1.26%
American Standard Cos. Inc.(a) 678,000 24,794,460
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-6.52%
ADTRAN, Inc. 239,400 $ 5,171,040
---------------------------------------------------------------------------
Andrew Corp.(a) 925,000 12,931,500
---------------------------------------------------------------------------
Avaya Inc.(a)(b) 1,250,000 18,000,000
---------------------------------------------------------------------------
Avocent Corp.(a) 350,000 12,460,000
---------------------------------------------------------------------------
Comverse Technology, Inc.(a)(b) 1,500,000 30,960,000
---------------------------------------------------------------------------
Plantronics, Inc. 528,600 22,994,100
---------------------------------------------------------------------------
Polycom, Inc.(a) 500,000 10,325,000
---------------------------------------------------------------------------
Tekelec(a) 682,500 15,233,400
===========================================================================
128,075,040
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.98%
Best Buy Co., Inc. 325,000 19,246,500
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
Joy Global Inc. 375,000 12,671,250
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-7.24%
Alliance Data Systems Corp.(a)(b) 1,000,000 42,280,000
---------------------------------------------------------------------------
Fiserv, Inc.(a) 1,000,000 35,540,000
---------------------------------------------------------------------------
Paychex, Inc.(b) 750,000 24,595,500
---------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 1,500,000 39,735,000
===========================================================================
142,150,500
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.81%
Cintas Corp.(b) 750,000 32,355,000
---------------------------------------------------------------------------
Corporate Executive Board Co. (The)(c) 200,000 12,730,000
---------------------------------------------------------------------------
CoStar Group Inc.(a) 250,000 10,092,500
===========================================================================
55,177,500
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.47%
Cooper Industries, Ltd.-Class A (Bermuda) 225,000 14,377,500
---------------------------------------------------------------------------
EnerSys(a) 1,100,000 14,520,000
===========================================================================
28,897,500
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.99%
Agilent Technologies, Inc.(a)(b) 750,000 18,795,000
---------------------------------------------------------------------------
Littelfuse, Inc.(a) 250,000 8,155,000
---------------------------------------------------------------------------
Tektronix, Inc. 400,000 12,132,000
===========================================================================
39,082,000
===========================================================================
EMPLOYMENT SERVICES-2.23%
Robert Half International Inc. 1,650,000 43,774,500
===========================================================================
|
FS-2
MARKET
SHARES VALUE
---------------------------------------------------------------------------
GENERAL MERCHANDISE STORES-0.94%
Family Dollar Stores, Inc.(b) 625,000 $ 18,468,750
===========================================================================
HEALTH CARE EQUIPMENT-3.05%
Cytyc Corp.(a) 385,000 10,044,650
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 600,000 34,416,000
---------------------------------------------------------------------------
PerkinElmer, Inc. 750,000 15,405,000
===========================================================================
59,865,650
===========================================================================
HEALTH CARE FACILITIES-1.95%
Health Management Associates, Inc.-Class A(b) 500,000 10,330,000
---------------------------------------------------------------------------
LifePoint Hospitals, Inc.(a) 350,000 11,347,000
---------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 500,000 16,515,000
===========================================================================
38,192,000
===========================================================================
HEALTH CARE SERVICES-4.90%
Caremark Rx, Inc.(a) 1,250,000 37,462,500
---------------------------------------------------------------------------
DaVita, Inc.(a) 600,000 17,772,000
---------------------------------------------------------------------------
Express Scripts, Inc.(a)(b) 400,000 25,600,000
---------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 450,000 15,259,500
===========================================================================
96,094,000
===========================================================================
HOTELS, RESORTS & CRUISE LINES-0.83%
Royal Caribbean Cruises Ltd. (Liberia)(b) 350,000 16,310,000
===========================================================================
INDUSTRIAL CONGLOMERATES-2.17%
Textron Inc.(c) 625,000 42,593,750
===========================================================================
INDUSTRIAL MACHINERY-1.28%
Danaher Corp.(b) 200,000 11,026,000
---------------------------------------------------------------------------
Eaton Corp. 221,000 14,132,950
===========================================================================
25,158,950
===========================================================================
INVESTMENT BANKING & BROKERAGE-1.86%
Ameritrade Holding Corp.(a) 1,000,000 13,020,000
---------------------------------------------------------------------------
Edwards (A.G.), Inc.(b) 250,000 9,065,000
---------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 175,000 14,376,250
===========================================================================
36,461,250
===========================================================================
IT CONSULTING & OTHER SERVICES-1.35%
Acxiom Corp. 600,000 15,000,000
---------------------------------------------------------------------------
CACI International Inc.-Class A(a) 188,800 11,511,136
===========================================================================
26,511,136
===========================================================================
LEISURE PRODUCTS-0.72%
Brunswick Corp. 300,000 14,076,000
===========================================================================
MOVIES & ENTERTAINMENT-0.92%
Regal Entertainment Group-Class A(b) 912,200 18,161,902
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OIL & GAS DRILLING-0.59%
Patterson-UTI Energy, Inc.(c) 600,000 $ 11,538,000
===========================================================================
PAPER PRODUCTS-0.47%
Bowater Inc. 250,000 9,210,000
===========================================================================
PHARMACEUTICALS-4.21%
Allergan, Inc. 34,100 2,440,196
---------------------------------------------------------------------------
Barr Pharmaceuticals Inc.(a) 550,000 20,707,500
---------------------------------------------------------------------------
Eon Labs, Inc.(a) 354,939 8,735,049
---------------------------------------------------------------------------
Impax Laboratories, Inc.(a)(b) 922,200 13,611,672
---------------------------------------------------------------------------
IVAX Corp.(a)(b) 937,500 16,968,750
---------------------------------------------------------------------------
MGI Pharma, Inc.(a) 400,000 10,668,000
---------------------------------------------------------------------------
Valeant Pharmaceuticals International 400,000 9,600,000
===========================================================================
82,731,167
===========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.99%
CB Richard Ellis Group, Inc.-Class A(a) 750,000 19,425,000
===========================================================================
RESTAURANTS-3.69%
Brinker International, Inc.(a)(b) 750,000 24,225,000
---------------------------------------------------------------------------
CBRL Group, Inc. 500,000 18,130,000
---------------------------------------------------------------------------
Ruby Tuesday, Inc. 675,000 16,672,500
---------------------------------------------------------------------------
Wendy's International, Inc. 400,000 13,348,000
===========================================================================
72,375,500
===========================================================================
SEMICONDUCTOR EQUIPMENT-3.10%
KLA-Tencor Corp.(a)(b) 500,000 22,765,000
---------------------------------------------------------------------------
Novellus Systems, Inc.(a)(b) 1,000,000 25,910,000
---------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 350,000 12,113,500
===========================================================================
60,788,500
===========================================================================
SEMICONDUCTORS-6.63%
Marvell Technology Group Ltd. (Bermuda)(a)(c) 375,000 10,713,750
---------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 1,100,000 16,720,000
---------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 625,000 16,906,250
---------------------------------------------------------------------------
Integrated Device Technology, Inc.(a) 1,500,000 17,730,000
---------------------------------------------------------------------------
Microchip Technology Inc.(b) 1,000,000 30,250,000
---------------------------------------------------------------------------
Micron Technology, Inc.(a)(b) 1,000,000 12,180,000
---------------------------------------------------------------------------
RF Micro Devices, Inc.(a)(b) 1,525,000 9,927,750
---------------------------------------------------------------------------
Semtech Corp.(a)(b) 750,000 15,660,000
===========================================================================
130,087,750
===========================================================================
SPECIALTY CHEMICALS-0.48%
Valspar Corp. (The) 200,000 9,332,000
===========================================================================
SPECIALTY STORES-4.23%
Advance Auto Parts, Inc.(a) 61,000 2,386,320
---------------------------------------------------------------------------
Linens 'n Things, Inc.(a) 750,000 18,060,000
---------------------------------------------------------------------------
|
FS-3
MARKET
SHARES VALUE
---------------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Staples, Inc.(b) 1,000,000 $ 29,740,000
---------------------------------------------------------------------------
Tiffany & Co. 500,000 14,665,000
---------------------------------------------------------------------------
Tractor Supply Co.(a) 500,000 18,140,000
===========================================================================
82,991,320
===========================================================================
TECHNOLOGY DISTRIBUTORS-1.26%
CDW Corp. 400,000 24,812,000
===========================================================================
THRIFTS & MORTGAGE FINANCE-0.70%
New York Community Bancorp, Inc.(b) 750,000 13,770,000
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.87%
MSC Industrial Direct Co., Inc.-Class A 500,000 17,070,000
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
TRUCKING-1.83%
Sirva Inc.(a) 1,500,000 $ 36,000,000
===========================================================================
Total Common Stocks (Cost $1,607,325,016) 1,874,154,089
===========================================================================
MONEY MARKET FUNDS-4.94%
Liquid Assets Portfolio-Institutional
Class(d) 48,442,076 48,442,076
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 48,442,076 48,442,076
===========================================================================
Total Money Market Funds (Cost
$96,884,152) 96,884,152
===========================================================================
TOTAL INVESTMENTS-100.42%
(excluding investments purchased with cash
collateral from securities loaned) (Cost
$1,704,209,168) 1,971,038,241
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-13.03%
Liquid Assets Portfolio-Institutional
Class(d)(e) 127,900,554 127,900,554
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 127,900,554 127,900,554
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $255,801,108) 255,801,108
===========================================================================
TOTAL INVESTMENTS-113.45% (Cost
$1,960,010,276) 2,226,839,349
===========================================================================
OTHER ASSETS LESS LIABILITIES-(13.45%) (263,934,602)
===========================================================================
NET ASSETS-100.00% $1,962,904,747
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
security lending transactions at October 31, 2004.
(c) A portion of this security is subject to call options written. See Note 1F
and Note 9.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$1,607,325,016)* $1,874,154,089
------------------------------------------------------------
Investments in affiliated money market funds
(cost $352,685,260) 352,685,260
============================================================
Total investments (cost $1,960,010,276) 2,226,839,349
____________________________________________________________
============================================================
Cash 990,624
------------------------------------------------------------
Receivables for:
Investments sold 45,624,834
------------------------------------------------------------
Fund shares sold 1,096,985
------------------------------------------------------------
Dividends 545,715
------------------------------------------------------------
Premium options written 402,609
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 152,955
------------------------------------------------------------
Other assets 31,627
============================================================
Total assets 2,275,684,698
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 50,838,522
------------------------------------------------------------
Fund shares reacquired 3,237,399
------------------------------------------------------------
Options written, at market value (premiums
received $830,758) 1,000,960
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 289,833
------------------------------------------------------------
Collateral upon return of securities
loaned 255,801,108
------------------------------------------------------------
Accrued distribution fees 586,155
------------------------------------------------------------
Accrued trustees' fees 2,700
------------------------------------------------------------
Accrued transfer agent fees 820,724
------------------------------------------------------------
Accrued operating expenses 202,550
============================================================
Total liabilities 312,779,951
============================================================
Net assets applicable to shares outstanding $1,962,904,747
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,288,155,491
------------------------------------------------------------
Undistributed net investment income (loss) (256,874)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (591,652,741)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 266,658,871
============================================================
$1,962,904,747
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,640,288,448
____________________________________________________________
============================================================
Class B $ 248,424,615
____________________________________________________________
============================================================
Class C $ 71,229,207
____________________________________________________________
============================================================
Class R $ 2,834,226
____________________________________________________________
============================================================
Institutional Class $ 128,251
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 170,545,391
____________________________________________________________
============================================================
Class B 27,157,561
____________________________________________________________
============================================================
Class C 7,787,511
____________________________________________________________
============================================================
Class R 296,658
____________________________________________________________
============================================================
Institutional Class 13,141
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.62
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.62 divided by
94.50%) $ 10.18
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 9.15
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 9.15
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.55
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.76
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $250,914,612 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-5
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,050) $ 8,323,244
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $631,176)* 1,249,812
===========================================================================
Total investment income 9,573,056
===========================================================================
EXPENSES:
Advisory fees 14,026,309
---------------------------------------------------------------------------
Administrative services fees 476,287
---------------------------------------------------------------------------
Custodian fees 216,364
---------------------------------------------------------------------------
Distribution fees:
Class A 4,656,901
---------------------------------------------------------------------------
Class B 2,595,972
---------------------------------------------------------------------------
Class C 763,418
---------------------------------------------------------------------------
Class R 11,194
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 7,320,608
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 106
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 53,801
---------------------------------------------------------------------------
Other 1,046,299
===========================================================================
Total expenses 31,167,259
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements 238,837
===========================================================================
Net expenses 30,928,422
===========================================================================
Net investment income (loss) (21,355,366)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 455,938,443
---------------------------------------------------------------------------
Option contracts written 261,654
===========================================================================
456,200,097
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (287,875,082)
---------------------------------------------------------------------------
Option contracts written (170,202)
===========================================================================
(288,045,284)
===========================================================================
Net gain from investment securities and option contracts 168,154,813
===========================================================================
Net increase in net assets resulting from operations $ 146,799,447
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-6
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (21,355,366) $ (22,556,283)
------------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 456,200,097 61,969,001
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (288,045,284) 408,592,565
================================================================================================
Net increase in net assets resulting from operations 146,799,447 448,005,283
================================================================================================
Share transactions-net:
Class A (469,733,957) (198,927,862)
------------------------------------------------------------------------------------------------
Class B (28,990,427) (13,011,938)
------------------------------------------------------------------------------------------------
Class C (14,524,768) (6,417,966)
------------------------------------------------------------------------------------------------
Class R 1,554,735 879,113
------------------------------------------------------------------------------------------------
Institutional Class (2,730,852) 1,928,983
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (514,425,269) (215,549,670)
================================================================================================
Net increase (decrease) in net assets (367,625,822) 232,455,613
================================================================================================
NET ASSETS:
Beginning of year 2,330,530,569 2,098,074,956
================================================================================================
End of year (including undistributed net investment income
(loss) of $(256,874) and $(235,341) for 2004 and 2003,
respectively) $1,962,904,747 $2,330,530,569
________________________________________________________________________________________________
================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-7
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-8
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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $12,113.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $187,437 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $476,287 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $7,320,608 for Class A, Class B, Class C and Class R shares and $106 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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
FS-9
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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $4,656,901, $2,595,972, $763,418 and $11,194, 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, 2004, AIM Distributors advised the Fund that it retained $227,703 in front-end sales commissions from the sale of Class A shares and $24,499, $28,619, $9,130 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $37,783,111 $ 543,189,076 $ (532,530,111) $ -- $48,442,076 $ 311,874 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 37,783,111 543,189,076 (532,530,111) -- 48,442,076 306,762 --
=================================================================================================================================
Subtotal $75,566,222 $1,086,378,152 $(1,065,060,222) $ -- $96,884,152 $ 618,636 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $261,330,936 $ 376,727,435 $ (510,157,817) $ -- $127,900,554 $ 318,715 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 261,330,936 376,727,435 (510,157,817) -- 127,900,554 312,461 --
=================================================================================================================================
Subtotal $522,661,872 $ 753,454,870 $(1,020,315,634) $ -- $255,801,108 $ 631,176 $ --
=================================================================================================================================
Total $598,228,094 $1,839,833,022 $(2,085,375,856) $ -- $352,685,260 $1,249,812 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $36,617,685 and $34,757,881, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $33,422 and credits in custodian fees of $5,865 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $39,287.
FS-10
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $12,315 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $250,914,612 were on loan to brokers. The loans were secured by cash collateral of $255,801,108 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $631,176 for securities lending transactions.
FS-11
NOTE 9--OPTIONS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------------
Written 20,359 1,201,222
-------------------------------------------------------------------------------------
Closed (2,250) (204,468)
-------------------------------------------------------------------------------------
Expired (2,000) (165,996)
=====================================================================================
End of year 16,109 $ 830,758
_____________________________________________________________________________________
=====================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
------------------------------------------------------------------------------------------------------------------------------
OCTOBER 31,
2004 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
Aeropostale, Inc. Dec-04 $35 863 $63,170 $ 69,040 $ (5,870)
------------------------------------------------------------------------------------------------------------------------------
Corporate Executive Board Co. (The) Dec-04 $65 476 79,490 80,920 (1,430)
------------------------------------------------------------------------------------------------------------------------------
Marvell Technology Group Ltd. Nov-04 $30 3,750 254,994 365,625 (110,631)
------------------------------------------------------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. Dec-04 $25 4,250 177,560 233,750 (56,190)
------------------------------------------------------------------------------------------------------------------------------
Patterson-UTI Energy, Inc. Nov-04 $20 6,000 173,156 165,000 8,156
------------------------------------------------------------------------------------------------------------------------------
Textron Inc. Dec-04 $70 770 82,388 86,625 (4,237)
==============================================================================================================================
16,109 $830,758 $1,000,960 $(170,202)
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 263,785,561 ---------------------------------------------------------------------------- Temporary book/tax differences (256,874) ---------------------------------------------------------------------------- Capital loss carryforward (588,779,431) ---------------------------------------------------------------------------- Shares of beneficial interest 2,288,155,491 ============================================================================ Total net assets $1,962,904,747 ____________________________________________________________________________ ============================================================================ |
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 losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on option contracts written of $(170,202).
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-12
The Fund utilized $451,377,424 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------------
October 31, 2009 $125,040,407
---------------------------------------------------------------------------------
October 31, 2010 463,739,024
=================================================================================
Total capital loss carryforward $588,779,431
_________________________________________________________________________________
=================================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $2,480,691,107 and $3,053,547,607, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $301,188,049 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (37,232,286) ============================================================================== Net unrealized appreciation of investment securities $263,955,763 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,962,883,586. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $21,333,833 and shares of beneficial interest decreased by $21,333,833. This reclassification had no effect on the net assets of the Fund.
FS-13
NOTE 13 -- 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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 19,503,343 $ 183,246,538 35,791,336 $ 277,895,468
--------------------------------------------------------------------------------------------------------------------------
Class B 2,785,031 24,931,760 4,508,173 33,128,293
--------------------------------------------------------------------------------------------------------------------------
Class C 1,454,243 13,022,624 2,072,120 15,430,661
--------------------------------------------------------------------------------------------------------------------------
Class R 233,461 2,175,865 162,296 1,283,289
--------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 275,456 2,002,058
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 366,882 3,476,875 337,998 2,617,107
--------------------------------------------------------------------------------------------------------------------------
Class B (384,365) (3,476,875) (351,540) (2,617,107)
==========================================================================================================================
Reacquired:
Class A (69,860,562) (656,457,370) (62,095,032) (479,440,437)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,651,768) (50,445,312) (5,947,043) (43,523,124)
--------------------------------------------------------------------------------------------------------------------------
Class C (3,075,625) (27,547,392) (2,982,429) (21,848,627)
--------------------------------------------------------------------------------------------------------------------------
Class R (66,756) (621,130) (51,154) (404,176)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (272,069) (2,730,852) (9,111) (73,075)
==========================================================================================================================
(54,968,185) $(514,425,269) (28,288,930) $(215,549,670)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are record owners of more than 5% of the outstanding shares of the Fund and in aggregate they own 16% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-14
NOTE 14--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,
----------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.07)(a) (0.09)(a) (0.09)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.71 1.76 (1.29) (6.34) 11.08
=================================================================================================================================
Total from investment operations 0.63 1.69 (1.38) (6.43) 10.95
=================================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.01% 23.15% (15.90)% (40.51)% 47.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,640,288 $1,983,600 $1,798,318 $2,516,407 $4,444,515
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.29%(c)(d) 1.30% 1.32% 1.17% 1.04%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.86)%(c) (0.96)% (1.00)% (0.79)% (0.77)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,862,760,352.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.30%.
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.67 1.71 (1.26) (6.20) 11.04
===========================================================================================================================
Total from investment operations 0.53 1.58 (1.41) (6.37) 10.75
===========================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
===========================================================================================================================
Net asset value, end of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 6.15% 22.44% (16.69)% (40.90)% 46.29%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $248,425 $262,098 $226,806 $294,303 $374,010
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.05% 2.07% 1.94% 1.86%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.61)%(c) (1.71)% (1.75)% (1.55)% (1.59)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $259,597,199.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
FS-15
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.11 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.67 1.71 (1.26) (6.19) 11.03
=================================================================================================================================
Total from investment operations 0.53 1.58 (1.41) (6.36) 10.74
=================================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.15% 22.44% (16.69)% (40.86)% 46.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $71,229 $81,079 $72,676 $96,640 $120,591
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.61)%(c) (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $76,341,843.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
CLASS R
-----------------------------------------------
YEAR ENDED JUNE 3, 2002
OCTOBER 31, (DATE SALES
----------------------- COMMENCED) TO
2004 2003 OCTOBER 31, 2002
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.96 $ 7.29 $ 8.89
-------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.10)(a) (0.04)(a)
-------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.69 1.77 (1.56)
=============================================================================================================
Total from investment operations 0.59 1.67 (1.60)
=============================================================================================================
Net asset value, end of period $ 9.55 $ 8.96 $ 7.29
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 6.58% 22.91% (18.00)%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,834 $1,164 $ 137
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets 1.54%(c)(d) 1.55% 1.62%(e)
=============================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (1.30)%(e)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(f) 115% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,238,723.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-16
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------
YEAR ENDED MARCH 15, 2002
OCTOBER 31, (DATE SALES
--------------------- COMMENCED) TO
2004 2003 OCTOBER 31, 2002
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.08 $7.32 $ 9.53
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.03)(a) (0.02)(a)
------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.71 1.79 (2.19)
============================================================================================================
Total from investment operations 0.68 1.76 (2.21)
============================================================================================================
Net asset value, end of period $9.76 $9.08 $ 7.32
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 7.49% 24.04% (23.19)%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 128 $2,589 $ 138
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets 0.72%(c)(d) 0.71% 0.81%(e)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.29)%(c) (0.37)% (0.49)%(e)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(f) 115% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $1,271,385.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.73%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-17
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-18
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-19
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-21
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.17%
AEROSPACE & DEFENSE-2.17%
Honeywell International Inc. 700,000 $ 23,576,000
--------------------------------------------------------------------------
United Technologies Corp. 350,000 32,487,000
==========================================================================
56,063,000
==========================================================================
AIR FREIGHT & LOGISTICS-1.01%
United Parcel Service, Inc.-Class B 330,000 26,129,400
==========================================================================
ALUMINUM-0.71%
Alcoa Inc. 567,200 18,434,000
==========================================================================
APPAREL RETAIL-0.70%
Gap, Inc. (The) 900,000 17,982,000
==========================================================================
BIOTECHNOLOGY-2.09%
Amgen Inc.(a) 570,000 32,376,000
--------------------------------------------------------------------------
Genentech, Inc.(a)(b) 475,000 21,626,750
==========================================================================
54,002,750
==========================================================================
BUILDING PRODUCTS-0.90%
Masco Corp. 675,000 23,125,500
==========================================================================
COMMUNICATIONS EQUIPMENT-2.91%
Cisco Systems, Inc.(a) 3,100,000 59,551,000
--------------------------------------------------------------------------
Motorola, Inc. 900,000 15,534,000
==========================================================================
75,085,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.88%
Best Buy Co., Inc.(b) 385,000 22,799,700
==========================================================================
COMPUTER HARDWARE-3.26%
Dell Inc.(a) 1,375,000 48,207,500
--------------------------------------------------------------------------
International Business Machines Corp. 400,000 35,900,000
==========================================================================
84,107,500
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.87%
EMC Corp.(a) 1,750,000 22,522,500
==========================================================================
CONSUMER FINANCE-2.54%
American Express Co. 635,000 33,699,450
--------------------------------------------------------------------------
MBNA Corp. 550,000 14,096,500
--------------------------------------------------------------------------
SLM Corp. 390,000 17,651,400
==========================================================================
65,447,350
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.65%
Automatic Data Processing, Inc. 527,300 22,879,547
--------------------------------------------------------------------------
First Data Corp. 475,000 19,608,000
==========================================================================
42,487,547
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DEPARTMENT STORES-0.64%
J.C. Penney Co., Inc. 475,000 $ 16,430,250
==========================================================================
DIVERSIFIED BANKS-2.52%
Bank of America Corp. 850,000 38,071,500
--------------------------------------------------------------------------
Wells Fargo & Co. 450,000 26,874,000
==========================================================================
64,945,500
==========================================================================
DIVERSIFIED CHEMICALS-0.96%
Dow Chemical Co. (The) 550,000 24,717,000
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.65%
Apollo Group, Inc.-Class A(a) 300,000 19,800,000
--------------------------------------------------------------------------
Cendant Corp. 1,100,000 22,649,000
==========================================================================
42,449,000
==========================================================================
ELECTRIC UTILITIES-1.01%
FPL Group, Inc. 275,000 18,947,500
--------------------------------------------------------------------------
Southern Co. (The) 225,000 7,107,750
==========================================================================
26,055,250
==========================================================================
ENVIRONMENTAL SERVICES-0.80%
Waste Management, Inc. 725,000 20,648,000
==========================================================================
FOOD DISTRIBUTORS-0.69%
Sysco Corp. 550,000 17,748,500
==========================================================================
FOOTWEAR-1.02%
NIKE, Inc.-Class B 325,000 26,425,750
==========================================================================
GENERAL MERCHANDISE STORES-0.85%
Target Corp. 440,000 22,008,800
==========================================================================
HEALTH CARE EQUIPMENT-2.81%
Medtronic, Inc. 650,000 33,221,500
--------------------------------------------------------------------------
Waters Corp.(a) 375,000 15,483,750
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 305,000 23,664,950
==========================================================================
72,370,200
==========================================================================
HOME IMPROVEMENT RETAIL-1.91%
Home Depot, Inc. (The) 1,200,000 49,296,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.51%
Carnival Corp. (Panama)(b) 425,000 21,488,000
--------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 365,000 17,421,450
==========================================================================
38,909,450
==========================================================================
HOUSEHOLD PRODUCTS-2.77%
Colgate-Palmolive Co. 450,000 20,079,000
--------------------------------------------------------------------------
Procter & Gamble Co. (The) 1,005,000 51,435,900
==========================================================================
71,514,900
==========================================================================
|
FS-22
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOUSEWARES & SPECIALTIES-0.56%
Fortune Brands, Inc. 200,000 $ 14,564,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-3.54%
Costco Wholesale Corp.(b) 525,000 25,168,500
--------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1,225,000 66,052,000
==========================================================================
91,220,500
==========================================================================
INDUSTRIAL CONGLOMERATES-6.01%
3M Co. 250,000 19,392,500
--------------------------------------------------------------------------
General Electric Co. 2,405,000 82,058,600
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,720,000 53,578,000
==========================================================================
155,029,100
==========================================================================
INDUSTRIAL GASES-0.65%
Air Products & Chemicals, Inc. 315,000 16,751,700
==========================================================================
INDUSTRIAL MACHINERY-2.05%
Danaher Corp.(b) 580,000 31,975,400
--------------------------------------------------------------------------
Eaton Corp. 325,000 20,783,750
==========================================================================
52,759,150
==========================================================================
INTEGRATED OIL & GAS-3.47%
Exxon Mobil Corp. 1,820,000 89,580,400
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.98%
SBC Communications Inc. 1,005,000 25,386,300
==========================================================================
INTERNET RETAIL-0.76%
eBay Inc.(a) 200,000 19,522,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.34%
Goldman Sachs Group, Inc. (The) 315,000 30,989,700
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 550,000 29,667,000
--------------------------------------------------------------------------
Morgan Stanley 500,000 25,545,000
==========================================================================
86,201,700
==========================================================================
IT CONSULTING & OTHER SERVICES-0.52%
Accenture Ltd.-Class A (Bermuda)(a) 550,000 13,315,500
==========================================================================
MANAGED HEALTH CARE-1.47%
UnitedHealth Group Inc. 525,000 38,010,000
==========================================================================
MOVIES & ENTERTAINMENT-0.92%
Viacom Inc.-Class B 650,000 23,718,500
==========================================================================
MULTI-LINE INSURANCE-1.77%
American International Group, Inc. 750,000 45,532,500
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.61%
Dominion Resources, Inc. 245,000 15,758,400
==========================================================================
OIL & GAS DRILLING-0.41%
ENSCO International Inc. 350,000 10,692,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-1.00%
Schlumberger Ltd. (Netherlands) 410,000 $ 25,805,400
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.28%
Citigroup Inc. 1,875,000 83,193,750
--------------------------------------------------------------------------
JPMorgan Chase & Co. 1,370,000 52,882,000
==========================================================================
136,075,750
==========================================================================
PERSONAL PRODUCTS-2.07%
Avon Products, Inc. 625,000 24,718,750
--------------------------------------------------------------------------
Gillette Co. (The) 690,000 28,621,200
==========================================================================
53,339,950
==========================================================================
PHARMACEUTICALS-7.28%
Allergan, Inc.(b) 230,000 16,458,800
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 250,000 11,150,000
--------------------------------------------------------------------------
Johnson & Johnson 1,000,000 58,380,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 290,000 15,923,900
--------------------------------------------------------------------------
Pfizer Inc. 2,450,000 70,927,500
--------------------------------------------------------------------------
Wyeth 375,000 14,868,750
==========================================================================
187,708,950
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.03%
Allstate Corp. (The) 550,000 26,449,500
==========================================================================
RAILROADS-0.77%
Canadian National Railway Co. (Canada) 370,000 19,998,500
==========================================================================
RESTAURANTS-1.36%
McDonald's Corp. 1,200,000 34,980,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.01%
Applied Materials, Inc.(a) 800,000 12,880,000
--------------------------------------------------------------------------
KLA-Tencor Corp.(a)(b) 290,000 13,203,700
==========================================================================
26,083,700
==========================================================================
SEMICONDUCTORS-3.92%
Analog Devices, Inc. 420,000 16,909,200
--------------------------------------------------------------------------
Intel Corp. 1,600,000 35,616,000
--------------------------------------------------------------------------
Linear Technology Corp. 355,000 13,447,400
--------------------------------------------------------------------------
Microchip Technology Inc. 500,000 15,125,000
--------------------------------------------------------------------------
Xilinx, Inc. 650,000 19,890,000
==========================================================================
100,987,600
==========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 435,000 21,567,300
==========================================================================
SPECIALTY STORES-0.59%
Bed Bath & Beyond Inc.(a) 375,000 15,296,250
==========================================================================
SYSTEMS SOFTWARE-6.08%
Microsoft Corp. 3,100,000 86,769,000
--------------------------------------------------------------------------
Oracle Corp.(a) 2,125,000 26,902,500
--------------------------------------------------------------------------
|
FS-23
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Symantec Corp.(a) 375,000 $ 21,352,500
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,000,000 21,880,000
==========================================================================
156,904,000
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.18%
Fannie Mae 435,000 30,515,250
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.87%
Vodafone Group PLC-ADR (United Kingdom) 870,000 22,437,300
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,015,015,477) 2,557,896,547
==========================================================================
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.06%
1.61%, 12/16/04 (Cost $1,496,976)(c) $1,500,000 1,496,976
==========================================================================
MONEY MARKET FUNDS-0.56%
Liquid Assets Portfolio-Institutional
Class(d) 7,279,701 $ 7,279,701
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 7,279,701 7,279,701
==========================================================================
Total Money Market Funds (Cost
$14,559,402) 14,559,402
==========================================================================
TOTAL INVESTMENTS-99.79% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,031,071,855) 2,573,952,925
==========================================================================
|
--------------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.36%
STIC Prime Portfolio-Institutional
Class(d)(e) 34,975,975 $ 34,975,975
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $34,975,975) 34,975,975
==========================================================================
TOTAL INVESTMENTS-101.15% (Cost
$2,066,047,830) 2,608,928,900
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.15%) (29,754,052)
==========================================================================
NET ASSETS-100.00% $2,579,174,848
__________________________________________________________________________
==========================================================================
|
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
security lending transactions at October 31, 2004.
(c) Security traded on a discount basis. Unless otherwise indicated, the
interest rate shown represents the discount rate at the time of purchase by
the Fund.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-24
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$2,016,512,453)* $ 2,559,393,523
------------------------------------------------------------
Investments in affiliated money market
funds (cost $49,535,377) 49,535,377
============================================================
Total investments (cost $2,066,047,830) 2,608,928,900
============================================================
Receivables for:
Investments sold 17,741,398
------------------------------------------------------------
Fund shares sold 1,201,975
------------------------------------------------------------
Dividends 2,809,147
------------------------------------------------------------
Investment for trustee deferred compensation and retirement
plans 154,126
------------------------------------------------------------
Other assets 49,427
============================================================
Total assets 2,630,884,973
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,373,237
------------------------------------------------------------
Fund shares reacquired 6,807,910
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 275,117
------------------------------------------------------------
Collateral upon return of securities
loaned 34,975,975
------------------------------------------------------------
Accrued distribution fees 1,444,569
------------------------------------------------------------
Accrued trustees' fees 4,120
------------------------------------------------------------
Accrued transfer agent fees 1,351,948
------------------------------------------------------------
Accrued operating expenses 477,249
============================================================
Total liabilities 51,710,125
============================================================
Net assets applicable to shares outstanding $ 2,579,174,848
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 3,728,825,373
------------------------------------------------------------
Undistributed net investment income (loss) (228,692)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures
contracts (1,692,302,903)
------------------------------------------------------------
Unrealized appreciation of investment
securities 542,881,070
============================================================
$ 2,579,174,848
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,236,433,569
____________________________________________________________
============================================================
Class B $ 1,032,773,714
____________________________________________________________
============================================================
Class C $ 222,839,537
____________________________________________________________
============================================================
Class R $ 6,000,455
____________________________________________________________
============================================================
Investor Class $ 32,083,995
____________________________________________________________
============================================================
Institutional Class $ 49,043,578
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 113,014,179
____________________________________________________________
============================================================
Class B 99,354,990
____________________________________________________________
============================================================
Class C 21,438,780
____________________________________________________________
============================================================
Class R 550,240
____________________________________________________________
============================================================
Investor Class 2,927,332
____________________________________________________________
============================================================
Institutional Class 4,403,381
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.94
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.94 divided by
94.50%) $ 11.58
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.39
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.39
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.91
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 10.96
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.14
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $34,048,041 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-25
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $61,297) $ 35,608,376
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $18,674)* 479,651
--------------------------------------------------------------------------
Interest 3,768
==========================================================================
Total investment income 36,091,795
==========================================================================
EXPENSES:
Advisory fees 18,508,235
--------------------------------------------------------------------------
Administrative services fees 575,871
--------------------------------------------------------------------------
Custodian fees 287,107
--------------------------------------------------------------------------
Distribution fees:
Class A 4,938,054
--------------------------------------------------------------------------
Class B 11,670,174
--------------------------------------------------------------------------
Class C 2,664,429
--------------------------------------------------------------------------
Class R 27,995
--------------------------------------------------------------------------
Investor Class 88,542
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 10,479,508
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 690
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 67,595
--------------------------------------------------------------------------
Other 1,761,913
==========================================================================
Total expenses 51,070,113
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (300,558)
==========================================================================
Net expenses 50,769,555
==========================================================================
Net investment income (loss) (14,677,760)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 141,430,751
--------------------------------------------------------------------------
Futures contracts 121,194
==========================================================================
141,551,945
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (63,358,526)
==========================================================================
Net gain from investment securities and futures contracts 78,193,419
==========================================================================
Net increase in net assets resulting from operations $ 63,515,659
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-26
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (14,677,760) $ (14,101,484)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and futures contracts 141,551,945 (105,157,212)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and futures
contracts (63,358,526) 519,286,935
==============================================================================================
Net increase in net assets resulting from operations 63,515,659 400,028,239
==============================================================================================
Share transactions-net:
Class A (236,834,043) (162,460,380)
----------------------------------------------------------------------------------------------
Class B (213,672,955) (136,334,779)
----------------------------------------------------------------------------------------------
Class C (73,035,331) (51,018,964)
----------------------------------------------------------------------------------------------
Class R 4,401,189 1,425,250
----------------------------------------------------------------------------------------------
Investor Class 30,994,771 99,068
----------------------------------------------------------------------------------------------
Institutional Class 48,256,952 (43,881)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (439,889,417) (348,333,686)
==============================================================================================
Net increase (decrease) in net assets (376,373,758) 51,694,553
==============================================================================================
NET ASSETS:
Beginning of year 2,955,548,606 2,903,854,053
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(228,692) and $(193,930), respectively) $2,579,174,848 $2,955,548,606
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-27
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-28
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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). Voluntary fee waivers or reimbursements may
FS-29
be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $11,809.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $242,427 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $575,871 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $10,479,508 for Class A, Class B, Class C, Class R and Investor Class shares and $690 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 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, Class R or Investor Class 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $4,938,054, $11,670,174, $2,664,429, $27,995 and $88,542, 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, 2004, AIM Distributors advised the Fund that it retained $330,881 in front-end sales commissions from the sale of Class A shares and $9,771, $99,868, $15,188 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-30
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $32,255,406 $208,774,062 $(233,749,767) $ -- $ 7,279,701 $232,259 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 32,255,406 208,774,062 (233,749,767) -- 7,279,701 228,718 --
===========================================================================================================================
Subtotal $64,510,812 $417,548,124 $(467,499,534) $ -- $14,559,402 $460,977 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 447,700 $401,247,004 $(401,694,704) $ -- $ -- $14,488 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 84,068,150 (49,092,175) -- 34,975,975 4,186 --
===========================================================================================================================
Subtotal $ 447,700 $485,315,154 $(450,786,879) $ -- $34,975,975 $18,674 $ --
===========================================================================================================================
Total $64,958,512 $902,863,278 $(918,286,413) $ -- $49,535,377 $479,651 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $12,437,600 and $3,790,920, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $46,302 and credits in custodian fees of $20 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $46,322.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $14,743 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.
FS-31
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $34,048,041 were on loan to brokers. The loans were secured by cash collateral of $34,975,975 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $18,674 for securities lending transactions.
NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 502,259,018
-----------------------------------------------------------------------------
Temporary book/tax differences (228,692)
-----------------------------------------------------------------------------
Capital loss carryforward (1,651,680,851)
-----------------------------------------------------------------------------
Shares of beneficial interest 3,728,825,373
=============================================================================
Total net assets $ 2,579,174,848
_____________________________________________________________________________
=============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,642,177,803 of capital loss carryforward in the fiscal year ended October 31, 2005.
FS-32
The Fund utilized $138,205,191 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
----------------------------------------------------------------------------
October 31, 2008 $ 85,920,513
----------------------------------------------------------------------------
October 31, 2009 845,288,837
----------------------------------------------------------------------------
October 31, 2010 617,527,392
----------------------------------------------------------------------------
October 31, 2011 102,944,109
============================================================================
Total capital loss carryforward $1,651,680,851
____________________________________________________________________________
============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth & Income Fund into the Fund, are realized on securities held in each fund on such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $827,221,607 and $1,262,244,981, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $545,012,455 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (42,753,437) ============================================================================== Net unrealized appreciation of investment securities $502,259,018 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $2,106,669,882. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $14,647,924 and shares of beneficial interest decreased by $14,647,924. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Growth & Income Fund into the Fund, undistributed income was decreased by $4,926, undistributed net realized gain was decreased by $13,855,504 and shares of beneficial interest increased by $13,860,430. These reclassifications had no effect on the net assets of the Fund.
FS-33
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 21,493,299 $ 237,822,246 30,092,109 $ 289,868,346
--------------------------------------------------------------------------------------------------------------------------
Class B 7,106,647 75,074,355 12,053,281 111,049,162
--------------------------------------------------------------------------------------------------------------------------
Class C 2,785,689 29,371,888 4,161,204 38,212,257
--------------------------------------------------------------------------------------------------------------------------
Class R 672,346 7,394,140 164,023 1,619,420
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 513,156 5,688,744 12,285 130,138
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 4,421,094 48,593,658 -- --
==========================================================================================================================
Issued in connection with acquisitions:(c)
Class A 63,333 676,707 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B 14,065 143,763 -- --
--------------------------------------------------------------------------------------------------------------------------
Class C 98,131 1,002,254 -- --
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 3,554,717 38,013,823 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,357,674 26,110,071 1,670,042 16,099,491
--------------------------------------------------------------------------------------------------------------------------
Class B (2,474,910) (26,110,071) (1,741,215) (16,099,491)
==========================================================================================================================
Reacquired:
Class A (45,616,888) (501,443,066) (49,132,867) (468,428,217)
--------------------------------------------------------------------------------------------------------------------------
Class B (25,052,874) (262,781,002) (25,556,829) (231,284,450)
--------------------------------------------------------------------------------------------------------------------------
Class C (9,864,695) (103,409,473) (9,824,798) (89,231,221)
--------------------------------------------------------------------------------------------------------------------------
Class R (270,057) (2,992,951) (20,044) (194,170)
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (1,149,919) (12,707,797) (2,907) (31,070)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (30,273) (336,706) (4,720) (43,881)
==========================================================================================================================
(41,379,465) $(439,889,417) (38,130,436) $(348,333,686)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 8% of the outstanding shares of the
Fund. AIM Distributors has an agreement with the entity to sell Fund shares.
The Fund, AIM and/or AIM affiliates may make payments to this entity, which
is considered to be related to the Fund, for providing services to the Fund,
AIM and/or AIM affiliates including but not limited to services such as,
securities brokerage, distributions, third party record keeping and account
servicing. The Trust has no knowledge as to whether all or any portion of
the shares owned of record by these shareholders are also owned
beneficially.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) 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-34
NOTE 13--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,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.04)(a) (0.04) (0.05)(a)
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 1.49 (1.96) (6.03) 1.85
====================================================================================================================
Total from investment operations 0.25 1.47 (2.00) (6.07) 1.80
====================================================================================================================
Net asset value, end of period $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 2.34% 15.94% (17.82)% (35.11)% 11.60%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,236,434 $1,439,518 $1,402,589 $2,067,602 $3,163,453
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 1.44%(c)(d) 1.47% 1.40% 1.28% 1.19%
====================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.19)%(c) (0.17)% (0.33)% (0.29)% (0.31)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,410,872,545.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.45%.
CLASS B
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.08) (0.10)(a) (0.13) (0.17)(a)
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 1.42 (1.89) (5.87) 1.82
====================================================================================================================
Total from investment operations 0.17 1.34 (1.99) (6.00) 1.65
====================================================================================================================
Net asset value, end of period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 1.66% 15.09% (18.31)% (35.57)% 10.87%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,032,774 $1,223,821 $1,198,513 $1,806,464 $2,746,149
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 2.09%(c)(d) 2.12% 2.05% 1.94% 1.88%
====================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (0.82)% (0.98)% (0.94)% (1.00)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,167,017,423.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.10%.
FS-35
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.08) (0.10)(a) (0.13) (0.17)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 1.42 (1.89) (5.86) 1.82
===============================================================================================================================
Total from investment operations 0.17 1.34 (1.99) (5.99) 1.65
===============================================================================================================================
Net asset value, end of period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 1.66% 15.09% (18.31)% (35.53)% 10.82%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $222,840 $290,396 $302,555 $487,838 $720,186
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.09%(c)(d) 2.12% 2.05% 1.94% 1.88%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.84)%(c) (0.82)% (0.98)% (0.94)% (1.00)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $266,442,859.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.10%.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.03) (0.00) (0.02)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 1.44 (1.29)
====================================================================================================
Total from investment operations 0.25 1.44 (1.31)
====================================================================================================
Net asset value, end of period $10.91 $10.66 $ 9.22
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 2.35% 15.62% (12.44)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,000 $1,578 $ 37
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.59%(c)(d) 1.62% 1.55%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.34)%(c) (0.32)% (0.49)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 29% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $5,598,909.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.60%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-36
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
------------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.69 $10.16
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.24 (0.00)
==================================================================================================
Net gains on securities (both realized and unrealized) 0.03 0.53
==================================================================================================
Total from investment operations 0.27 0.53
==================================================================================================
Net asset value, end of period $ 10.96 $10.69
__________________________________________________________________________________________________
==================================================================================================
Total return(a) 2.53% 5.22%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,084 $ 100
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets 1.34%(b)(c) 1.29%(d)
==================================================================================================
Ratio of net investment income (loss) to average net assets (0.09)%(b) (0.01)%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(e) 29% 28%
__________________________________________________________________________________________________
==================================================================================================
|
(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. Not annualized for periods less than one year.
(b) Ratios are based on average daily net assets of $35,416,969.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.35%.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
----------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
---------------------- OCTOBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.81 $ 9.26 $ 12.13
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04 0.06 0.02(a)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.49 (2.89)
======================================================================================================
Total from investment operations 0.33 1.55 (2.87)
======================================================================================================
Net asset value, end of period $ 11.14 $10.81 $ 9.26
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 3.05% 16.74% (23.66)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $49,044 $ 136 $ 160
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets 0.74%(c)(d) 0.77% 0.77%(e)
======================================================================================================
Ratio of net investment income to average net assets 0.51%(c) 0.53% 0.30%(e)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(f) 29% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $5,968,822.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.75%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-37
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-38
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-39
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-41
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.73%
ADVERTISING-1.59%
Lamar Advertising Co.-Class A(a)(b) 136,000 $ 5,633,120
--------------------------------------------------------------------------
R.H. Donnelley Corp.(a) 210,700 11,430,475
==========================================================================
17,063,595
==========================================================================
AIR FREIGHT & LOGISTICS-1.38%
Robinson (C.H.) Worldwide, Inc. 274,900 14,828,106
==========================================================================
APPAREL RETAIL-2.22%
Limited Brands 487,700 12,085,206
--------------------------------------------------------------------------
Ross Stores, Inc. 446,900 11,740,063
==========================================================================
23,825,269
==========================================================================
APPLICATION SOFTWARE-4.27%
Amdocs Ltd. (United Kingdom)(a) 473,400 11,906,010
--------------------------------------------------------------------------
Autodesk, Inc. 273,600 14,432,400
--------------------------------------------------------------------------
Intuit Inc.(a)(b) 274,300 12,442,248
--------------------------------------------------------------------------
Mercury Interactive Corp.(a) 161,000 6,992,230
==========================================================================
45,772,888
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.72%
Calamos Asset Management, Inc.-Class A(a) 338,600 6,602,700
--------------------------------------------------------------------------
Franklin Resources, Inc. 194,900 11,814,838
==========================================================================
18,417,538
==========================================================================
BROADCASTING & CABLE TV-0.44%
Cox Radio, Inc.-Class A(a) 300,000 4,770,000
==========================================================================
BUILDING PRODUCTS-1.05%
American Standard Cos. Inc.(a) 306,900 11,223,333
==========================================================================
CASINOS & GAMING-2.44%
Harrah's Entertainment, Inc.(b) 234,400 13,717,088
--------------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 590,600 12,508,908
==========================================================================
26,225,996
==========================================================================
COMMERCIAL PRINTING-1.11%
Donnelley (R.R.) & Sons Co. 379,764 11,943,578
==========================================================================
COMMUNICATIONS EQUIPMENT-1.77%
Harris Corp. 224,400 13,807,332
--------------------------------------------------------------------------
Scientific-Atlanta, Inc. 189,300 5,184,927
==========================================================================
18,992,259
==========================================================================
COMPUTER HARDWARE-0.89%
PalmOne, Inc.(a)(b) 331,200 9,594,864
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.50%
Emulex Corp.(a) 510,000 5,360,100
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.77%
Cummins Inc. 117,100 $ 8,206,368
==========================================================================
CONSUMER ELECTRONICS-1.19%
Garmin Ltd. (Cayman Islands)(b) 255,500 12,775,000
==========================================================================
CONSUMER FINANCE-0.91%
AmeriCredit Corp.(a)(b) 503,600 9,769,840
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.53%
Alliance Data Systems Corp.(a) 268,600 11,356,408
--------------------------------------------------------------------------
Certegy Inc. 164,550 5,816,842
--------------------------------------------------------------------------
CSG Systems International, Inc.(a) 516,000 8,673,960
--------------------------------------------------------------------------
DST Systems, Inc.(a)(b) 278,000 12,468,300
--------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 311,850 10,306,642
==========================================================================
48,622,152
==========================================================================
DEPARTMENT STORES-1.02%
Kohl's Corp.(a)(b) 216,200 10,974,312
==========================================================================
DISTILLERS & VINTNERS-0.89%
Constellation Brands, Inc.-Class A(a) 244,000 9,572,120
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.89%
Corrections Corp. of America(a) 284,500 9,886,375
--------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 595,500 12,505,500
--------------------------------------------------------------------------
United Rentals, Inc.(a) 560,300 8,656,635
==========================================================================
31,048,510
==========================================================================
DRUG RETAIL-0.60%
Shoppers Drug Mart Corp. (Canada)(a) 212,100 6,452,340
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.27%
Cooper Industries, Ltd.-Class A (Bermuda) 214,000 13,674,600
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.66%
Aeroflex Inc.(a) 580,000 6,438,000
--------------------------------------------------------------------------
Amphenol Corp.-Class A(a) 332,400 11,411,292
==========================================================================
17,849,292
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.54%
Benchmark Electronics, Inc.(a) 170,000 5,774,900
==========================================================================
|
FS-42
MARKET
SHARES VALUE
--------------------------------------------------------------------------
EMPLOYMENT SERVICES-0.50%
Manpower Inc. 118,200 $ 5,348,550
==========================================================================
ENVIRONMENTAL SERVICES-1.74%
Republic Services, Inc. 435,000 13,398,000
--------------------------------------------------------------------------
Stericycle, Inc.(a) 115,900 5,253,747
==========================================================================
18,651,747
==========================================================================
GENERAL MERCHANDISE STORES-1.40%
Dollar General Corp. 498,400 9,594,200
--------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a)(b) 188,800 5,456,320
==========================================================================
15,050,520
==========================================================================
HEALTH CARE DISTRIBUTORS-0.79%
Henry Schein, Inc.(a) 133,900 8,466,497
==========================================================================
HEALTH CARE EQUIPMENT-3.99%
Bio-Rad Laboratories, Inc.-Class A(a) 131,400 6,835,428
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 240,100 13,772,136
--------------------------------------------------------------------------
Varian Inc.(a) 278,300 10,152,384
--------------------------------------------------------------------------
Waters Corp.(a) 292,400 12,073,196
==========================================================================
42,833,144
==========================================================================
HEALTH CARE FACILITIES-1.47%
Community Health Systems Inc.(a) 435,000 11,666,700
--------------------------------------------------------------------------
Select Medical Corp. 241,400 4,149,666
==========================================================================
15,816,366
==========================================================================
HEALTH CARE SERVICES-3.79%
Caremark Rx, Inc.(a) 410,277 12,296,002
--------------------------------------------------------------------------
Covance Inc.(a)(b) 198,900 7,900,308
--------------------------------------------------------------------------
DaVita, Inc.(a) 338,550 10,027,851
--------------------------------------------------------------------------
Express Scripts, Inc.(a) 162,800 10,419,200
==========================================================================
40,643,361
==========================================================================
HOME FURNISHINGS-1.35%
Tempur-Pedic International Inc.(a) 891,300 14,474,712
==========================================================================
HOMEBUILDING-1.05%
Ryland Group, Inc. (The) 118,200 11,275,098
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.51%
Starwood Hotels & Resorts Worldwide, Inc.(b) 113,800 5,431,674
==========================================================================
HOUSEWARES & SPECIALTIES-2.00%
Jarden Corp.(a) 287,700 10,104,024
--------------------------------------------------------------------------
Yankee Candle Co., Inc. (The)(a) 408,400 11,312,680
==========================================================================
21,416,704
==========================================================================
HYPERMARKETS & SUPER CENTERS-1.05%
BJ's Wholesale Club, Inc.(a)(b) 389,800 11,315,894
==========================================================================
INDUSTRIAL GASES-1.04%
Airgas, Inc. 455,000 11,193,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INDUSTRIAL MACHINERY-1.72%
Eaton Corp. 84,000 $ 5,371,800
--------------------------------------------------------------------------
Parker Hannifin Corp. 185,600 13,108,928
==========================================================================
18,480,728
==========================================================================
INSURANCE BROKERS-1.08%
Willis Group Holdings Ltd. (Bermuda) 320,900 11,536,355
==========================================================================
INTEGRATED OIL & GAS-0.97%
Murphy Oil Corp. 129,500 10,362,590
==========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.41%
iShares Nasdaq Biotechnology Index Fund(a)(b) 222,500 15,161,150
==========================================================================
LEISURE PRODUCTS-1.99%
Brunswick Corp. 262,700 12,325,884
--------------------------------------------------------------------------
Polaris Industries Inc.(b) 152,700 9,062,745
==========================================================================
21,388,629
==========================================================================
METAL & GLASS CONTAINERS-0.98%
Pactiv Corp.(a) 444,200 10,523,098
==========================================================================
MULTI-LINE INSURANCE-0.95%
Quanta Capital Holdings Ltd. (Bermuda)
(Acquired 08/27/2003: Cost
$10,000,000)(a)(c)(e) 1,000,000 9,000,000
--------------------------------------------------------------------------
Quanta Capital Holdings Ltd. (Bermuda)(a)(b) 138,100 1,242,900
==========================================================================
10,242,900
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.13%
Questar Corp. 251,900 12,091,200
==========================================================================
OFFICE ELECTRONICS-0.60%
Zebra Technologies Corp.-Class A(a) 121,725 6,450,208
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.59%
BJ Services Co.(b) 213,200 10,873,200
--------------------------------------------------------------------------
Key Energy Services, Inc.(a) 539,500 6,204,250
==========================================================================
17,077,450
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.37%
XTO Energy Inc. 439,125 14,657,992
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-3.16%
Ashland Inc. 226,300 13,039,406
--------------------------------------------------------------------------
Kinder Morgan, Inc. 105,800 6,810,346
--------------------------------------------------------------------------
Williams Cos., Inc. (The) 1,120,100 14,012,451
==========================================================================
33,862,203
==========================================================================
PACKAGED FOODS & MEATS-0.54%
Flowers Foods, Inc. 228,400 5,792,224
==========================================================================
PAPER PACKAGING-1.41%
Sealed Air Corp.(a)(b) 107,000 5,300,780
--------------------------------------------------------------------------
|
FS-43
MARKET
SHARES VALUE
--------------------------------------------------------------------------
PAPER PACKAGING-(CONTINUED)
Smurfit-Stone Container Corp.(a) 563,800 $ 9,787,568
==========================================================================
15,088,348
==========================================================================
PERSONAL PRODUCTS-1.02%
NBTY, Inc.(a) 398,800 10,982,952
==========================================================================
PHARMACEUTICALS-1.12%
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 423,647 12,031,575
==========================================================================
REAL ESTATE-4.01%
Fieldstone Investment Corp. (Acquired
11/10/2003-11/11/2003; Cost
$9,984,140)(d)(e) 661,900 11,417,775
--------------------------------------------------------------------------
Friedman, Billings, Ramsey Group, Inc.-Class
A 574,555 9,847,873
--------------------------------------------------------------------------
KKR Financial Corp. (Acquired 08/05/2004;
Cost $10,250,000)(a)(d)(e) 1,025,000 10,506,250
--------------------------------------------------------------------------
New Century Financial Corp. 100,000 5,515,000
--------------------------------------------------------------------------
Saxon Capital, Inc.(a) 296,600 5,694,720
==========================================================================
42,981,618
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.30%
CB Richard Ellis Group, Inc.-Class A(a) 540,400 13,996,360
==========================================================================
REGIONAL BANKS-1.08%
Zions Bancorp 175,200 11,592,984
==========================================================================
RESTAURANTS-0.86%
Ruby Tuesday, Inc.(b) 372,400 9,198,280
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.73%
Cabot Microelectronics Corp.(a)(b) 212,200 7,645,566
--------------------------------------------------------------------------
KLA-Tencor Corp.(a) 247,700 11,277,781
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 402,000 10,415,820
==========================================================================
29,339,167
==========================================================================
SEMICONDUCTORS-2.07%
ATI Technologies Inc. (Canada)(a) 322,100 5,813,905
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 185,100 5,006,955
--------------------------------------------------------------------------
Microchip Technology Inc.(b) 374,762 11,336,551
==========================================================================
22,157,411
==========================================================================
SPECIALTY CHEMICALS-0.95%
Great Lakes Chemical Corp. 397,300 10,178,826
==========================================================================
SPECIALTY STORES-1.03%
Advance Auto Parts, Inc.(a) 281,200 11,000,544
==========================================================================
SYSTEMS SOFTWARE-1.24%
McAfee Inc.(a) 550,000 13,310,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-0.90%
CDW Corp. 156,100 $ 9,682,883
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.08%
Radian Group Inc.(b) 242,800 11,637,404
==========================================================================
TRUCKING-1.07%
Sirva Inc.(a) 477,300 11,455,200
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.04%
NII Holdings Inc.(a)(b) 246,600 10,916,982
--------------------------------------------------------------------------
SpectraSite, Inc.(a) 213,100 10,932,030
==========================================================================
21,849,012
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $800,639,901) 1,048,763,518
==========================================================================
|
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
OPTIONS
PURCHASED-0.04%
PUTS-0.04%
Murphy Oil Corp.
(Integrated Oil &
Gas) 1,295 $80 Nov-04 301,087
-------------------------------------------------------------------------
XTO Energy Inc. (Oil
& Gas Exploration &
Production) 4,391 30 Nov-04 76,843
=========================================================================
Total Options Purchased (Cost $884,638) 377,930
=========================================================================
|
SHARES
MONEY MARKET FUNDS-1.91%
Liquid Assets Portfolio-Institutional
Class(f) 10,261,930 10,261,930
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 10,261,930 10,261,930
==========================================================================
Total Money Market Funds (Cost $20,523,860) 20,523,860
==========================================================================
TOTAL INVESTMENTS-99.68% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $822,048,399) 1,069,665,308
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-12.89%
Liquid Assets Portfolio-Institutional
Class(f)(g) 69,189,281 69,189,281
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(f)(g) 69,189,281 69,189,281
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $138,378,562) 138,378,562
==========================================================================
TOTAL INVESTMENTS-112.57% (Cost $960,426,961) 1,208,043,870
==========================================================================
OTHER ASSETS LESS LIABILITIES-(12.57%) (134,877,684)
==========================================================================
NET ASSETS-100.00% $1,073,166,186
__________________________________________________________________________
==========================================================================
|
FS-44
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
security lending transactions at October 31, 2004.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The market value of this security at
October 31, 2004 represented 0.75% of the Fund's Total Investments. See Note
1A.
(d) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at October 31, 2004 was $21,924,025, which
represented 2.04% of the Fund's net assets.
(e) 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 October 31, 2004 was
$30,924,025, which represented 2.88% of the Fund's net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-45
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$801,524,539)* $1,049,141,448
------------------------------------------------------------
Investments in affiliated money market funds
(cost $158,902,422) 158,902,422
============================================================
Total investments (cost $960,426,961) 1,208,043,870
============================================================
Receivables for:
Investments sold 23,158,959
------------------------------------------------------------
Fund shares sold 1,040,163
------------------------------------------------------------
Dividends 140,573
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 72,551
------------------------------------------------------------
Other assets 46,726
============================================================
Total assets 1,232,502,842
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 18,056,931
------------------------------------------------------------
Fund shares reacquired 1,569,825
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 117,451
------------------------------------------------------------
Collateral upon return of securities
loaned 138,378,562
------------------------------------------------------------
Accrued distribution fees 630,739
------------------------------------------------------------
Accrued trustees' fees 2,277
------------------------------------------------------------
Accrued transfer agent fees 387,654
------------------------------------------------------------
Accrued operating expenses 193,217
============================================================
Total liabilities 159,336,656
============================================================
Net assets applicable to shares outstanding $1,073,166,186
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 738,072,716
------------------------------------------------------------
Undistributed net investment income (loss) (98,307)
------------------------------------------------------------
Undistributed net realized gain from
investment securities 87,611,149
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 247,580,628
============================================================
$1,073,166,186
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 617,193,910
____________________________________________________________
============================================================
Class B $ 376,354,647
____________________________________________________________
============================================================
Class C $ 73,929,300
____________________________________________________________
============================================================
Class R $ 5,621,711
____________________________________________________________
============================================================
Institutional Class $ 66,618
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 34,565,765
____________________________________________________________
============================================================
Class B 22,421,759
____________________________________________________________
============================================================
Class C 4,407,579
____________________________________________________________
============================================================
Class R 316,184
____________________________________________________________
============================================================
Institutional Class 3,674
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 17.86
------------------------------------------------------------
Offering price per share:
(Net asset value of $17.86 divided by
94.50%) $ 18.90
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 16.79
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 16.77
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 17.78
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 18.13
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $135,274,803 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-46
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,998) $ 9,123,366
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $316,380)* 782,270
==========================================================================
Total investment income 9,905,636
==========================================================================
EXPENSES:
Advisory fees 7,018,923
--------------------------------------------------------------------------
Administrative services fees 282,196
--------------------------------------------------------------------------
Custodian fees 120,476
--------------------------------------------------------------------------
Distribution fees:
Class A 2,031,361
--------------------------------------------------------------------------
Class B 3,967,972
--------------------------------------------------------------------------
Class C 729,633
--------------------------------------------------------------------------
Class R 14,320
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,027,243
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 54
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 32,363
--------------------------------------------------------------------------
Other 650,014
==========================================================================
Total expenses 17,874,555
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (125,412)
==========================================================================
Net expenses 17,749,143
==========================================================================
Net investment income (loss) (7,843,507)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from investment securities 92,544,722
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 9,292,934
--------------------------------------------------------------------------
Foreign currencies (36,281)
==========================================================================
9,256,653
==========================================================================
Net gain from investment securities and foreign currencies 101,801,375
==========================================================================
Net increase in net assets resulting from operations $ 93,957,868
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-47
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (7,843,507) $ (7,651,741)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 92,544,722 64,445,148
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investments
securities and foreign currencies 9,256,653 180,427,376
==============================================================================================
Net increase in net assets resulting from operations 93,957,868 237,220,783
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (13,528,020) --
----------------------------------------------------------------------------------------------
Class B (10,257,718) --
----------------------------------------------------------------------------------------------
Class C (1,789,455) --
----------------------------------------------------------------------------------------------
Class R (30,198) --
----------------------------------------------------------------------------------------------
Institutional Class (242) --
==============================================================================================
Decrease in net assets resulting from distributions (25,605,633) --
==============================================================================================
Share transactions-net:
Class A 31,588,830 (40,295,276)
----------------------------------------------------------------------------------------------
Class B (40,086,908) (45,852,897)
----------------------------------------------------------------------------------------------
Class C 1,351,823 (3,420,452)
----------------------------------------------------------------------------------------------
Class R 4,312,014 902,244
----------------------------------------------------------------------------------------------
Institutional Class 55,370 --
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (2,778,871) (88,666,381)
==============================================================================================
Net increase in net assets 65,573,364 148,554,402
==============================================================================================
NET ASSETS:
Beginning of year 1,007,592,822 859,038,420
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(98,307) and $(85,597), respectively) $1,073,166,186 $1,007,592,822
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-48
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-49
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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-50
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $8,699.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $96,092 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $282,196 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $3,027,243 for Class A, Class B, Class C and Class R shares and $14 for Institutional Class shares after AISI reimbursed fees for the Institutional Class shares of $40. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $2,031,361, $3,967,972, $729,633 and $14,320, 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, 2004, AIM Distributors advised the Fund that it retained $171,202 in front-end sales commissions from the sale of Class A shares and $519, $25,762, $5,602 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-51
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $16,395,571 $221,684,483 $(227,818,124) $ -- $10,261,930 $235,656 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 16,395,571 221,684,483 (227,818,124) -- 10,261,930 230,234 --
===========================================================================================================================
Subtotal $32,791,142 $443,368,966 $(455,636,248) $ -- $20,523,860 $465,890 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $77,943,886 $210,017,597 $(218,772,202) $ -- $69,189,281 $158,802 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 77,943,886 210,017,597 (218,772,202) -- 69,189,281 157,578 --
===========================================================================================================================
Subtotal $155,887,772 $420,035,194 $(437,544,404) $ -- $138,378,562 $316,380 $ --
===========================================================================================================================
Total $188,678,914 $863,404,160 $(893,180,652) $ -- $158,902,422 $782,270 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $27,195,023 and $10,946,219, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $16,199 and credits in custodian fees of $4,382 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $20,581.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $7,855 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.
FS-52
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $135,274,803 were on loan to brokers. The loans were secured by cash collateral of $138,378,562 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $316,380 for securities lending transactions.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
--------------------------------------------------------------------------------------
Distributions paid from long-term capital gain $25,605,633 $ --
______________________________________________________________________________________
======================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed long-term gain $ 88,000,687
----------------------------------------------------------------------------
Unrealized appreciation -- investments 247,191,090
----------------------------------------------------------------------------
Temporary book/tax differences (98,307)
----------------------------------------------------------------------------
Shares of beneficial interest 738,072,716
============================================================================
Total net assets $1,073,166,186
____________________________________________________________________________
============================================================================
|
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 deferral of losses on certain straddles. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(36,281).
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 trustee deferral of compensation and retirement plan expenses.
FS-53
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 year ended October 31, 2004 was $748,265,373 and $776,755,843, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $260,704,530 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (13,477,159) ============================================================================== Net unrealized appreciation of investment securities $247,227,371 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $960,816,499. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $7,830,797, undistributed net realized gain (loss) was decreased by $2,894,200 and shares of beneficial interest decreased by $4,936,597. This reclassification had no effect on the net assets of the Fund.
NOTE 12--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 certain 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(a)
-------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2004 2003
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,956,116 $ 121,226,684 7,864,878 $ 109,808,336
-------------------------------------------------------------------------------------------------------------------------
Class B 2,589,525 42,660,392 2,057,426 27,535,873
-------------------------------------------------------------------------------------------------------------------------
Class C 1,128,395 18,630,607 834,828 11,240,012
-------------------------------------------------------------------------------------------------------------------------
Class R 275,328 4,806,109 74,458 986,707
-------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,080 55,129 -- --
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 727,483 12,170,787 -- --
-------------------------------------------------------------------------------------------------------------------------
Class B 564,080 8,923,747 -- --
-------------------------------------------------------------------------------------------------------------------------
Class C 96,104 1,519,408 -- --
-------------------------------------------------------------------------------------------------------------------------
Class R 1,810 30,198 -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class 14 241 -- --
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 834,769 14,693,499 340,670 4,868,315
-------------------------------------------------------------------------------------------------------------------------
Class B (886,014) (14,693,499) (358,616) (4,868,315)
=========================================================================================================================
Reacquired:
Class A (6,701,600) (116,502,140) (11,106,766) (154,971,927)
-------------------------------------------------------------------------------------------------------------------------
Class B (4,698,851) (76,977,548) (5,230,794) (68,520,455)
-------------------------------------------------------------------------------------------------------------------------
Class C (1,149,534) (18,798,192) (1,117,790) (14,660,464)
-------------------------------------------------------------------------------------------------------------------------
Class R (30,395) (524,293) (5,766) (84,463)
=========================================================================================================================
(289,690) $ (2,778,871) (6,647,472) $ (88,666,381)
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) There is one entity that is record owner of more than 5% of the outstanding shares of the Fund and owns 7% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this shareholder are also owned beneficially.
FS-54
NOTE 13--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,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.08)(a) (0.04)(a) (0.04) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.70 3.94 (1.85) (4.27) 6.68
=================================================================================================================================
Total from investment operations 1.62 3.86 (1.89) (4.31) 6.55
=================================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.87% 30.16% (12.87)% (21.76)% 42.98%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $617,194 $545,691 $456,268 $576,660 $759,838
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.40%(c)(d) 1.53% 1.38% 1.33% 1.28%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.56)% (0.29)% (0.21)% (0.60)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $580,388,749.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.41%.
CLASS B
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a) (0.16)(a) (0.14)(a) (0.15) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.60 3.74 (1.75) (4.12) 6.52
=================================================================================================================================
Total from investment operations 1.42 3.58 (1.89) (4.27) 6.26
=================================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.13% 29.32% (13.40)% (22.29)% 42.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $376,355 $392,382 $346,456 $454,018 $617,576
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.05%(c)(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $396,797,209.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%
FS-55
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a) (0.16)(a) (0.14)(a) (0.14) (0.25)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.59 3.74 (1.76) (4.12) 6.51
============================================================================================================================
Total from investment operations 1.41 3.58 (1.90) (4.26) 6.26
============================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
============================================================================================================================
Net asset value, end of period $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 9.07% 29.34% (13.48)% (22.24)% 42.04%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $73,929 $68,356 $56,298 $66,127 $82,982
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.05%(c)(d) 2.18% 2.03% 1.99% 1.99%
============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (0.94)% (0.87)% (1.30)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $72,963,303.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
CLASS R
-----------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.10)(a) (0.03)(a)
-------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.68 3.93 (3.80)
=======================================================================================================
Total from investment operations 1.58 3.83 (3.83)
=======================================================================================================
Less distributions from net realized gains (0.42) -- --
=======================================================================================================
Net asset value, end of period $17.78 $16.62 $ 12.79
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 9.65% 29.95% (23.05)%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,622 $1,154 $ 10
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets 1.55%(c)(d) 1.68% 1.54%(e)
=======================================================================================================
Ratio of net investment income (loss) to average net assets (0.61)%(c) (0.71)% (0.44)%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 74% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,864,084.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.56%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-56
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
----------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------- OCTOBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.83 $12.84 $ 17.25
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.01(a) 0.01(a) 0.02(a)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.71 3.98 (4.43)
======================================================================================================
Total from investment operations 1.72 3.99 (4.41)
======================================================================================================
Less distributions from net realized gains (0.42) -- --
======================================================================================================
Net asset value, end of period $18.13 $16.83 $ 12.84
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 10.38% 31.08% (25.57)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 67 $ 10 $ 7
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.86%(c) 0.87% 0.84%(d)
------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(c) 1.25% 0.99%(d)
======================================================================================================
Ratio of net investment income to average net assets 0.08%(c) 0.10% 0.25%(d)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(e) 74% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $14,384.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered
FS-57
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or
FS-58
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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
FS-59
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-61
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-94.34%
AEROSPACE & DEFENSE-1.26%
Northrop Grumman Corp. 700,000 $ 36,225,000
==========================================================================
BREWERS-1.48%
Heineken N.V. (Netherlands)(a)(b) 1,347,106 42,595,608
==========================================================================
BUILDING PRODUCTS-1.40%
Masco Corp. 1,174,500 40,238,370
==========================================================================
COMMUNICATIONS EQUIPMENT-1.03%
Nokia Oyj-ADR (Finland) 1,924,100 29,669,622
==========================================================================
COMPUTER HARDWARE-1.59%
International Business Machines Corp. 510,000 45,772,500
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.36%
First Data Corp. 945,000 39,009,600
==========================================================================
DEPARTMENT STORES-1.91%
Kohl's Corp.(c) 1,081,700 54,907,092
==========================================================================
DIVERSIFIED BANKS-2.53%
Bank of America Corp. 1,011,000 45,282,690
--------------------------------------------------------------------------
Wachovia Corp. 554,850 27,304,168
==========================================================================
72,586,858
==========================================================================
DIVERSIFIED CHEMICALS-1.19%
Dow Chemical Co. (The) 758,000 34,064,520
==========================================================================
ELECTRIC UTILITIES-1.23%
FPL Group, Inc. 511,200 35,221,680
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.17%
Emerson Electric Co. 525,000 33,626,250
==========================================================================
ENVIRONMENTAL SERVICES-1.99%
Waste Management, Inc. 2,006,500 57,145,120
==========================================================================
FOOD RETAIL-2.91%
Kroger Co. (The)(c) 3,460,000 52,280,600
--------------------------------------------------------------------------
Safeway Inc.(c) 1,720,000 31,372,800
==========================================================================
83,653,400
==========================================================================
HOUSEHOLD PRODUCTS-1.07%
Kimberly-Clark Corp. 513,000 30,610,710
==========================================================================
HOUSEWARES & SPECIALTIES-1.05%
Newell Rubbermaid Inc. 1,400,000 30,184,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-0.94%
Wal-Mart Stores, Inc. 500,000 26,960,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-4.26%
General Electric Co. 1,434,500 $ 48,945,140
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 2,360,000 73,514,000
==========================================================================
122,459,140
==========================================================================
INDUSTRIAL MACHINERY-2.48%
Dover Corp. 1,040,800 40,872,216
--------------------------------------------------------------------------
Illinois Tool Works Inc. 329,500 30,406,260
==========================================================================
71,278,476
==========================================================================
INTEGRATED OIL & GAS-7.03%
Amerada Hess Corp. 290,500 23,446,255
--------------------------------------------------------------------------
BP PLC-ADR (United Kingdom) 1,015,000 59,123,750
--------------------------------------------------------------------------
ChevronTexaco Corp. 467,000 24,779,020
--------------------------------------------------------------------------
ConocoPhillips 305,300 25,739,843
--------------------------------------------------------------------------
Exxon Mobil Corp. 892,700 43,938,694
--------------------------------------------------------------------------
Murphy Oil Corp. 310,900 24,878,218
==========================================================================
201,905,780
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.34%
ALLTEL Corp. 700,000 38,451,000
==========================================================================
INTERNET RETAIL-0.80%
IAC/InterActiveCorp.(a)(c) 1,070,000 23,133,400
==========================================================================
INVESTMENT BANKING & BROKERAGE-1.04%
Morgan Stanley 582,250 29,747,152
==========================================================================
IT CONSULTING & OTHER SERVICES-1.01%
Accenture Ltd.-Class A (Bermuda)(c) 1,200,000 29,052,000
==========================================================================
LIFE & HEALTH INSURANCE-1.16%
Prudential Financial, Inc. 716,200 33,281,814
==========================================================================
OFFICE ELECTRONICS-1.62%
Xerox Corp.(c) 3,156,300 46,618,551
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.14%
Baker Hughes Inc. 763,000 32,679,290
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.29%
Citigroup Inc. 670,000 29,727,900
--------------------------------------------------------------------------
Principal Financial Group, Inc. 955,000 36,060,800
==========================================================================
65,788,700
==========================================================================
PACKAGED FOODS & MEATS-8.23%
Campbell Soup Co. 2,107,000 56,551,880
--------------------------------------------------------------------------
General Mills, Inc. 1,880,000 83,190,000
--------------------------------------------------------------------------
Kraft Foods Inc.-Class A 1,600,000 53,296,000
--------------------------------------------------------------------------
|
FS-62
MARKET
SHARES VALUE
--------------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
Sara Lee Corp. 1,865,000 $ 43,417,200
==========================================================================
236,455,080
==========================================================================
PAPER PRODUCTS-1.44%
Georgia-Pacific Corp. 1,200,000 41,508,000
==========================================================================
PHARMACEUTICALS-12.68%
Bristol-Myers Squibb Co. 1,635,000 38,308,050
--------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom) 1,430,000 60,632,000
--------------------------------------------------------------------------
Johnson & Johnson 495,000 28,898,100
--------------------------------------------------------------------------
Merck & Co. Inc. 2,420,000 75,770,200
--------------------------------------------------------------------------
Pfizer Inc. 2,395,000 69,335,250
--------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,168,000 30,368,000
--------------------------------------------------------------------------
Wyeth 1,540,000 61,061,000
==========================================================================
364,372,600
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.97%
ACE Ltd. (Cayman Islands) 750,000 28,545,000
--------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 828,122 28,123,023
==========================================================================
56,668,023
==========================================================================
PUBLISHING-3.71%
Gannett Co., Inc. 450,000 37,327,500
--------------------------------------------------------------------------
New York Times Co. (The)-Class A(a) 952,900 38,163,645
--------------------------------------------------------------------------
Tribune Co. 720,000 31,104,000
==========================================================================
106,595,145
==========================================================================
RAILROADS-2.76%
Norfolk Southern Corp. 1,334,000 45,289,300
--------------------------------------------------------------------------
Union Pacific Corp. 538,000 33,877,860
==========================================================================
79,167,160
==========================================================================
REGIONAL BANKS-1.87%
BB&T Corp. 709,300 29,159,323
--------------------------------------------------------------------------
SunTrust Banks, Inc. 351,150 24,713,937
==========================================================================
53,873,260
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SEMICONDUCTORS-5.07%
Analog Devices, Inc. 855,000 $ 34,422,300
--------------------------------------------------------------------------
Intel Corp. 1,889,500 42,060,270
--------------------------------------------------------------------------
National Semiconductor Corp.(c) 2,139,000 35,721,300
--------------------------------------------------------------------------
Xilinx, Inc. 1,097,000 33,568,200
==========================================================================
145,772,070
==========================================================================
SOFT DRINKS-0.99%
Coca-Cola Co. (The) 700,000 28,462,000
==========================================================================
SYSTEMS SOFTWARE-5.23%
Computer Associates International, Inc. 2,099,000 58,163,290
--------------------------------------------------------------------------
Microsoft Corp. 3,287,000 92,003,130
==========================================================================
150,166,420
==========================================================================
THRIFTS & MORTGAGE FINANCE-2.11%
Washington Mutual, Inc. 1,564,560 60,564,118
==========================================================================
Total Common Stocks & Other Equity
Interests
(Cost $2,396,059,963) 2,710,469,509
==========================================================================
MONEY MARKET FUNDS-5.78%
Liquid Assets Portfolio-Institutional
Class(d) 83,058,993 83,058,993
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 83,058,993 83,058,993
==========================================================================
Total Money Market Funds (Cost
$166,117,986) 166,117,986
==========================================================================
TOTAL INVESTMENTS-100.12% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,562,177,949) 2,876,587,495
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.95%
STIC Prime Portfolio-Institutional
Class(d)(e) 27,336,279 27,336,279
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $27,336,279) 27,336,279
==========================================================================
TOTAL INVESTMENTS-101.07% (Cost $2,589,514,228) 2,903,923,774
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.07%) (30,677,348)
==========================================================================
NET ASSETS-100.00% $2,873,246,426
__________________________________________________________________________
==========================================================================
|
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
security lending transactions as of October 31, 2004.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
market value of this security at October 31, 2004 represented 1.47% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-63
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$2,396,059,963)* $2,710,469,509
------------------------------------------------------------
Investments in affiliated money market funds
(cost $193,454,265) 193,454,265
============================================================
Total investments (cost $2,589,514,228) 2,903,923,774
------------------------------------------------------------
Receivables for:
Investments sold 91,749
------------------------------------------------------------
Fund shares sold 677,874
------------------------------------------------------------
Dividends 3,441,529
------------------------------------------------------------
Investments matured (Note 10) 2,616,170
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 225,690
------------------------------------------------------------
Other assets 61,803
============================================================
Total assets 2,911,038,589
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 7,281,636
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 444,079
------------------------------------------------------------
Collateral upon return of securities
loaned 27,336,279
------------------------------------------------------------
Accrued distribution fees 1,338,545
------------------------------------------------------------
Accrued trustees' fees 4,421
------------------------------------------------------------
Accrued transfer agent fees 1,070,958
------------------------------------------------------------
Accrued operating expenses 316,245
============================================================
Total liabilities 37,792,163
============================================================
Net assets applicable to shares outstanding $2,873,246,426
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,220,676,279
------------------------------------------------------------
Undistributed net investment income 5,696,221
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (667,535,620)
------------------------------------------------------------
Unrealized appreciation of investment
securities 314,409,546
============================================================
$2,873,246,426
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,843,623,034
____________________________________________________________
============================================================
Class B $ 885,499,723
____________________________________________________________
============================================================
Class C $ 138,305,296
____________________________________________________________
============================================================
Class R $ 2,533,768
____________________________________________________________
============================================================
Institutional Class $ 3,284,605
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 151,588,810
____________________________________________________________
============================================================
Class B 76,298,853
____________________________________________________________
============================================================
Class C 11,883,687
____________________________________________________________
============================================================
Class R 209,486
____________________________________________________________
============================================================
Institutional Class 262,233
____________________________________________________________
============================================================
Class A :
Net asset value per share $ 12.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.16 divided by
94.50%) $ 12.87
____________________________________________________________
============================================================
Class B :
Net asset value and offering price per
share $ 11.61
____________________________________________________________
============================================================
Class C :
Net asset value and offering price per
share $ 11.64
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.10
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.53
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $26,097,344 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-64
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $182,690) $ 55,078,131
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $25,015)* 2,075,348
--------------------------------------------------------------------------
Interest 956
==========================================================================
Total investment income 57,154,435
==========================================================================
EXPENSES:
Advisory fees 20,136,790
--------------------------------------------------------------------------
Administrative services fees 585,397
--------------------------------------------------------------------------
Custodian fees 243,906
--------------------------------------------------------------------------
Distribution fees:
Class A 5,883,153
--------------------------------------------------------------------------
Class B 10,549,491
--------------------------------------------------------------------------
Class C 1,572,686
--------------------------------------------------------------------------
Class R 11,195
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 8,357,015
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,847
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 73,380
--------------------------------------------------------------------------
Other 1,564,364
==========================================================================
Total expenses 48,979,224
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (360,129)
==========================================================================
Net expenses 48,619,095
==========================================================================
Net investment income 8,535,340
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 284,896,878
--------------------------------------------------------------------------
Foreign currencies 47,518
==========================================================================
284,944,396
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (662,843)
==========================================================================
Net gain from investment securities and foreign currencies 284,281,553
==========================================================================
Net increase in net assets resulting from operations $292,816,893
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-65
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,535,340 $ 3,496,816
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 284,944,396 (177,091,373)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (662,843) 649,909,999
==============================================================================================
Net increase in net assets resulting from operations 292,816,893 476,315,442
==============================================================================================
Distributions to shareholders from net investment income:
Class A (4,234,798) --
----------------------------------------------------------------------------------------------
Class R (2,682) --
----------------------------------------------------------------------------------------------
Institutional Class (14,410) --
==============================================================================================
Decrease in net assets resulting from distributions (4,251,890) --
----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (343,025,821) (380,938,708)
----------------------------------------------------------------------------------------------
Class B (360,933,716) (215,082,650)
----------------------------------------------------------------------------------------------
Class C (39,355,393) (29,277,194)
----------------------------------------------------------------------------------------------
Class R 642,358 1,521,693
----------------------------------------------------------------------------------------------
Institutional Class 1,074,851 339,875
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (741,597,721) (623,436,984)
==============================================================================================
Net increase (decrease) in net assets (453,032,718) (147,121,542)
==============================================================================================
NET ASSETS:
Beginning of year 3,326,279,144 3,473,400,686
==============================================================================================
End of year (including undistributed net investment income
of $5,696,221 and $1,365,253, respectively) $2,873,246,426 $3,326,279,144
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-66
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-67
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.
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $44,820. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $267,010 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
FS-68
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, 2004, AIM was paid $585,397 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $8,357,015 for Class A, Class B, Class C and Class R shares and $1,847 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $5,883,153, $10,549,491, $1,572,686 and $11,195, 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, 2004, AIM Distributors advised the Fund that it retained $234,197 in front-end sales commissions from the sale of Class A shares and $3,448, $59,959, $6,679 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 98,974,452 $487,207,080 $ (503,122,539) $ -- $ 83,058,993 $1,032,599 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 98,974,452 487,207,080 (503,122,539) -- 83,058,993 1,017,734 --
===================================================================================================================================
Subtotal $197,948,904 $974,414,160 $(1,006,245,078) $ -- $166,117,986 $2,050,333 $ --
===================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 22,552,000 $ 341,863,851 $ (364,415,851) $ -- $ -- $ 21,732 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 46,453,174 (19,116,895) -- 27,336,279 3,283 --
===================================================================================================================================
Subtotal $ 22,552,000 $ 388,317,025 $ (383,532,746) $ -- $ 27,336,279 $ 25,015 $ --
===================================================================================================================================
Total $220,500,904 $1,362,731,185 $(1,389,777,824) $ -- $193,454,265 $2,075,348 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-69
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $43,476,128 and $115,762,500, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $48,299, which resulted in a reduction of the Fund's total expenses of $48,299.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $15,947 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $26,097,344 were on loan to brokers. The loans were secured by cash collateral of $27,336,279 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $25,015 for securities lending transactions.
FS-70
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
----------------------------------------------------------------------------------
Distributions paid from ordinary income $4,251,890 $ --
__________________________________________________________________________________
==================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed ordinary income $ 8,592,013
----------------------------------------------------------------------------
Unrealized appreciation -- investments 264,884,884
----------------------------------------------------------------------------
Temporary book/tax difference (394,478)
----------------------------------------------------------------------------
Capital loss carryforward (620,512,272)
----------------------------------------------------------------------------
Shares of beneficial interest 3,220,676,279
============================================================================
Total net assets $2,873,246,426
____________________________________________________________________________
============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $282,887,750 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2009 $488,443,372
-----------------------------------------------------------------------------
October 31, 2011 132,068,900
=============================================================================
Total capital loss carryforward $620,512,272
_____________________________________________________________________________
=============================================================================
* Capital loss carryforward as of the date listed above 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 year ended October 31, 2004 was $1,066,339,251 and $1,695,085,970, 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 $ 376,858,000 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (111,973,116) =============================================================================== Net unrealized appreciation of investment securities $ 264,884,884 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $2,639,038,890. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency transactions, on October 31, 2004, undistributed net investment income was increased by $47,518 and undistributed net realized gain (loss) was decreased by $47,518. This reclassification had no effect on the net assets of the Fund.
FS-71
NOTE 12--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 certain 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(A)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,951,437 $ 94,832,462 16,680,459 $ 167,057,570
--------------------------------------------------------------------------------------------------------------------------
Class B 3,877,677 44,222,154 8,128,480 78,572,729
--------------------------------------------------------------------------------------------------------------------------
Class C 1,217,568 13,934,813 2,035,003 19,657,080
--------------------------------------------------------------------------------------------------------------------------
Class R 95,004 1,120,376 182,932 1,841,485
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 515,765 6,344,104 53,551 570,090
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 345,517 3,966,625 -- --
--------------------------------------------------------------------------------------------------------------------------
Class R 234 2,681 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 714 8,400 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 12,968,092 155,893,419 3,640,846 37,843,518
--------------------------------------------------------------------------------------------------------------------------
Class B (13,548,346) (155,893,419) (3,789,510) (37,843,518)
==========================================================================================================================
Reacquired:
Class A (50,261,476) (597,718,327) (58,788,618) (585,839,796)
--------------------------------------------------------------------------------------------------------------------------
Class B (21,841,949) (249,262,451) (26,845,101) (255,811,861)
--------------------------------------------------------------------------------------------------------------------------
Class C (4,652,957) (53,290,206) (5,102,475) (48,934,274)
--------------------------------------------------------------------------------------------------------------------------
Class R (40,399) (480,699) (29,999) (319,792)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (434,182) (5,277,653) (22,226) (230,215)
==========================================================================================================================
(63,807,301) $(741,597,721) (63,856,658) $(623,436,984)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 13.20% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell the Fund Shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-72
NOTE 13--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,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.04(a) 0.01(b) (0.03) (0.04)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.00 1.51 (0.90) (6.70) 2.30
=================================================================================================================================
Total from investment operations 1.06 1.55 (0.89) (6.73) 2.26
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.02) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.02) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.58% 16.20% (8.51)% (38.75)% 13.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,843,623 $2,008,702 $2,096,866 $3,159,304 $5,801,869
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(d) 1.30% 1.22% 1.16% 1.06%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.27%(d) 1.30% 1.22% 1.17% 1.08%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.54%(d) 0.39% 0.09%(b) (0.24)% (0.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $1,961,051,091.
FS-73
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.03)(a) (0.08)(b) (0.13) (0.17)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 1.46 (0.86) (6.53) 2.27
=================================================================================================================================
Total from investment operations 0.94 1.43 (0.94) (6.66) 2.10
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.81% 15.48% (9.23)% (39.14)% 12.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $885,500 $1,149,943 $1,204,617 $1,719,470 $3,088,611
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.96%(d) 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.97%(d) 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.16%)(d) (0.31)% (0.61%)(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $1,054,949,073.
FS-74
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.03)(a) (0.08)(b) (0.13) (0.17)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 1.46 (0.86) (6.55) 2.28
=========================================================================================================================
Total from investment operations 0.94 1.43 (0.94) (6.68) 2.11
=========================================================================================================================
Less distributions from net realized gains -- -- -- (0.88) (1.35)
=========================================================================================================================
Net asset value, end of period $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 8.79% 15.43% (9.21)% (39.14)% 12.78%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,305 $163,859 $170,444 $248,533 $412,872
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.96%(d) 2.00% 1.92% 1.86% 1.80%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.97%(d) 2.00% 1.92% 1.87% 1.82%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.16)%(d) (0.31)% (0.61)%(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $157,268,602.
FS-75
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.08 $ 9.56 $ 10.94
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.02(a) 0.00
====================================================================================================
Net gains (losses) on securities (both realized and
unrealized) 1.00 1.50 (1.38)
====================================================================================================
Total from investment operations 1.04 1.52 (1.38)
====================================================================================================
Less dividends from net investment income (0.02) -- --
====================================================================================================
Net asset value, end of period $12.10 $11.08 $ 9.56
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 9.35% 15.90% (12.61)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534 $1,714 $ 16
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.46%(c)(d) 1.50% 1.42%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets 0.34%(c) 0.19% (0.11)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 36% 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 values may differ from the net asset value and the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,239,072.
(d) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements ratio of expenses to average net assets
was 1.47%
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-76
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
--------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.45 $ 9.80 $10.67 $ 18.33 $17.33
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13(a) 0.09(a) 0.06(b) 0.04 0.52
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.03 1.56 (0.93) (6.82) 1.83
================================================================================================================
Total from investment operations 1.16 1.65 (0.87) (6.78) 2.35
================================================================================================================
Less distributions:
Dividends from net investment income (0.08) -- -- -- --
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35)
================================================================================================================
Total distributions (0.08) -- -- (0.88) (1.35)
================================================================================================================
Net asset value, end of period $12.53 $11.45 $ 9.80 $ 10.67 $18.33
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) 10.21% 16.84% (8.15)% (38.46)% 14.02%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,285 $2,061 $1,457 $ 1,648 $3,234
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.74%(d) 0.79% 0.79% 0.68% 0.66%
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.75%(d) 0.79% 0.83% 0.69% 0.68%
================================================================================================================
Ratio of net investment income to average net assets 1.06%(d) 0.90% 0.52%(b) 0.25% 0.20%
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
________________________________________________________________________________________________________________
================================================================================================================
|
(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 the returns for
shareholder transactions.
(d) Ratios are based on average daily net assets of $4,378,524.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and
FS-77
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
FS-78
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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-79
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-81
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.49%
ADVERTISING-1.02%
Lamar Advertising Co.-Class A(a)(b) 1,609,800 $ 66,677,916
===========================================================================
AEROSPACE & DEFENSE-0.64%
Honeywell International Inc. 1,250,000 42,100,000
===========================================================================
AIR FREIGHT & LOGISTICS-1.13%
Expeditors International of Washington,
Inc.(b) 500,000 28,550,000
---------------------------------------------------------------------------
FedEx Corp.(b) 500,000 45,560,000
===========================================================================
74,110,000
===========================================================================
AIRLINES-0.53%
Southwest Airlines Co.(b) 2,193,800 34,596,226
===========================================================================
APPAREL RETAIL-0.37%
TJX Cos., Inc. (The) 1,000,000 23,980,000
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.71%
Coach, Inc.(a) 1,000,000 46,630,000
===========================================================================
APPLICATION SOFTWARE-1.08%
Autodesk, Inc.(b) 1,350,000 71,212,500
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.22%
Investors Financial Services Corp.(b) 380,000 14,626,200
===========================================================================
BIOTECHNOLOGY-1.98%
Amgen Inc.(a) 744,700 42,298,960
---------------------------------------------------------------------------
Biogen Idec Inc.(a)(b) 600,000 34,896,000
---------------------------------------------------------------------------
Gilead Sciences, Inc.(a)(b) 1,527,600 52,900,788
===========================================================================
130,095,748
===========================================================================
BROADCASTING & CABLE TV-1.99%
Clear Channel Communications, Inc.(b) 2,112,800 70,567,520
---------------------------------------------------------------------------
Univision Communications Inc.-Class A(a)(b) 1,944,400 60,198,624
===========================================================================
130,766,144
===========================================================================
COMMUNICATIONS EQUIPMENT-6.27%
Avaya Inc.(a)(b) 1,500,000 21,600,000
---------------------------------------------------------------------------
Cisco Systems, Inc.(a) 7,500,000 144,075,000
---------------------------------------------------------------------------
Comverse Technology, Inc.(a)(b) 2,500,000 51,600,000
---------------------------------------------------------------------------
Corning Inc.(a)(b) 2,200,000 25,190,000
---------------------------------------------------------------------------
Juniper Networks, Inc.(a)(b) 2,000,000 53,220,000
---------------------------------------------------------------------------
Motorola, Inc.(b) 1,473,900 25,439,514
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Nokia Oyi-ADR (Finland)(b) 2,500,000 $ 38,550,000
---------------------------------------------------------------------------
QUALCOMM Inc. 1,250,000 52,262,500
===========================================================================
411,937,014
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.68%
Best Buy Co., Inc.(b) 750,000 44,415,000
===========================================================================
COMPUTER HARDWARE-2.80%
Apple Computer, Inc.(a)(b) 1,000,000 52,530,000
---------------------------------------------------------------------------
Dell Inc.(a)(b) 3,750,000 131,475,000
===========================================================================
184,005,000
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-2.19%
Caterpillar Inc.(b) 750,000 60,405,000
---------------------------------------------------------------------------
Deere & Co. 1,400,000 83,692,000
===========================================================================
144,097,000
===========================================================================
CONSUMER FINANCE-3.63%
American Express Co.(b) 1,250,000 66,337,500
---------------------------------------------------------------------------
Capital One Financial Corp.(b) 500,000 36,880,000
---------------------------------------------------------------------------
MBNA Corp.(b) 3,500,000 89,705,000
---------------------------------------------------------------------------
SLM Corp.(b) 1,000,000 45,260,000
===========================================================================
238,182,500
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.84%
Affiliated Computer Services, Inc.-Class
A(a)(b) 500,000 27,275,000
---------------------------------------------------------------------------
Automatic Data Processing, Inc. 1,000,000 43,390,000
---------------------------------------------------------------------------
Fiserv, Inc.(a)(b) 2,250,000 79,965,000
---------------------------------------------------------------------------
Paychex, Inc.(b) 1,100,000 36,073,400
===========================================================================
186,703,400
===========================================================================
DEPARTMENT STORES-0.26%
J.C. Penney Co., Inc.(b) 500,000 17,295,000
===========================================================================
DIVERSIFIED BANKS-0.68%
Bank of America Corp.(b) 1,000,000 44,790,000
===========================================================================
DIVERSIFIED CHEMICALS-1.37%
Dow Chemical Co. (The)(b) 650,000 29,211,000
---------------------------------------------------------------------------
E. I. du Pont de Nemours & Co. 750,000 32,152,500
---------------------------------------------------------------------------
Eastman Chemical Co.(b) 600,000 28,482,000
===========================================================================
89,845,500
===========================================================================
|
FS-82
MARKET
SHARES VALUE
---------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-1.00%
Apollo Group, Inc.-Class A(a)(b) 500,000 $ 33,000,000
---------------------------------------------------------------------------
Cintas Corp. 750,000 32,355,000
===========================================================================
65,355,000
===========================================================================
DIVERSIFIED METALS & MINING-0.53%
Phelps Dodge Corp.(b) 400,000 35,016,000
===========================================================================
DRUG RETAIL-0.55%
Walgreen Co.(b) 1,000,000 35,890,000
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.63%
Rockwell Automation, Inc.(b) 1,000,000 41,690,000
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.59%
Agilent Technologies, Inc.(a)(b) 1,550,000 38,843,000
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.36%
Molex Inc. 802,400 23,726,968
===========================================================================
EMPLOYMENT SERVICES-1.62%
Robert Half International Inc. 4,000,000 106,120,000
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.46%
Monsanto Co. 700,000 29,925,000
===========================================================================
FOOD RETAIL-0.43%
Whole Foods Market, Inc.(b) 350,000 28,500,500
===========================================================================
FOOTWEAR-0.43%
NIKE, Inc.-Class B 350,000 28,458,500
===========================================================================
GOLD-0.67%
Newmont Mining Corp. 471,600 22,410,432
---------------------------------------------------------------------------
Placer Dome Inc. (Canada) 1,003,900 21,332,875
===========================================================================
43,743,307
===========================================================================
HEALTH CARE EQUIPMENT-6.78%
Bard (C.R.), Inc. 652,100 37,039,280
---------------------------------------------------------------------------
Becton, Dickinson & Co. 1,034,200 54,295,500
---------------------------------------------------------------------------
Biomet, Inc.(b) 3,535,175 165,021,969
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 566,500 32,494,440
---------------------------------------------------------------------------
Medtronic, Inc.(b) 815,700 41,690,427
---------------------------------------------------------------------------
St. Jude Medical, Inc.(a)(b) 352,700 27,006,239
---------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)(b) 834,400 33,501,160
---------------------------------------------------------------------------
Waters Corp.(a)(b) 410,200 16,937,158
---------------------------------------------------------------------------
Zimmer Holdings, Inc.(a)(b) 475,600 36,901,804
===========================================================================
444,887,977
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
HEALTH CARE SERVICES-1.11%
Caremark Rx, Inc.(a)(b) 2,427,881 $ 72,763,594
===========================================================================
HEALTH CARE SUPPLIES-0.73%
Alcon, Inc. (Switzerland)(b) 677,400 48,230,880
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.48%
Carnival Corp. (Panama)(b) 750,000 37,920,000
---------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Liberia)(b) 500,000 23,300,000
---------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(b) 750,000 35,797,500
===========================================================================
97,017,500
===========================================================================
HOUSEHOLD PRODUCTS-0.72%
Procter & Gamble Co. (The)(b) 918,800 47,024,184
===========================================================================
HYPERMARKETS & SUPER CENTERS-1.03%
Wal-Mart Stores, Inc.(b) 1,250,000 67,400,000
===========================================================================
INDUSTRIAL CONGLOMERATES-1.72%
3M Co.(b) 290,000 22,495,300
---------------------------------------------------------------------------
General Electric Co. 1,500,000 51,180,000
---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)(b) 1,250,000 38,937,500
===========================================================================
112,612,800
===========================================================================
INDUSTRIAL GASES-0.87%
Air Products & Chemicals, Inc. 600,000 31,908,000
---------------------------------------------------------------------------
Praxair, Inc. 600,000 25,320,000
===========================================================================
57,228,000
===========================================================================
INDUSTRIAL MACHINERY-3.63%
Danaher Corp.(b) 1,000,000 55,130,000
---------------------------------------------------------------------------
Eaton Corp.(b) 500,000 31,975,000
---------------------------------------------------------------------------
Illinois Tool Works Inc.(b) 363,300 33,525,324
---------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 1,100,000 75,284,000
---------------------------------------------------------------------------
Parker Hannifin Corp.(b) 600,000 42,378,000
===========================================================================
238,292,324
===========================================================================
INTEGRATED OIL & GAS-1.37%
ChevronTexaco Corp. 307,000 16,289,420
---------------------------------------------------------------------------
Exxon Mobil Corp. 1,500,000 73,830,000
===========================================================================
90,119,420
===========================================================================
INTERNET RETAIL-1.19%
eBay Inc.(a)(b) 800,000 78,088,000
===========================================================================
INTERNET SOFTWARE & SERVICES-2.52%
Google Inc.-Class A(a)(b) 250,413 47,755,011
---------------------------------------------------------------------------
Yahoo! Inc.(a)(b) 3,250,000 117,617,500
===========================================================================
165,372,511
===========================================================================
|
FS-83
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-0.37%
Goldman Sachs Group, Inc. (The)(b) 250,000 $ 24,595,000
===========================================================================
IT CONSULTING & OTHER SERVICES-0.37%
Accenture Ltd.-Class A (Bermuda)(a)(b) 1,000,000 24,210,000
===========================================================================
LIFE & HEALTH INSURANCE-0.40%
AFLAC Inc.(b) 725,450 26,029,146
===========================================================================
MANAGED HEALTH CARE-1.34%
Aetna Inc.(b) 346,500 32,917,500
---------------------------------------------------------------------------
UnitedHealth Group Inc.(b) 463,100 33,528,440
---------------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 222,300 21,709,818
===========================================================================
88,155,758
===========================================================================
MOTORCYCLE MANUFACTURERS-0.31%
Harley-Davidson, Inc.(b) 350,000 20,149,500
===========================================================================
MOVIES & ENTERTAINMENT-1.08%
DreamWorks Animation SKG, Inc.-Class A(a) 117,200 4,576,660
---------------------------------------------------------------------------
Viacom Inc.-Class B(b) 1,811,464 66,100,321
===========================================================================
70,676,981
===========================================================================
MULTI-LINE INSURANCE-0.89%
American International Group, Inc.(b) 500,000 30,355,000
---------------------------------------------------------------------------
Genworth Financial Inc.-Class A(b) 1,180,000 28,154,800
===========================================================================
58,509,800
===========================================================================
OIL & GAS DRILLING-0.57%
ENSCO International Inc.(b) 1,219,000 37,240,450
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.45%
BJ Services Co.(b) 869,600 44,349,600
---------------------------------------------------------------------------
Halliburton Co.(b) 500,000 18,520,000
---------------------------------------------------------------------------
Weatherford International Ltd.
(Bermuda)(a)(b) 625,000 32,662,500
===========================================================================
95,532,100
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.58%
Apache Corp.(b) 500,000 25,350,000
---------------------------------------------------------------------------
Devon Energy Corp. 700,000 51,779,000
---------------------------------------------------------------------------
XTO Energy, Inc.(b) 800,000 26,704,000
===========================================================================
103,833,000
===========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-0.44%
Valero Energy Corp.(b) 670,000 28,789,900
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.17%
Citigroup Inc.(b) 1,906,900 84,609,153
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
JPMorgan Chase & Co.(b) 1,500,000 $ 57,900,000
===========================================================================
142,509,153
===========================================================================
PACKAGED FOODS & MEATS-0.89%
Hershey Foods Corp.(b) 500,000 25,345,000
---------------------------------------------------------------------------
Kellogg Co. 765,900 32,933,700
===========================================================================
58,278,700
===========================================================================
PERSONAL PRODUCTS-1.02%
Avon Products, Inc. 600,000 23,730,000
---------------------------------------------------------------------------
Gillette Co. (The)(b) 1,042,000 43,222,160
===========================================================================
66,952,160
===========================================================================
PHARMACEUTICALS-5.68%
Johnson & Johnson 1,696,100 99,018,318
---------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(b) 1,333,500 54,233,445
---------------------------------------------------------------------------
Pfizer Inc. 4,250,000 123,037,500
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(b) 3,709,700 96,452,200
===========================================================================
372,741,463
===========================================================================
PUBLISHING-0.50%
Gannett Co., Inc.(b) 398,400 33,047,280
===========================================================================
REGIONAL BANKS-0.45%
Commerce Bancorp, Inc.(b) 500,000 29,620,000
===========================================================================
RESTAURANTS-0.44%
McDonald's Corp.(b) 1,000,000 29,150,000
===========================================================================
SEMICONDUCTOR EQUIPMENT-0.74%
Applied Materials, Inc.(a)(b) 1,583,600 25,495,960
---------------------------------------------------------------------------
KLA-Tencor Corp.(a)(b) 500,000 22,765,000
===========================================================================
48,260,960
===========================================================================
SEMICONDUCTORS-6.21%
Analog Devices, Inc.(b) 2,250,000 90,585,000
---------------------------------------------------------------------------
Freescale Semiconductor Inc.-Class A(a)(b) 3,000,000 46,620,000
---------------------------------------------------------------------------
Linear Technology Corp. 1,600,000 60,608,000
---------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a)(b) 750,000 21,427,500
---------------------------------------------------------------------------
Maxim Integrated Products, Inc.(b) 806,985 35,499,270
---------------------------------------------------------------------------
Microchip Technology Inc. 5,068,952 153,335,798
===========================================================================
408,075,568
===========================================================================
SPECIALTY CHEMICALS-0.80%
Ecolab Inc.(b) 800,000 27,080,000
---------------------------------------------------------------------------
Rohm & Haas Co.(b) 600,000 25,434,000
===========================================================================
52,514,000
===========================================================================
SPECIALTY STORES-3.36%
Bed Bath & Beyond Inc.(a)(b) 2,000,000 81,580,000
---------------------------------------------------------------------------
Staples, Inc.(b) 3,500,000 104,090,000
---------------------------------------------------------------------------
|
FS-84
MARKET
SHARES VALUE
---------------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Williams-Sonoma, Inc.(a)(b) 917,800 $ 35,032,426
===========================================================================
220,702,426
===========================================================================
STEEL-0.75%
Nucor Corp.(b) 600,000 25,338,000
---------------------------------------------------------------------------
United States Steel Corp.(b) 651,000 23,904,720
===========================================================================
49,242,720
===========================================================================
SYSTEMS SOFTWARE-5.04%
Adobe Systems Inc.(b) 600,000 33,618,000
---------------------------------------------------------------------------
Microsoft Corp. 6,000,000 167,940,000
---------------------------------------------------------------------------
Oracle Corp.(a) 4,438,800 56,195,208
---------------------------------------------------------------------------
Symantec Corp.(a)(b) 800,000 45,552,000
---------------------------------------------------------------------------
VERITAS Software Corp.(a)(b) 1,263,800 27,651,944
===========================================================================
330,957,152
===========================================================================
TECHNOLOGY DISTRIBUTORS-1.31%
CDW Corp.(b) 1,391,300 86,302,339
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.52%
Nextel Communications, Inc.-Class A(a)(b) 1,297,900 34,381,371
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,083,616,766) 6,532,827,540
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
MONEY MARKET FUNDS-0.64%
Liquid Assets Portfolio-Institutional
Class(c) 21,040,807 $ 21,040,807
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 21,040,807 21,040,807
===========================================================================
Total Money Market Funds (Cost
$42,081,614) 42,081,614
===========================================================================
TOTAL INVESTMENTS-100.13% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$5,125,698,380) 6,574,909,154
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-14.83%
Liquid Assets Portfolio-Institutional
Class(c)(d) 969,136,004 969,136,004
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(c)(d) 4,938,485 4,938,485
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $974,074,489) 974,074,489
===========================================================================
TOTAL INVESTMENTS-114.96% (Cost
$6,099,772,869) 7,548,983,643
===========================================================================
OTHER ASSETS LESS LIABILITIES-(14.96%) (982,334,057)
===========================================================================
NET ASSETS-100.00% $6,566,649,586
___________________________________________________________________________
===========================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-85
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$5,083,616,766)* $ 6,532,827,540
------------------------------------------------------------
Investments in affiliated money market
funds (cost $1,016,156,103) 1,016,156,103
============================================================
Total investments (cost $6,099,772,869) 7,548,983,643
============================================================
Foreign currencies, at value (cost $1,505) 1,543
------------------------------------------------------------
Receivables for:
Investments sold 36,103,535
------------------------------------------------------------
Fund shares sold 5,247,741
------------------------------------------------------------
Dividends 3,608,701
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 478,198
------------------------------------------------------------
Other assets 73,560
============================================================
Total assets 7,594,496,921
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 24,512,996
------------------------------------------------------------
Fund shares reacquired 22,456,741
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 1,036,780
------------------------------------------------------------
Collateral upon return of securities
loaned 974,074,489
------------------------------------------------------------
Accrued distribution fees 1,956,560
------------------------------------------------------------
Accrued trustees' fees 6,750
------------------------------------------------------------
Accrued transfer agent fees 2,947,479
------------------------------------------------------------
Accrued operating expenses 855,540
============================================================
Total liabilities 1,027,847,335
============================================================
Net assets applicable to shares outstanding $ 6,566,649,586
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 7,288,266,146
------------------------------------------------------------
Undistributed net investment income (loss) (907,378)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (2,169,919,994)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,449,210,812
============================================================
$ 6,566,649,586
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 5,616,072,058
____________________________________________________________
============================================================
Class B $ 617,004,804
____________________________________________________________
============================================================
Class C $ 162,706,560
____________________________________________________________
============================================================
Class R $ 6,202,267
____________________________________________________________
============================================================
Institutional Class $ 164,663,897
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 264,001,060
____________________________________________________________
============================================================
Class B 30,930,529
____________________________________________________________
============================================================
Class C 8,158,834
____________________________________________________________
============================================================
Class R 291,974
____________________________________________________________
============================================================
Institutional Class 7,157,074
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.27
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.27 divided by
94.50%) $ 22.51
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.95
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.94
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.24
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 23.01
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $954,954,771 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-86
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $414,846) $ 48,034,675
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $138,487)* 1,652,388
===========================================================================
Total investment income 49,687,063
===========================================================================
EXPENSES:
Advisory fees 46,243,987
---------------------------------------------------------------------------
Administrative services fees 710,711
---------------------------------------------------------------------------
Custodian fees 525,253
---------------------------------------------------------------------------
Distribution fees:
Class A 19,016,041
---------------------------------------------------------------------------
Class B 6,702,181
---------------------------------------------------------------------------
Class C 1,845,072
---------------------------------------------------------------------------
Class R 24,911
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 21,734,849
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 81,066
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 151,416
---------------------------------------------------------------------------
Other 2,985,841
===========================================================================
Total expenses 100,021,328
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (1,322,281)
===========================================================================
Net expenses 98,699,047
===========================================================================
Net investment income (loss) (49,011,984)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 750,565,101
---------------------------------------------------------------------------
Foreign currencies (1,170,065)
---------------------------------------------------------------------------
Option contracts written 804,191
===========================================================================
750,199,227
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (467,700,274)
---------------------------------------------------------------------------
Foreign currencies 38
===========================================================================
(467,700,236)
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 282,498,991
===========================================================================
Net increase in net assets resulting from operations $ 233,487,007
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-87
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (49,011,984) $ (54,584,186)
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 750,199,227 (454,745,158)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, and foreign currencies and option
contracts (467,700,236) 1,834,190,965
================================================================================================
Net increase in net assets resulting from operations 233,487,007 1,324,861,621
================================================================================================
Share transactions-net:
Class A (1,414,942,300) (1,112,282,235)
------------------------------------------------------------------------------------------------
Class B (88,166,720) (46,666,906)
------------------------------------------------------------------------------------------------
Class C (35,344,446) (22,091,083)
------------------------------------------------------------------------------------------------
Class R 3,284,897 2,235,274
------------------------------------------------------------------------------------------------
Institutional Class 4,128,631 5,433,008
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,531,039,938) (1,173,371,942)
================================================================================================
Net increase (decrease) in net assets (1,297,552,931) 151,489,679
================================================================================================
NET ASSETS:
Beginning of year 7,864,202,517 7,712,712,838
================================================================================================
End of year (including undistributed net investment income
(loss) of $(907,378) and $(844,799), respectively) $ 6,566,649,586 $ 7,864,202,517
________________________________________________________________________________________________
================================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued
FS-88
by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the
FS-89
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.
G. 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.
H. 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.
I. 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.
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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $623,391. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $587,335 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $710,711 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $21,734,849 for Class A, Class B, Class C and Class R shares and $81,066 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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
FS-90
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, 2004, the Class A, Class B, Class C and Class R shares paid $19,016,041, $6,702,181, $1,845,072 and $24,911, 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, 2004, AIM Distributors advised the Fund that it retained $743,284 in front-end sales commissions from the sale of Class A shares and $19,335, $84,327, $11,693 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 95,933,174 $1,169,096,235 $(1,243,988,602) $ -- $21,040,807 $ 766,132 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 95,933,174 1,169,096,235 (1,243,988,602) -- 21,040,807 747,769 --
===================================================================================================================================
Subtotal $191,866,348 $2,338,192,470 $(2,487,977,204) $ -- $42,081,614 $1,513,901 $ --
===================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $155,180,095 $3,731,967,251 $(2,918,011,342) $ -- $ 969,136,004 $ 132,031 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 24,938,485 -- (20,000,000) -- 4,938,485 6,456 --
====================================================================================================================================
Subtotal $180,118,580 $3,731,967,251 $(2,938,011,342) $ -- $ 974,074,489 $ 138,487 $ --
====================================================================================================================================
Total $371,984,928 $6,070,159,721 $(5,425,988,546) $ -- $1,016,156,103 $1,652,388 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $114,504,134 and $56,171,339, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $109,966 and credits in custodian fees of $1,589 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $111,555.
FS-91
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $31,034 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $954,954,771 were on loan to brokers. The loans were secured by cash collateral of $974,074,489 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $138,487 for securities lending transactions.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------------
Beginning of year -- $ --
------------------------------------------------------------------------------------
Written 7,250 867,152
------------------------------------------------------------------------------------
Closed (3,925) (613,840)
------------------------------------------------------------------------------------
Expired (3,325) (253,312)
====================================================================================
End of year -- $ --
____________________________________________________________________________________
====================================================================================
|
FS-92
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 1,443,574,764
-----------------------------------------------------------------------------
Temporary book/tax differences (907,378)
-----------------------------------------------------------------------------
Capital loss carryforward (2,164,283,946)
-----------------------------------------------------------------------------
Shares of beneficial interest 7,288,266,146
=============================================================================
Total net assets $ 6,566,649,586
_____________________________________________________________________________
=============================================================================
|
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 losses on wash sales. The tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation on foreign currencies of $38.
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $745,543,129 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
----------------------------------------------------------------------------
October 31, 2009 $ 478,530,901
----------------------------------------------------------------------------
October 31, 2010 1,223,985,487
----------------------------------------------------------------------------
October 31, 2011 461,767,558
============================================================================
Total capital loss carryforward $2,164,283,946
____________________________________________________________________________
============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $3,585,815,574 and $5,051,191,698, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,643,458,910 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (199,884,184) ============================================================================== Net unrealized appreciation of investment securities $1,443,574,726 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $6,105,408,917. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2004, undistributed net
investment income was increased by $48,949,405, undistributed net realized gain
(loss) was increased by $1,170,065 and shares of beneficial interest decreased
by $50,119,470. This reclassification had no effect on the net assets of the
Fund.
FS-93
NOTE 13--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 certain 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(a)
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2004 2003
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 21,730,966 $ 462,412,977 40,892,692 $ 728,901,495
-------------------------------------------------------------------------------------------------------------------------------
Class B 2,742,938 54,987,929 4,399,643 74,587,779
-------------------------------------------------------------------------------------------------------------------------------
Class C 1,295,928 26,018,679 1,764,643 29,858,199
-------------------------------------------------------------------------------------------------------------------------------
Class R 215,406 4,599,852 163,302 2,916,332
-------------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,641,747 36,786,966 1,117,656 21,391,286
===============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 403,007 8,647,784 325,830 5,894,532
-------------------------------------------------------------------------------------------------------------------------------
Class B (428,243) (8,647,784) (344,006) (5,894,532)
===============================================================================================================================
Reacquired:
Class A (89,250,664) (1,886,003,061) (104,213,879) (1,847,078,262)
-------------------------------------------------------------------------------------------------------------------------------
Class B (6,761,489) (134,506,865) (6,899,964) (115,360,153)
-------------------------------------------------------------------------------------------------------------------------------
Class C (3,085,701) (61,363,125) (3,090,330) (51,949,282)
-------------------------------------------------------------------------------------------------------------------------------
Class R (61,955) (1,314,955) (37,857) (681,058)
-------------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,437,940) (32,658,335) (833,861) (15,958,278)
===============================================================================================================================
(72,996,000) $(1,531,039,938) (66,756,131) $(1,173,371,942)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 14% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-94
NOTE 14--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,
---------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.12)(a) (0.15)(a) (0.12) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.79 3.53 (2.37) (16.24) 12.39
=================================================================================================================================
Total from investment operations 0.66 3.41 (2.52) (16.36) 12.13
=================================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.20% 19.83% (12.78)% (43.10)% 36.56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,616,072 $6,825,023 $6,780,055 $9,703,277 $19,268,977
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.27%(c) 1.29% 1.26% 1.14% 1.08%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.29%(c) 1.30% 1.27% 1.17% 1.11%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.59)(c) (0.67)% (0.74)% (0.46)% (0.61)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $6,338,680,161.
CLASS B
----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a) (0.23)(a) (0.27)(a) (0.28) (0.58)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.75 3.33 (2.26) (15.69) 12.14
=============================================================================================================================
Total from investment operations 0.49 3.10 (2.53) (15.97) 11.56
=============================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=============================================================================================================================
Net asset value, end of period $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 2.52% 18.95% (13.39)% (43.49)% 35.51%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $617,005 $688,587 $625,294 $818,343 $1,315,524
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.97%(c) 1.99% 1.96% 1.86% 1.85%
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.99%(c) 2.00% 1.97% 1.89% 1.88%
=============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.29)(c) (1.37)% (1.44)% (1.17)% (1.38)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $670,218,131.
FS-95
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a) (0.23)(a) (0.27)(a) (0.29) (0.59)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.74 3.33 (2.25) (15.68) 12.15
==============================================================================================================================
Total from investment operations 0.48 3.10 (2.52) (15.97) 11.56
==============================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
==============================================================================================================================
Net asset value, end of period $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 2.47% 18.95% (13.35)% (43.51)% 35.52%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $162,707 $193,585 $184,393 $258,786 $434,544
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.97%(c) 1.99% 1.96% 1.86% 1.85%
------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.99%(c) 2.00% 1.97% 1.89% 1.88%
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.29)(c) (1.37)% (1.44)% (1.17)% (1.38)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $184,507,218.
CLASS R
-------------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.17)(a) (0.16)(a) (0.07)(a)
---------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.78 3.53 (2.49)
=========================================================================================================
Total from investment operations 0.61 3.37 (2.56)
=========================================================================================================
Net asset value, end of period $21.24 $20.63 $17.26
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) 2.96% 19.52% (12.92)%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,202 $2,857 $ 226
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.47%(c) 1.49% 1.53%(d)
---------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.49%(c) 1.50% 1.54%(d)
=========================================================================================================
Ratio of net investment income (loss) to average net assets (0.79)(c) (0.87)% (1.01)(d)
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate(e) 50% 47% 57%
_________________________________________________________________________________________________________
=========================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America 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 based on average daily net assets of $4,982,137.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-96
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.03)(a) (0.06) 0.01 (0.09)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.85 3.80 (2.54) (17.14) 12.91
=========================================================================================================================
Total from investment operations 0.84 3.77 (2.60) (17.13) 12.82
=========================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=========================================================================================================================
Net asset value, end of period $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 3.79% 20.49% (12.38)% (42.80)% 37.14%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $164,664 $154,150 $122,746 $150,609 $288,097
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.72%(c) 0.75% 0.80% 0.65% 0.65%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.74%(c) 0.76% 0.81% 0.68% 0.68%
=========================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.04)(c) (0.13)% (0.28)% 0.03% (0.18)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values and returns for shareholder transactions.
(c) Ratios are based on average daily net assets of $158,650,215.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-97
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-98
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-99
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-100
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, the results of its operations for the year then ended, the statements of 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 U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-101
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-90.30%
ADVERTISING-0.97%
Omnicom Group Inc. 15,300 $ 1,207,170
=======================================================================
AEROSPACE & DEFENSE-2.06%
Raytheon Co. 50,800 1,853,184
-----------------------------------------------------------------------
United Technologies Corp. 7,700 714,714
=======================================================================
2,567,898
=======================================================================
APPAREL RETAIL-1.90%
Limited Brands 39,600 981,288
-----------------------------------------------------------------------
TJX Cos., Inc. (The) 57,800 1,386,044
=======================================================================
2,367,332
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.67%
V. F. Corp. 38,600 2,077,838
=======================================================================
APPLICATION SOFTWARE-0.53%
SAP A.G.-ADR (Germany) 15,500 661,075
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.19%
Federated Investors, Inc.-Class B 51,000 1,478,490
=======================================================================
AUTO PARTS & EQUIPMENT-0.35%
Johnson Controls, Inc. 7,600 435,860
=======================================================================
BREWERS-1.36%
Anheuser-Busch Cos., Inc. 33,900 1,693,305
=======================================================================
BUILDING PRODUCTS-2.34%
Masco Corp. 85,100 2,915,526
=======================================================================
COMPUTER HARDWARE-2.19%
Hewlett-Packard Co. 83,900 1,565,574
-----------------------------------------------------------------------
International Business Machines Corp. 12,900 1,157,775
=======================================================================
2,723,349
=======================================================================
CONSTRUCTION & ENGINEERING-1.32%
Fluor Corp. 35,500 1,648,620
=======================================================================
CONSTRUCTION MATERIALS-0.48%
Lafarge North America Inc. 12,100 592,900
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.05%
Automatic Data Processing, Inc. 31,600 1,371,124
-----------------------------------------------------------------------
First Data Corp. 28,500 1,176,480
=======================================================================
2,547,604
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
DISTRIBUTORS-0.86%
Genuine Parts Co. 26,900 $ 1,073,041
=======================================================================
DIVERSIFIED BANKS-3.11%
Bank of America Corp. 47,200 2,114,088
-----------------------------------------------------------------------
U.S. Bancorp 28,900 826,829
-----------------------------------------------------------------------
Wachovia Corp. 19,000 934,990
=======================================================================
3,875,907
=======================================================================
DIVERSIFIED CHEMICALS-2.48%
Dow Chemical Co. (The) 26,800 1,204,392
-----------------------------------------------------------------------
PPG Industries, Inc. 29,500 1,880,625
=======================================================================
3,085,017
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.51%
H&R Block, Inc. 18,800 893,940
-----------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 46,700 980,700
=======================================================================
1,874,640
=======================================================================
ELECTRIC UTILITIES-3.07%
Entergy Corp. 17,400 1,137,264
-----------------------------------------------------------------------
Exelon Corp. 56,300 2,230,606
-----------------------------------------------------------------------
Wisconsin Energy Corp. 14,000 456,960
=======================================================================
3,824,830
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.83%
Cooper Industries, Ltd.-Class A (Bermuda) 19,600 1,252,440
-----------------------------------------------------------------------
Emerson Electric Co. 35,400 2,267,370
=======================================================================
3,519,810
=======================================================================
FOOTWEAR-0.72%
NIKE, Inc.-Class B 11,000 894,410
=======================================================================
HEALTH CARE EQUIPMENT-2.16%
Baxter International Inc. 62,600 1,925,576
-----------------------------------------------------------------------
Becton, Dickinson & Co. 14,500 761,250
=======================================================================
2,686,826
=======================================================================
HOME IMPROVEMENT RETAIL-1.21%
Home Depot, Inc. (The) 36,800 1,511,744
=======================================================================
HOUSEHOLD APPLIANCES-0.94%
Snap-on Inc. 39,800 1,169,324
=======================================================================
HOUSEHOLD PRODUCTS-2.30%
Colgate-Palmolive Co. 50,900 2,271,158
-----------------------------------------------------------------------
Kimberly-Clark Corp. 9,900 590,733
=======================================================================
2,861,891
=======================================================================
|
FS-102
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INDUSTRIAL MACHINERY-3.46%
Illinois Tool Works Inc. 9,100 $ 839,748
-----------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 28,800 1,971,072
-----------------------------------------------------------------------
Pentair, Inc. 40,200 1,502,676
=======================================================================
4,313,496
=======================================================================
INSURANCE BROKERS-1.14%
Marsh & McLennan Cos., Inc. 51,200 1,416,192
=======================================================================
INTEGRATED OIL & GAS-4.43%
ChevronTexaco Corp. 11,200 594,272
-----------------------------------------------------------------------
ConocoPhillips 11,700 986,427
-----------------------------------------------------------------------
Eni S.p.A. (Italy)(a) 30,100 690,704
-----------------------------------------------------------------------
Exxon Mobil Corp. 16,000 787,520
-----------------------------------------------------------------------
Occidental Petroleum Corp. 26,100 1,457,163
-----------------------------------------------------------------------
Total S.A. (France)(a) 4,800 1,004,810
=======================================================================
5,520,896
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.83%
SBC Communications Inc. 40,900 1,033,134
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.74%
Morgan Stanley 42,400 2,166,216
=======================================================================
LIFE & HEALTH INSURANCE-0.83%
Prudential Financial, Inc. 22,300 1,036,281
=======================================================================
MULTI-LINE INSURANCE-1.10%
Hartford Financial Services Group, Inc. (The) 23,500 1,374,280
=======================================================================
MULTI-UTILITIES & UNREGULATED POWER-2.93%
Dominion Resources, Inc. 28,700 1,845,984
-----------------------------------------------------------------------
Public Service Enterprise Group Inc. 42,200 1,797,298
=======================================================================
3,643,282
=======================================================================
OFFICE SERVICES & SUPPLIES-0.81%
Pitney Bowes Inc. 23,000 1,006,250
=======================================================================
OIL & GAS DRILLING-1.04%
GlobalSantaFe Corp. (Cayman Islands) 44,000 1,298,000
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.64%
Citigroup Inc. 46,100 2,045,457
=======================================================================
PACKAGED FOODS & MEATS-3.94%
General Mills, Inc. 45,500 2,013,375
-----------------------------------------------------------------------
Hershey Foods Corp. 14,400 729,936
-----------------------------------------------------------------------
Kellogg Co. 20,000 860,000
-----------------------------------------------------------------------
Sara Lee Corp. 55,900 1,301,352
=======================================================================
4,904,663
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PAPER PACKAGING-0.84%
Bemis Co., Inc. 15,200 $ 402,344
-----------------------------------------------------------------------
Sonoco Products Co. 24,300 647,595
=======================================================================
1,049,939
=======================================================================
PERSONAL PRODUCTS-0.69%
Avon Products, Inc. 21,600 854,280
=======================================================================
PHARMACEUTICALS-10.24%
Abbott Laboratories 55,100 2,348,913
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 52,600 1,232,418
-----------------------------------------------------------------------
Johnson & Johnson 41,400 2,416,932
-----------------------------------------------------------------------
Lilly (Eli) & Co. 35,200 1,932,832
-----------------------------------------------------------------------
Merck & Co. Inc. 13,800 432,078
-----------------------------------------------------------------------
Pfizer Inc. 65,200 1,887,540
-----------------------------------------------------------------------
Wyeth 63,200 2,505,880
=======================================================================
12,756,593
=======================================================================
PROPERTY & CASUALTY INSURANCE-3.43%
Chubb Corp. (The) 8,700 627,531
-----------------------------------------------------------------------
MBIA Inc. 27,200 1,573,792
-----------------------------------------------------------------------
SAFECO Corp. 9,300 430,032
-----------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 48,400 1,643,664
=======================================================================
4,275,019
=======================================================================
PUBLISHING-0.99%
Gannett Co., Inc. 14,900 1,235,955
=======================================================================
REGIONAL BANKS-2.17%
Cullen/Frost Bankers, Inc. 10,800 529,200
-----------------------------------------------------------------------
KeyCorp 17,000 571,030
-----------------------------------------------------------------------
North Fork Bancorp., Inc. 36,400 1,605,240
=======================================================================
2,705,470
=======================================================================
RESTAURANTS-1.45%
Outback Steakhouse, Inc. 45,700 1,809,263
=======================================================================
SEMICONDUCTORS-1.49%
Linear Technology Corp. 25,000 947,000
-----------------------------------------------------------------------
Texas Instruments Inc. 37,400 914,430
=======================================================================
1,861,430
=======================================================================
SOFT DRINKS-1.25%
PepsiCo, Inc. 31,300 1,551,854
=======================================================================
SYSTEMS SOFTWARE-1.71%
Microsoft Corp. 76,100 2,130,039
=======================================================================
THRIFTS & MORTGAGE FINANCE-1.21%
Fannie Mae 13,600 954,040
-----------------------------------------------------------------------
MGIC Investment Corp. 8,500 546,635
=======================================================================
1,500,675
=======================================================================
|
FS-103
MARKET
SHARES VALUE
-----------------------------------------------------------------------
TOBACCO-1.34%
Altria Group, Inc. 34,400 $ 1,667,024
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $103,200,562) 112,450,095
=======================================================================
PRINCIPAL
AMOUNT
NOTES-0.36%
AEROSPACE & DEFENSE-0.07%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06(b) $ 75,000 82,638
=======================================================================
BROADCASTING & CABLE TV-0.08%
TCI Communications, Inc., Medium Term Notes,
8.35%, 02/15/05(b) 100,000 101,597
=======================================================================
ELECTRIC UTILITIES-0.13%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05(b) 160,000 167,573
=======================================================================
|
-----------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
OTHER DIVERSIFIED FINANCIAL SERVICES-0.08%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%,
01/30/06(b) $ 100,000 $ 100,407
=======================================================================
Total Notes (Cost $451,848) 452,215
=======================================================================
U.S. TREASURY BILLS-0.40%
1.62%, 12/16/04 (Cost $498,986)(c) 500,000(d) 498,986
=======================================================================
SHARES
MONEY MARKET FUNDS-13.44%
Liquid Assets Portfolio-Institutional
Class(e) 8,365,886 8,365,886
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 8,365,886 8,365,886
=======================================================================
Total Money Market Funds (Cost
$16,731,772) 16,731,772
=======================================================================
TOTAL INVESTMENTS-104.50% (Cost $120,883,168) 130,133,068
=======================================================================
OTHER ASSETS LESS LIABILITIES-(4.50%) (5,603,883)
=======================================================================
NET ASSETS-100.00% $124,529,185
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Sr. - Senior Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at October 31, 2004 was
$1,695,514, which represented 1.30% of the Fund's Total Investments. See
Note 1A.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate market value of these securities at October
31, 2004 was $452,215, which represented 0.35% of the Fund's Total
Investments. See Note 1A.
(c) Security traded on a discount basis. Unless otherwise indicated, the
interest rate shown represents the discount rate at the time of purchase by
the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1I and Note 9.
(e) 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-104
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$104,151,396) $113,401,296
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $16,731,772) 16,731,772
===========================================================
Total investments (cost $120,883,168) 130,133,068
===========================================================
Receivables for:
Investments sold 303,590
-----------------------------------------------------------
Variation margin 2,700
-----------------------------------------------------------
Fund shares sold 1,185,428
-----------------------------------------------------------
Dividends and interest 182,194
-----------------------------------------------------------
Amount due from advisor 9,911
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 8,846
-----------------------------------------------------------
Other assets 32,175
===========================================================
Total assets 131,857,912
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 7,008,815
-----------------------------------------------------------
Fund shares reacquired 164,368
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 9,560
-----------------------------------------------------------
Accrued distribution fees 64,638
-----------------------------------------------------------
Accrued trustees' fees 864
-----------------------------------------------------------
Accrued transfer agent fees 45,135
-----------------------------------------------------------
Accrued operating expenses 35,347
===========================================================
Total liabilities 7,328,727
===========================================================
Net assets applicable to shares outstanding $124,529,185
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $112,989,604
-----------------------------------------------------------
Undistributed net investment income (8,903)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
futures contracts and option contracts 2,289,194
-----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 9,259,290
===========================================================
$124,529,185
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 63,513,256
___________________________________________________________
===========================================================
Class B $ 45,699,620
___________________________________________________________
===========================================================
Class C $ 15,316,309
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 5,531,730
___________________________________________________________
===========================================================
Class B 4,014,872
___________________________________________________________
===========================================================
Class C 1,347,153
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.48
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.48 divided by
94.50%) $ 12.15
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.38
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.37
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-105
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $7,650) $1,718,885
------------------------------------------------------------------------
Dividends from affiliated money market funds 78,001
------------------------------------------------------------------------
Interest 18,670
========================================================================
Total investment income 1,815,556
========================================================================
EXPENSES:
Advisory fees 600,345
------------------------------------------------------------------------
Administrative services fees 50,000
------------------------------------------------------------------------
Custodian fees 22,370
------------------------------------------------------------------------
Distribution fees:
Class A 134,282
------------------------------------------------------------------------
Class B 318,360
------------------------------------------------------------------------
Class C 98,436
------------------------------------------------------------------------
Transfer agent fees 248,184
------------------------------------------------------------------------
Trustees' fees and retirement benefits 13,241
------------------------------------------------------------------------
Other 148,681
========================================================================
Total expenses 1,633,899
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (561,093)
========================================================================
Net expenses 1,072,806
========================================================================
Net investment income 742,750
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain from:
Investment securities 3,140,049
------------------------------------------------------------------------
Foreign currencies 2,121
------------------------------------------------------------------------
Futures contracts 46,724
------------------------------------------------------------------------
Option contracts written 21,415
========================================================================
3,210,309
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 4,343,728
------------------------------------------------------------------------
Foreign currencies (14)
------------------------------------------------------------------------
Futures contracts 9,390
========================================================================
4,353,104
========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 7,563,413
========================================================================
Net increase in net assets resulting from operations $8,306,163
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-106
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 742,750 $ 85,307
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts 3,210,309 (463,512)
----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and futures contracts 4,353,104 6,127,078
========================================================================================
Net increase in net assets resulting from operations 8,306,163 5,748,873
========================================================================================
Distributions to shareholders from net investment income:
Class A (500,393) (67,755)
----------------------------------------------------------------------------------------
Class B (204,810) (14,134)
----------------------------------------------------------------------------------------
Class C (63,792) (3,436)
========================================================================================
Decrease in net assets resulting from distributions (768,995) (85,325)
========================================================================================
Share transactions-net:
Class A 37,536,817 11,899,583
----------------------------------------------------------------------------------------
Class B 21,106,883 12,028,596
----------------------------------------------------------------------------------------
Class C 8,543,492 4,163,744
========================================================================================
Net increase in net assets resulting from share
transactions 67,187,192 28,091,923
========================================================================================
Net increase in net assets 74,724,360 33,755,471
========================================================================================
NET ASSETS:
Beginning of year 49,804,825 16,049,354
========================================================================================
End of year (including undistributed net investment
income of $(8,903) and $(3,386), respectively) $124,529,185 $49,804,825
________________________________________________________________________________________
========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued
FS-107
by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
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 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. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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-108
G. 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.
H. 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.
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. 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.
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. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.00%, 1.65% and 1.65% of average daily net assets, respectively. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.50%, 2.15% and 2.15% of average daily net assets, respectively, through October 31, 2005. 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), or items designated as such 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. 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. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $531,230.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $28,553 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $248,184. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B and Class C shares paid $134,282, $318,360 and $98,436, respectively.
FS-109
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, 2004, AIM Distributors advised the Fund that it retained $64,410 in front-end sales commissions from the sale of Class A shares and $300, $8,410 and $1,776 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") 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. The table below shows the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,615,482 $24,141,052 $(17,390,648) $ -- $ 8,365,886 $39,277 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,615,482 24,141,052 (17,390,648) -- 8,365,886 38,724 --
==================================================================================================================================
Total $3,230,964 $48,282,104 $(34,781,296) $ -- $16,731,772 $78,001 $ --
==================================================================================================================================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $102,143 and $94,900, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $1,198 and credits in custodian fees of $112 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $1,310.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $4,484 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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
FS-110
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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------------
Written 688 51,842
-------------------------------------------------------------------------------------
Closed (473) (40,673)
-------------------------------------------------------------------------------------
Exercised (215) (11,169)
=====================================================================================
End of year -- $ --
_____________________________________________________________________________________
=====================================================================================
|
NOTE 9--FUTURES CONTRACTS
On October 31, 2004, $77,000 principal amount of U.S. Treasury obligations was pledged as collateral to cover margin requirements for open futures contracts.
OPEN FUTURES CONTRACTS AT PERIOD END
-----------------------------------------------------------------------------------------------------------------------
NO. OF MONTH/ MARKET UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
-----------------------------------------------------------------------------------------------------------------------
S&P 500 Futures 20 Dec-04/Long $1,130,300 $9,390
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
---------------------------------------------------------------------------------
Distributions paid from ordinary income $768,995 $85,325
_________________________________________________________________________________
=================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed ordinary income $ 1,363,869
----------------------------------------------------------------------------
Undistributed long-term gain 1,100,008
----------------------------------------------------------------------------
Unrealized appreciation -- investments 9,084,607
----------------------------------------------------------------------------
Temporary book/tax differences (8,903)
----------------------------------------------------------------------------
Shares of beneficial interest 112,989,604
============================================================================
Total net assets $124,529,185
____________________________________________________________________________
============================================================================
|
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 losses on wash sales and the realization of gains on certain futures contracts.
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 trustee deferral of compensation and retirement plan expenses.
FS-111
The Fund utilized $411,417 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund did not have a capital loss carryforward as of October 31, 2004.
NOTE 11--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, 2004 was $80,661,385 and $22,212,633, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $11,614,974 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,530,367) =============================================================================== Net unrealized appreciation of investment securities $ 9,084,607 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $121,048,461. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of distributions and foreign currencies transactions, on October 31, 2004, undistributed net investment income was increased by $20,728, undistributed net realized gain was decreased by $250,728 and shares of beneficial interest increased by $230,000. This reclassification had no effect on the net assets of the Fund.
NOTE 13--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 certain 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.
CHANGE IN SHARES OUTSTANDING(a)
--------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2004 2003
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,322,865 $ 48,449,001 2,036,155 $18,695,942
--------------------------------------------------------------------------------------------------------------------
Class B 2,496,183 27,796,432 1,811,612 16,607,284
--------------------------------------------------------------------------------------------------------------------
Class C 891,143 9,870,802 599,285 5,518,092
====================================================================================================================
Issued as reinvestment of dividends:
Class A 41,472 465,571 6,293 61,880
--------------------------------------------------------------------------------------------------------------------
Class B 16,701 185,244 1,275 12,449
--------------------------------------------------------------------------------------------------------------------
Class C 5,270 58,491 324 3,166
====================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 186,137 2,093,587 71,889 675,552
--------------------------------------------------------------------------------------------------------------------
Class B (187,728) (2,093,587) (72,485) (675,552)
====================================================================================================================
Reacquired:
Class A (1,198,931) (13,471,342) (834,757) (7,533,791)
--------------------------------------------------------------------------------------------------------------------
Class B (432,094) (4,781,206) (439,212) (3,915,585)
--------------------------------------------------------------------------------------------------------------------
Class C (125,008) (1,385,801) (152,851) (1,357,514)
====================================================================================================================
6,016,010 $ 67,187,192 3,027,528 $28,091,923
____________________________________________________________________________________________________________________
====================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 8% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distributions, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-112
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.26 $ 8.70 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.14 0.06(a) (0.03)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.23 1.54 (1.27)
========================================================================================================
Total from investment operations 1.37 1.60 (1.30)
========================================================================================================
Less dividends from net investment income (0.15) (0.04) --
========================================================================================================
Net asset value, end of period $ 11.48 $ 10.26 $ 8.70
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 13.36% 18.39% (13.00)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $63,513 $22,375 $ 7,834
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(c) 1.51% 1.75%(d)
--------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.70%(c) 2.12% 4.26%(d)
========================================================================================================
Ratio of net investment income (loss) to average net assets 1.27%(c) 0.65% (0.34)%(d)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $38,366,366.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-113
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.17 $ 8.65 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.00(a) (0.08)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.21 1.53 (1.27)
========================================================================================================
Total from investment operations 1.28 1.53 (1.35)
========================================================================================================
Less dividends from net investment income (0.07) (0.01) --
========================================================================================================
Net asset value, end of period $ 11.38 $ 10.17 $ 8.65
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 12.63% 17.67% (13.50)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $45,700 $21,582 $ 7,100
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 2.16% 2.40%(d)
--------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.35%(c) 2.77% 4.91%(d)
========================================================================================================
Ratio of net investment income (loss) to average net assets 0.62%(c) 0.00% (0.99)%(d)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $31,836,043.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-114
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
-------------------- OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.16 $ 8.65 $ 10.00
----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.00(a) (0.08)(a)
----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.21 1.52 (1.27)
==========================================================================================================
Total from investment operations 1.28 1.52 (1.35)
==========================================================================================================
Less dividends from net investment income (0.07) (0.01) --
==========================================================================================================
Net asset value, end of period $ 11.37 $10.16 $ 8.65
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) 12.64% 17.55% (13.50)%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,316 $5,848 $ 1,116
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 2.16% 2.40%(d)
----------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.35%(c) 2.77% 4.91%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets 0.62%(c) 0.00% (0.99)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $9,843,547.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered
FS-115
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-116
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-117
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-118
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-119
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.23%
ADVERTISING-5.13%
Interpublic Group of Cos., Inc. (The)(a) 580,200 $ 7,113,252
-----------------------------------------------------------------------
Omnicom Group Inc. 141,600 11,172,240
=======================================================================
18,285,492
=======================================================================
AEROSPACE & DEFENSE-1.80%
Honeywell International Inc. 190,300 6,409,304
=======================================================================
ALUMINUM-1.62%
Alcoa Inc. 177,500 5,768,750
=======================================================================
APPAREL RETAIL-1.71%
Gap, Inc. (The) 304,700 6,087,906
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.47%
Bank of New York Co., Inc. (The) 270,600 8,783,676
=======================================================================
BUILDING PRODUCTS-2.33%
Masco Corp. 242,200 8,297,772
=======================================================================
COMMUNICATIONS EQUIPMENT-1.06%
Motorola, Inc. 219,200 3,783,392
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.85%
Deere & Co. 50,800 3,036,824
=======================================================================
CONSUMER ELECTRONICS-3.19%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 197,970 4,715,645
-----------------------------------------------------------------------
Sony Corp.-ADR (Japan) 190,700 6,645,895
=======================================================================
11,361,540
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.69%
Ceridian Corp.(a) 300,700 5,187,075
-----------------------------------------------------------------------
First Data Corp. 278,700 11,504,736
=======================================================================
16,691,811
=======================================================================
DEPARTMENT STORES-1.25%
May Department Stores Co. (The) 170,800 4,451,048
=======================================================================
DIVERSIFIED CHEMICALS-0.71%
Dow Chemical Co. (The) 56,600 2,543,604
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.60%
Cendant Corp. 449,600 9,257,264
=======================================================================
ENVIRONMENTAL SERVICES-3.11%
Waste Management, Inc. 388,550 11,065,904
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
FOOD RETAIL-3.04%
Kroger Co. (The)(a) 416,600 $ 6,294,826
-----------------------------------------------------------------------
Safeway Inc.(a) 248,800 4,538,112
=======================================================================
10,832,938
=======================================================================
GENERAL MERCHANDISE STORES-2.57%
Target Corp. 183,100 9,158,662
=======================================================================
HEALTH CARE DISTRIBUTORS-4.92%
Cardinal Health, Inc. 239,600 11,201,300
-----------------------------------------------------------------------
McKesson Corp. 237,100 6,321,086
=======================================================================
17,522,386
=======================================================================
HEALTH CARE EQUIPMENT-1.47%
Baxter International Inc. 170,800 5,253,808
=======================================================================
HEALTH CARE FACILITIES-1.80%
HCA, Inc. 174,400 6,405,712
=======================================================================
INDUSTRIAL CONGLOMERATES-6.25%
General Electric Co. 232,500 7,932,900
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 459,800 14,322,770
=======================================================================
22,255,670
=======================================================================
INDUSTRIAL MACHINERY-2.47%
Illinois Tool Works Inc. 95,515 8,814,124
=======================================================================
INSURANCE BROKERS-1.18%
Aon Corp. 206,600 4,216,706
=======================================================================
INVESTMENT BANKING & BROKERAGE-4.26%
Merrill Lynch & Co., Inc. 127,800 6,893,532
-----------------------------------------------------------------------
Morgan Stanley 162,000 8,276,580
=======================================================================
15,170,112
=======================================================================
MANAGED HEALTH CARE-2.21%
Anthem, Inc.(a)(b) 98,000 7,879,200
=======================================================================
MOVIES & ENTERTAINMENT-2.60%
Walt Disney Co. (The) 367,100 9,258,262
=======================================================================
MULTI-LINE INSURANCE-1.41%
Hartford Financial Services Group, Inc. (The) 85,600 5,005,888
=======================================================================
OIL & GAS DRILLING-2.09%
Transocean Inc. (Cayman Islands)(a) 211,377 7,451,039
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.74%
Halliburton Co. 265,100 9,819,304
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 112,100 7,055,574
=======================================================================
16,874,878
=======================================================================
|
FS-120
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-6.51%
Citigroup Inc. 241,619 $ 10,720,635
-----------------------------------------------------------------------
JPMorgan Chase & Co. 323,356 12,481,542
=======================================================================
23,202,177
=======================================================================
PACKAGED FOODS & MEATS-1.65%
Kraft Foods Inc.-Class A 176,300 5,872,553
=======================================================================
PHARMACEUTICALS-7.62%
Pfizer Inc. 276,900 8,016,255
-----------------------------------------------------------------------
Sanofi-Aventis S.A. (France)(b)(c) 164,452 12,065,161
-----------------------------------------------------------------------
Wyeth 178,300 7,069,595
=======================================================================
27,151,011
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.22%
ACE Ltd. (Cayman Islands) 207,800 7,908,868
=======================================================================
SYSTEMS SOFTWARE-3.27%
Computer Associates International, Inc. 419,900 11,635,429
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.43%
Fannie Mae 174,300 12,227,145
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $308,322,173) 349,920,855
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MONEY MARKET FUNDS-2.13%
Liquid Assets Portfolio-Institutional
Class(d) 3,790,466 $ 3,790,466
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 3,790,466 3,790,466
=======================================================================
Total Money Market Funds (Cost
$7,580,932) 7,580,932
=======================================================================
TOTAL INVESTMENTS-100.36% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $315,903,105) 357,501,787
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-2.02%
STIC Prime Portfolio-Institutional
Class(d)(e) 7,196,450 7,196,450
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $7,196,450) 7,196,450
=======================================================================
TOTAL INVESTMENTS-102.38% (Cost $323,099,555) 364,698,237
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.38%) (8,492,777)
=======================================================================
NET ASSETS-100.00% $356,205,460
_______________________________________________________________________
=======================================================================
|
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
security lending transactions at October 31, 2004.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
market value of this security at October 31, 2004 represented 3.31% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-121
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$308,322,173)* $349,920,855
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $14,777,382) 14,777,382
===========================================================
Total investments (cost $323,099,555) 364,698,237
___________________________________________________________
===========================================================
Receivables for:
Fund shares sold 581,284
-----------------------------------------------------------
Dividends 503,581
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 55,403
-----------------------------------------------------------
Other assets 58,511
===========================================================
Total assets 365,897,016
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,403,301
-----------------------------------------------------------
Fund shares reacquired 758,866
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 68,796
-----------------------------------------------------------
Collateral upon return of securities loaned 7,196,450
-----------------------------------------------------------
Accrued distribution fees 164,794
-----------------------------------------------------------
Accrued trustees' fees 1,433
-----------------------------------------------------------
Accrued transfer agent fees 58,660
-----------------------------------------------------------
Accrued operating expenses 39,256
===========================================================
Total liabilities 9,691,556
===========================================================
Net assets applicable to shares outstanding $356,205,460
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $335,213,046
-----------------------------------------------------------
Undistributed net investment income (loss) (57,053)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (20,549,215)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 41,598,682
===========================================================
$356,205,460
___________________________________________________________
===========================================================
NET ASSETS:
Class A $150,190,493
___________________________________________________________
===========================================================
Class B $ 84,895,719
___________________________________________________________
===========================================================
Class C $ 30,835,140
___________________________________________________________
===========================================================
Class R $ 990,992
___________________________________________________________
===========================================================
Investor Class $ 70,548,023
___________________________________________________________
===========================================================
Institutional Class $ 18,745,093
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,155,745
___________________________________________________________
===========================================================
Class B 7,064,497
___________________________________________________________
===========================================================
Class C 2,566,055
___________________________________________________________
===========================================================
Class R 80,535
___________________________________________________________
===========================================================
Investor Class 5,704,142
___________________________________________________________
===========================================================
Institutional Class 1,513,815
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 12.36
-----------------------------------------------------------
Offering price per share:
(Net asset value of $12.36 divided by
94.50%) $ 13.08
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.02
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.02
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 12.31
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 12.37
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 12.38
___________________________________________________________
===========================================================
|
* At October 31, 2004, securities with an aggregate market value of $6,877,673 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-122
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $71,703) $ 4,901,739
-------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $17,393)* 154,542
=========================================================================
Total investment income 5,056,281
=========================================================================
EXPENSES:
Advisory fees 2,109,274
-------------------------------------------------------------------------
Administrative services fees 125,883
-------------------------------------------------------------------------
Custodian fees 43,391
-------------------------------------------------------------------------
Distribution fees:
Class A 525,588
-------------------------------------------------------------------------
Class B 893,755
-------------------------------------------------------------------------
Class C 314,386
-------------------------------------------------------------------------
Class R 3,976
-------------------------------------------------------------------------
Investor Class 188,897
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor 868,093
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 3,536
-------------------------------------------------------------------------
Trustees' fees and retirement benefits 18,698
-------------------------------------------------------------------------
Other 327,822
=========================================================================
Total expenses 5,423,299
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (48,743)
=========================================================================
Net expenses 5,374,556
=========================================================================
Net investment income (loss) (318,275)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 12,491,108
-------------------------------------------------------------------------
Foreign currencies 9,419
=========================================================================
12,500,527
=========================================================================
Change in net unrealized appreciation of investment
securities 13,417,119
=========================================================================
Net gain from investment securities and foreign currencies 25,917,646
=========================================================================
Net increase in net assets resulting from operations $25,599,371
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-123
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (318,275) $ (639,955)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 12,500,527 (9,793,824)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 13,417,119 51,420,584
==========================================================================================
Net increase in net assets resulting from operations 25,599,371 40,986,805
==========================================================================================
Share transactions-net:
Class A 18,535,871 5,382,960
------------------------------------------------------------------------------------------
Class B (1,304,921) 2,113,303
------------------------------------------------------------------------------------------
Class C 2,160,392 (14,173)
------------------------------------------------------------------------------------------
Class R 365,393 537,385
------------------------------------------------------------------------------------------
Investor Class 62,887,146 177,572
------------------------------------------------------------------------------------------
Institutional Class 18,632,135 --
==========================================================================================
Net increase in net assets resulting from share
transactions 101,276,016 8,197,047
==========================================================================================
Net increase in net assets 126,875,387 49,183,852
==========================================================================================
NET ASSETS:
Beginning of year 229,330,073 180,146,221
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(57,053) and $(25,218), respectively) $356,205,460 $229,330,073
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-124
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-125
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $2,312.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $41,164 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $125,883 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the
FS-126
Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $868,093 for Class A, Class B, Class C, Class R and Investor Class shares and $3,536 for Institutional Class. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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, 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $525,588, $893,755, $314,386, $3,976, $188,897, 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, 2004, AIM Distributors advised the Fund that it retained $78,339 in front-end sales commissions from the sale of Class A shares and $1,584, $11,543, $4,072 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,921,637 $ 39,445,160 $ (37,576,331) $ -- $ 3,790,466 $ 69,486 $ --
------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,921,637 39,445,160 (37,576,331) -- 3,790,466 67,663 --
==============================================================================================================================
Subtotal $3,843,274 $ 78,890,320 $ (75,152,662) $ -- $ 7,580,932 $137,149 $ --
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $3,248,000 $ 74,751,501 $ (77,999,501) $ -- $ -- $ 13,457 $ --
------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 26,802,341 (19,605,891) -- 7,196,450 3,936 --
==============================================================================================================================
Subtotal $3,248,000 $101,553,842 $ (97,605,392) $ -- $ 7,196,450 $ 17,393 $ --
==============================================================================================================================
Total $7,091,274 $180,444,162 $(172,758,054) $ -- $14,777,382 $154,542 $ --
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-127
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $2,159,448 and $4,625,830, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $5,264 and credits in custodian fees of $3 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $5,267.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $5,344 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-128
At October 31, 2004, securities with an aggregate value of $6,877,673 were on loan to brokers. The loans were secured by cash collateral of $7,196,450, received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $17,393 for securities lending transactions.
NOTE 9--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, 2004 and October 31, 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
--------------------------------------------------------------------------
Unrealized appreciation -- investments $ 39,701,181
--------------------------------------------------------------------------
Temporary book/tax differences (57,053)
--------------------------------------------------------------------------
Capital loss carryforward (18,651,714)
--------------------------------------------------------------------------
Shares of beneficial interest 335,213,046
==========================================================================
Total net assets $356,205,460
__________________________________________________________________________
==========================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $18,651,714 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund utilized $12,094,867 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2010 $ 9,120,472
-----------------------------------------------------------------------------
October 31, 2011 9,531,242
=============================================================================
Total capital loss carryforward $18,651,714
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Value Equity Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $108,851,727 and $96,576,124, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 55,037,043 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (15,335,862) ============================================================================== Net unrealized appreciation of investment securities $ 39,701,181 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $324,997,056. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions, on October 31, 2004, undistributed net investment income (loss) was increased by $318,190, undistributed net realized gain (loss) was decreased by $9,419 and shares of beneficial interest decreased by $308,771. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Value Equity Fund into the Fund, undistributed net
FS-129
investment income (loss) was decreased by $31,750, undistributed net realized gain (loss) was decreased by $6,270,695, and shares of beneficial interest increased by $6,302,445. This reclassification had no effect on the net assets of the Fund.
NOTE 12--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 certain 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(A)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,797,896 $ 59,721,792 5,695,229 $ 56,588,456
----------------------------------------------------------------------------------------------------------------------
Class B 1,918,978 23,316,127 2,611,379 25,467,901
----------------------------------------------------------------------------------------------------------------------
Class C 753,705 9,128,932 936,198 9,069,047
----------------------------------------------------------------------------------------------------------------------
Class R 54,757 677,970 59,714 632,113
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 1,838,069 22,849,380 30,507 346,714
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) 1,526,455 18,788,116 -- --
======================================================================================================================
Issued in connection with acquisitions:(d)
Class A 23,582 268,604 -- --
----------------------------------------------------------------------------------------------------------------------
Class B 31,404 350,200 -- --
----------------------------------------------------------------------------------------------------------------------
Class C 100,704 1,122,781 -- --
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 7,662,600 87,273,020 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 467,293 5,834,860 315,247 3,158,288
----------------------------------------------------------------------------------------------------------------------
Class B (478,951) (5,834,860) (321,047) (3,158,288)
======================================================================================================================
Reacquired:
Class A (3,841,386) (47,289,385) (5,558,986) (54,363,784)
----------------------------------------------------------------------------------------------------------------------
Class B (1,581,802) (19,136,388) (2,170,734) (20,196,310)
----------------------------------------------------------------------------------------------------------------------
Class C (671,051) (8,091,321) (955,066) (9,083,220)
----------------------------------------------------------------------------------------------------------------------
Class R (25,935) (312,577) (8,863) (94,728)
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) (3,812,184) (47,235,254) (14,850) (169,142)
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) (12,640) (155,981) -- --
======================================================================================================================
8,751,494 $101,276,016 618,728 $ 8,197,047
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 13% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder are also
owned beneficially. 5% of the outstanding shares of the Fund are owned by
affiliated mutual funds. Affiliated mutual funds are mutual funds that are
advised by AIM.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) 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 on 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-130
NOTE 13--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,
--------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $ 9.20 $ 10.94 $ 12.05 $ 9.40
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.00)(a) 0.01(a) 0.02(a) 0.07(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 2.19 (1.75) (1.07) 2.88
============================================================================================================================
Total from investment operations 0.97 2.19 (1.74) (1.05) 2.95
============================================================================================================================
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 $ 12.36 $ 11.39 $ 9.20 $ 10.94 $12.05
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 8.52% 23.80% (15.90)% (8.74)% 32.21%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $150,190 $121,980 $94,387 $68,676 $5,888
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.33%(c) 1.42% 1.38% 1.27% 1.25%
----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.35%(c) 1.42% 1.38% 1.36% 8.21%
============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.11%(c) (0.01)% 0.11% 0.17% 0.62%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $150,168,025.
FS-131
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-------------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------------------------------------- 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) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment operations 0.87 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 $ 12.02 $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.80% 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $84,896 $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.98%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.54)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 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 assets values may differ from the net 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 $89,375,514.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-132
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) 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) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment operations 0.87 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 $ 12.02 $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.80% 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,835 $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.98%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.54)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 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 assets values may differ from the net 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 $31,438,601.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-133
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
------------------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
-------------------------- 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)(a) (0.02)(a) (0.00)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 2.18 (2.40)
==============================================================================================================
Total from investment operations 0.95 2.16 (2.40)
==============================================================================================================
Net asset value, end of period $12.31 $11.36 $ 9.20
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 8.36% 23.48% (20.69)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 991 $ 588 $ 8
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 1.48%(c)(d) 1.57% 1.54%(e)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.04)%(c) (0.16)% (0.05)%(e)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(f) 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $795,090.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.50% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
INVESTOR CLASS
-----------------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $10.98
-------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.00)(a)
-------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.95 0.41
=======================================================================================================
Total from investment operations 0.98 0.41
=======================================================================================================
Net asset value, end of period $ 12.37 $11.39
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 8.60% 3.73%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,548 $ 178
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets: 1.24%(c)(d) 1.25%(e)
=======================================================================================================
Ratio of net investment income to average net assets 0.20%(c) 0.16%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $75,558,943.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.25% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-134
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.62
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)
-----------------------------------------------------------------------------------
Net losses on securities (both realized and unrealized) (0.28)
===================================================================================
Total from investment operations (0.24)
===================================================================================
Net asset value, end of period $ 12.38
___________________________________________________________________________________
===================================================================================
Total return(b) (1.90)%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,745
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets: 0.80%(c)(d)
===================================================================================
Ratio of net investment income to average net assets 0.64%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(e) 32%
___________________________________________________________________________________
===================================================================================
|
(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 assets values may differ from the net 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
$8,327,922.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.81% for the year ended October 31, 2004.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-135
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-136
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-137
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-138
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-139
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.91%
AEROSPACE & DEFENSE-3.89%
Boeing Co. (The) 127,000 $ 6,337,300
------------------------------------------------------------------------
General Dynamics Corp. 75,000 7,659,000
------------------------------------------------------------------------
Northrop Grumman Corp. 90,000 4,657,500
------------------------------------------------------------------------
Rockwell Collins, Inc. 140,000 4,965,800
------------------------------------------------------------------------
United Technologies Corp. 56,200 5,216,484
========================================================================
28,836,084
========================================================================
AIR FREIGHT & LOGISTICS-0.68%
FedEx Corp. 55,000 5,011,600
========================================================================
APPAREL RETAIL-1.13%
Limited Brands 337,000 8,350,860
========================================================================
APPLICATION SOFTWARE-0.94%
Autodesk, Inc. 132,000 6,963,000
========================================================================
BIOTECHNOLOGY-0.61%
Genentech, Inc.(a) 99,000 4,507,470
========================================================================
BUILDING PRODUCTS-2.14%
American Standard Cos. Inc.(a) 175,000 6,399,750
------------------------------------------------------------------------
Masco Corp. 275,000 9,421,500
========================================================================
15,821,250
========================================================================
COMMUNICATIONS EQUIPMENT-4.98%
Cisco Systems, Inc.(a) 696,440 13,378,612
------------------------------------------------------------------------
Motorola, Inc. 417,000 7,197,420
------------------------------------------------------------------------
QUALCOMM Inc. 390,000 16,305,900
========================================================================
36,881,932
========================================================================
COMPUTER HARDWARE-2.26%
Dell Inc.(a) 476,600 16,709,596
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.61%
Lexmark International, Inc.-Class A(a) 54,000 4,487,940
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
PACCAR Inc. 70,000 4,851,700
========================================================================
CONSUMER ELECTRONICS-2.29%
Harman International Industries, Inc. 141,000 16,945,380
========================================================================
CONSUMER FINANCE-2.21%
American Express Co. 89,300 4,739,151
------------------------------------------------------------------------
MBNA Corp. 190,000 4,869,700
------------------------------------------------------------------------
SLM Corp. 150,000 6,789,000
========================================================================
16,397,851
========================================================================
DEPARTMENT STORES-1.82%
J.C. Penney Co., Inc. 158,000 5,465,220
------------------------------------------------------------------------
Nordstrom, Inc. 186,000 8,031,480
========================================================================
13,496,700
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-0.60%
Cendant Corp. 217,000 $ 4,468,030
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.07%
Rockwell Automation, Inc. 191,000 7,962,790
========================================================================
FOOTWEAR-1.99%
NIKE, Inc.-Class B 181,000 14,717,110
========================================================================
HEALTH CARE EQUIPMENT-3.93%
Bard (C.R.), Inc. 100,000 5,680,000
------------------------------------------------------------------------
Becton, Dickinson & Co. 259,000 13,597,500
------------------------------------------------------------------------
Medtronic, Inc. 95,000 4,855,450
------------------------------------------------------------------------
Waters Corp.(a) 120,000 4,954,800
========================================================================
29,087,750
========================================================================
HEALTH CARE SERVICES-1.71%
IMS Health Inc. 206,600 4,375,788
------------------------------------------------------------------------
Quest Diagnostics Inc. 95,000 8,316,300
========================================================================
12,692,088
========================================================================
HEALTH CARE SUPPLIES-1.88%
Alcon, Inc. (Switzerland) 195,700 13,933,840
========================================================================
HOME IMPROVEMENT RETAIL-1.25%
Home Depot, Inc. (The) 225,000 9,243,000
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.60%
Marriott International, Inc.-Class A 81,000 4,413,690
========================================================================
HOUSEHOLD APPLIANCES-0.91%
Black & Decker Corp. (The) 84,000 6,743,520
========================================================================
HOUSEHOLD PRODUCTS-2.60%
Procter & Gamble Co. (The) 377,000 19,294,860
========================================================================
HOUSEWARES & SPECIALTIES-1.01%
Fortune Brands, Inc. 103,000 7,500,460
========================================================================
HYPERMARKETS & SUPER CENTERS-2.34%
Costco Wholesale Corp. 361,000 17,306,340
========================================================================
INDUSTRIAL CONGLOMERATES-3.43%
3M Co. 202,000 15,669,140
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 313,000 9,749,950
========================================================================
25,419,090
========================================================================
INDUSTRIAL MACHINERY-2.81%
Danaher Corp.(b) 104,000 5,733,520
------------------------------------------------------------------------
Eaton Corp. 116,000 7,418,200
------------------------------------------------------------------------
Illinois Tool Works Inc. 83,000 7,659,240
========================================================================
20,810,960
========================================================================
|
FS-140
MARKET
SHARES VALUE
------------------------------------------------------------------------
INTEGRATED OIL & GAS-3.34%
BP PLC-ADR (United Kingdom) 143,000 $ 8,329,750
------------------------------------------------------------------------
ChevronTexaco Corp. 155,000 8,224,300
------------------------------------------------------------------------
ConocoPhillips 97,000 8,178,070
========================================================================
24,732,120
========================================================================
INTERNET RETAIL-1.57%
eBay Inc.(a) 119,000 11,615,590
========================================================================
INTERNET SOFTWARE & SERVICES-2.19%
Yahoo! Inc.(a) 448,200 16,220,358
========================================================================
IT CONSULTING & OTHER SERVICES-1.77%
Accenture Ltd.-Class A (Bermuda)(a) 541,000 13,097,610
========================================================================
MANAGED HEALTH CARE-2.18%
UnitedHealth Group Inc. 223,000 16,145,200
========================================================================
MOTORCYCLE MANUFACTURERS-1.97%
Harley-Davidson, Inc. 254,000 14,622,780
========================================================================
OFFICE ELECTRONICS-0.91%
Xerox Corp.(a)(b) 455,000 6,720,350
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.71%
Citigroup Inc. 119,221 5,289,836
========================================================================
PERSONAL PRODUCTS-6.21%
Avon Products, Inc. 349,800 13,834,590
------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 230,000 9,878,500
------------------------------------------------------------------------
Gillette Co. (The) 537,000 22,274,760
========================================================================
45,987,850
========================================================================
PHARMACEUTICALS-3.87%
Johnson & Johnson 491,000 28,664,580
========================================================================
PROPERTY & CASUALTY INSURANCE-0.82%
Allstate Corp. (The) 126,000 6,059,340
========================================================================
RESTAURANTS-4.96%
McDonald's Corp. 487,000 14,196,050
------------------------------------------------------------------------
Starbucks Corp.(a) 149,000 7,879,120
------------------------------------------------------------------------
Yum! Brands, Inc. 337,000 14,659,500
========================================================================
36,734,670
========================================================================
SEMICONDUCTORS-0.96%
Analog Devices, Inc. 95,300 3,836,778
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Intel Corp. 149,000 $ 3,316,740
========================================================================
7,153,518
========================================================================
SOFT DRINKS-1.71%
PepsiCo, Inc. 256,000 12,692,480
========================================================================
SPECIALTY STORES-2.49%
Staples, Inc. 620,000 18,438,800
========================================================================
STEEL-0.60%
Nucor Corp. 105,000 4,434,150
========================================================================
SYSTEMS SOFTWARE-6.80%
Adobe Systems Inc. 194,000 10,869,820
------------------------------------------------------------------------
Microsoft Corp. 429,280 12,015,547
------------------------------------------------------------------------
Oracle Corp.(a) 389,000 4,924,740
------------------------------------------------------------------------
Symantec Corp.(a) 396,000 22,548,240
========================================================================
50,358,347
========================================================================
THRIFTS & MORTGAGE FINANCE-1.68%
Countrywide Financial Corp. 389,000 12,420,770
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.83%
W.W. Grainger, Inc. 105,000 6,151,950
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $621,566,204) 710,395,190
========================================================================
MONEY MARKET FUNDS-3.85%
Liquid Assets Portfolio-Institutional
Class(c) 14,259,968 14,259,968
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 14,259,968 14,259,968
========================================================================
Total Money Market Funds (Cost
$28,519,936) 28,519,936
========================================================================
TOTAL INVESTMENTS-99.76% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $650,086,140) 738,915,126
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.66%
Liquid Assets Portfolio-Institutional
Class(c)(d) 4,905,700 4,905,700
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $4,905,700) 4,905,700
========================================================================
TOTAL INVESTMENTS-100.42% (Cost $654,991,840) 743,820,826
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.42%) (3,115,847)
========================================================================
NET ASSETS-100.00% $740,704,979
________________________________________________________________________
========================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-141
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$621,566,204)* $ 710,395,190
------------------------------------------------------------
Investments in affiliated money market
funds (cost $33,425,636) 33,425,636
============================================================
Total investments (cost $654,991,840) 743,820,826
============================================================
Receivables for:
Investments sold 2,182,403
------------------------------------------------------------
Fund shares sold 1,017,641
------------------------------------------------------------
Dividends 483,016
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 154,151
------------------------------------------------------------
Other assets 69,573
============================================================
Total assets 747,727,610
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,389,536
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 191,745
------------------------------------------------------------
Collateral upon return of securities
loaned 4,905,700
------------------------------------------------------------
Accrued distribution fees 262,952
------------------------------------------------------------
Accrued trustees' fees 1,728
------------------------------------------------------------
Accrued transfer agent fees 270,970
============================================================
Total liabilities 7,022,631
============================================================
Net assets applicable to shares outstanding $ 740,704,979
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,293,726,418
------------------------------------------------------------
Undistributed net investment income (loss) (131,109)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (1,641,719,316)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 88,828,986
============================================================
$ 740,704,979
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 177,497,860
____________________________________________________________
============================================================
Class B $ 112,930,837
____________________________________________________________
============================================================
Class C $ 48,420,471
____________________________________________________________
============================================================
Class R $ 2,761,191
____________________________________________________________
============================================================
Investor Class $ 376,904,848
____________________________________________________________
============================================================
Institutional Class $ 22,189,772
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 19,384,974
____________________________________________________________
============================================================
Class B 12,797,591
____________________________________________________________
============================================================
Class C 5,484,462
____________________________________________________________
============================================================
Class R 302,503
____________________________________________________________
============================================================
Investor Class 40,986,060
____________________________________________________________
============================================================
Institutional Class 2,417,583
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.16 divided by
94.50%) $ 9.69
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.82
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.83
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 9.20
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.18
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $4,820,915 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-142
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $49,547) $ 4,445,838
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $24,288)* 225,252
==========================================================================
Total investment income 4,671,090
==========================================================================
EXPENSES:
Advisory fees 5,663,512
--------------------------------------------------------------------------
Administrative services fees 218,708
--------------------------------------------------------------------------
Custodian fees 53,205
--------------------------------------------------------------------------
Distribution fees:
Class A 606,542
--------------------------------------------------------------------------
Class B 1,205,821
--------------------------------------------------------------------------
Class C 499,243
--------------------------------------------------------------------------
Class R 12,219
--------------------------------------------------------------------------
Investor Class 888,532
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 2,635,697
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 3,478
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 25,808
--------------------------------------------------------------------------
Other 442,622
==========================================================================
Total expenses 12,255,387
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (978,085)
==========================================================================
Net expenses 11,277,302
==========================================================================
Net investment income (loss) (6,606,212)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 98,241,139
--------------------------------------------------------------------------
Foreign currencies (27,375)
==========================================================================
98,213,764
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (67,692,327)
--------------------------------------------------------------------------
Foreign currencies (11)
==========================================================================
(67,692,338)
==========================================================================
Net gain from investment securities and foreign currencies 30,521,426
==========================================================================
Net increase in net assets resulting from operations $ 23,915,214
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-143
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (6,606,212) $ (3,634,169)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and foreign currencies 98,213,764 (11,557,152)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (67,692,338) 66,632,928
==========================================================================================
Net increase in net assets resulting from operations 23,915,214 51,441,607
==========================================================================================
Share transactions-net:
Class A 18,678,547 24,813,254
------------------------------------------------------------------------------------------
Class B (12,082,083) (2,160,788)
------------------------------------------------------------------------------------------
Class C 3,097,603 594,530
------------------------------------------------------------------------------------------
Class R 574,491 1,830,726
------------------------------------------------------------------------------------------
Investor Class 361,821,129 173,236
------------------------------------------------------------------------------------------
Institutional Class 22,063,157 --
==========================================================================================
Net increase in net assets resulting from share
transactions 394,152,844 25,250,958
==========================================================================================
Net increase in net assets 418,068,058 76,692,565
==========================================================================================
NET ASSETS:
Beginning of year 322,636,921 245,944,356
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(131,109) and $(32,869), respectively). $740,704,979 $322,636,921
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-144
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-145
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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 affiliated money market funds with cash
FS-146
collateral from securities loaned by the fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $3,368.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $59,549 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $218,708 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $2,635,697 for Class A, Class B, Class C, Class R and Investor Class shares and $3,478 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $606,542, $1,205,821, $499,243, $12,219 and $888,532. AIM reimbursed $902,390 of Investor Class expenses related to an overpayment of Rule 12b-1 fees of the INVESCO Growth Fund (a fund acquired by the Fund in a merger on November 3, 2003) paid to INVESCO Distributors, Inc., the prior distributor of INVESCO Growth Fund and an AIM affiliate.
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, 2004, AIM Distributors advised the Fund that it retained $83,801 in front-end sales commissions from the sale of Class A shares and $890, $12,380, $4,895 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,325,601 $147,601,547 $(138,667,180) $ -- $14,259,968 $100,940 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 5,325,601 147,601,547 (138,667,180) -- 14,259,968 100,024 --
==================================================================================================================================
Subtotal $10,651,202 $295,203,094 $(277,334,360) $ -- $28,519,936 $200,964 $ --
==================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,969,563 $311,892,022 $(312,955,885) $ -- $ 4,905,700 $ 24,288 $ --
==================================================================================================================================
Total $16,620,765 $607,095,116 $(590,290,245) $ -- $33,425,636 $225,252 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-147
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $10,034,447 and $17,960,639, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $12,205 and credits in custodian fees of $573 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $12,778.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $6,385 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $4,820,915 were on loan to brokers. The loans were secured by cash collateral of $4,905,700 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $24,288 for securities lending transactions.
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NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 81,823,318
-----------------------------------------------------------------------------
Temporary book/tax differences (131,109)
-----------------------------------------------------------------------------
Capital loss carryforward (1,634,713,648)
-----------------------------------------------------------------------------
Shares of Beneficial Interest 2,293,726,418
=============================================================================
Total net assets $ 740,704,979
_____________________________________________________________________________
=============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,546,950,857 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund utilized $83,728,510 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------------------
October 31, 2009 $1,067,082,723
-----------------------------------------------------------------------------------------
October 31, 2010 532,535,321
-----------------------------------------------------------------------------------------
October 31, 2011 35,095,604
=========================================================================================
Total capital loss carryforward $1,634,713,648
_________________________________________________________________________________________
=========================================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $904,935,222 and $600,186,187, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $90,270,070 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,446,752) =============================================================================== Net unrealized appreciation of investment securities $81,823,318 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $661,997,508. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions on October 31, 2004, undistributed net investment income (loss) was increased by $6,616,586, undistributed net realized gain (loss) was increased by $27,375 and shares of beneficial interest decreased by $6,643,961. This reclassification had no effect on the net assets of the Fund. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Growth Fund into the Fund, undistributed net investment income (loss) was decreased by $108,614, undistributed net realized gain (loss) was decreased by $1,337,791,398 and shares of beneficial interest increased by $1,337,900,012. These reclassifications had no effect on the net assets of the Fund.
FS-149
NOTE 12--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 certain 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(A)
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2004 2003
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,225,450 $ 57,170,463 9,469,394 $ 73,883,856
------------------------------------------------------------------------------------------------------------------------
Class B 2,516,228 22,341,073 4,041,264 29,817,268
------------------------------------------------------------------------------------------------------------------------
Class C 2,041,593 18,173,950 2,208,427 16,412,874
------------------------------------------------------------------------------------------------------------------------
Class R 111,709 1,022,930 278,067 2,156,076
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 4,268,368 39,323,955 20,194 178,134
------------------------------------------------------------------------------------------------------------------------
Institutional Class(c) 2,436,212 22,232,973 -- --
========================================================================================================================
Issued in connection with acquisitions:(d)
Class A 445,760 3,960,921 -- --
------------------------------------------------------------------------------------------------------------------------
Class B 24,464 210,855 -- --
------------------------------------------------------------------------------------------------------------------------
Class C 426,258 3,668,554 -- --
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 50,546,207 449,143,077 -- --
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 472,810 4,373,299 325,063 2,536,902
------------------------------------------------------------------------------------------------------------------------
Class B (489,052) (4,373,299) (334,300) (2,536,902)
========================================================================================================================
Reacquired:
Class A (5,108,536) (46,826,136) (6,726,902) (51,607,504)
------------------------------------------------------------------------------------------------------------------------
Class B (3,420,244) (30,260,712) (3,989,440) (29,441,154)
------------------------------------------------------------------------------------------------------------------------
Class C (2,120,502) (18,744,901) (2,147,493) (15,818,344)
------------------------------------------------------------------------------------------------------------------------
Class R (48,964) (448,439) (39,568) (325,350)
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (13,848,145) (126,645,903) (564) (4,898)
------------------------------------------------------------------------------------------------------------------------
Institutional Class(c) (18,629) (169,816) -- --
========================================================================================================================
44,460,987 $ 394,152,844 3,104,142 $ 25,250,958
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 10% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder is also
owned beneficially.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) As of the opening of business on November 3, 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 on 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-150
NOTE 13--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,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 7.37 $ 8.82 $ 17.74 $ 11.29
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.36 1.59 (1.36) (8.84) 6.60
===========================================================================================================================
Total from investment operations 0.28 1.51 (1.45) (8.92) 6.45
===========================================================================================================================
Net asset value, end of period $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 3.15% 20.49% (16.44)% (50.28)% 57.13%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $177,498 $154,052 $105,320 $138,269 $225,255
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 1.54%(c)(d) 1.82% 1.70% 1.57% 1.58%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.92)%(c) (1.01)% (1.01)% (0.72)% (0.82)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $173,297,774.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.61 $ 7.20 $ 8.67 $ 17.54 $ 11.25
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.35 1.53 (1.33) (8.71) 6.56
===========================================================================================================================
Total from investment operations 0.21 1.41 (1.47) (8.87) 6.29
===========================================================================================================================
Net asset value, end of period $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 2.44% 19.58% (16.96)% (50.57)% 55.91%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $112,931 $122,011 $104,040 $144,747 $210,224
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.19%(c)(d) 2.47% 2.35% 2.23% 2.24%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.57)%(c) (1.66)% (1.66)% (1.39)% (1.48)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $120,582,108.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.20%.
FS-151
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.21 $ 8.67 $ 17.55 $ 11.25
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.35 1.53 (1.32) (8.72) 6.57
======================================================================================================================
Total from investment operations 0.21 1.41 (1.46) (8.88) 6.30
======================================================================================================================
Net asset value, end of period $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.44% 19.56% (16.84)% (50.60)% 56.00%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $48,420 $44,272 $36,575 $57,865 $79,392
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 2.19%(c)(d) 2.47% 2.35% 2.23% 2.24%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.57)%(c) (1.66)% (1.66)% (1.39)% (1.48)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $49,924,256.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.20%.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.09)(a) (0.04)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.36 1.59 (0.99)
====================================================================================================
Total from investment operations 0.26 1.50 (1.03)
====================================================================================================
Net asset value, end of period $ 9.13 $ 8.87 $ 7.37
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 2.93% 20.35% (12.26)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,761 $2,127 $ 9
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.69%(c)(d) 1.97% 1.85%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (1.07)%(c) (1.16)% (1.16)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 111% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,443,827.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.70%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-152
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
---------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 8.24
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)(b) (0.01)(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.37 0.65
=================================================================================================
Total from investment operations 0.32 0.64
=================================================================================================
Net asset value, end of period $ 9.20 $ 8.88
_________________________________________________________________________________________________
=================================================================================================
Total return(c) 3.60%(b) 7.77%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $376,905 $ 174
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets 1.19%(b)(d)(e) 1.56%(f)
=================================================================================================
Ratio of net investment income (loss) to average net assets (0.57)%(d) (0.75)%(f)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(g) 111% 123%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) The advisor reimbursed Investor Class expenses related to an overpayment
of Rule 12b-1 fees of the INVESCO Growth fund paid to INVESCO
Distributors, Inc., the prior distributor of INVESCO Growth Fund. Had
the advisor not reimbursed these expenses the net investment income per
share, the ratio of expenses to average net assets, the ratio of net
investment income to average net assets and the total return would have
been (0.07), 1.41%, (0.79) and 3.27%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are based on average daily net assets of $403,878,080.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.42%.
(f) Annualized.
(g) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.13
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a)
-----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.06
===================================================================================
Total from investment operations 0.05
===================================================================================
Net asset value, end of period $ 9.18
___________________________________________________________________________________
===================================================================================
Total return(b) 0.55%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,190
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.92%(c)
-----------------------------------------------------------------------------------
With fee waivers and/or expense reimbursements 0.93%(c)
===================================================================================
Ratio of net investment income (loss) to average net assets (0.30)%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(d) 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$9,909,449.
(d) Not annualized for periods less than one year.
FS-153
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-154
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-155
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-156
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-157
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.10%
ADVERTISING-0.73%
Omnicom Group Inc. 18,000 $ 1,420,200
=====================================================================
AEROSPACE & DEFENSE-0.68%
L-3 Communications Holdings, Inc. 20,000 1,318,600
=====================================================================
AIR FREIGHT & LOGISTICS-0.64%
Robinson (C.H.) Worldwide, Inc. 23,000 1,240,620
=====================================================================
APPAREL RETAIL-2.24%
Chico's FAS, Inc.(a) 44,000 1,761,320
---------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 55,000 1,289,200
---------------------------------------------------------------------
Urban Outfitters, Inc.(a) 32,000 1,312,000
=====================================================================
4,362,520
=====================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.96%
Coach, Inc.(a) 40,000 1,865,200
=====================================================================
APPLICATION SOFTWARE-2.70%
Amdocs Ltd. (United Kingdom)(a) 85,200 2,142,780
---------------------------------------------------------------------
Intuit Inc.(a) 40,000 1,814,400
---------------------------------------------------------------------
Mercury Interactive Corp.(a) 30,000 1,302,900
=====================================================================
5,260,080
=====================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.46%
Calamos Asset Management, Inc.-Class A(a) 60,700 1,183,650
---------------------------------------------------------------------
Franklin Resources, Inc. 18,000 1,091,160
---------------------------------------------------------------------
Investors Financial Services Corp.(b) 55,000 2,116,950
---------------------------------------------------------------------
Legg Mason, Inc. 37,000 2,357,270
=====================================================================
6,749,030
=====================================================================
AUTO PARTS & EQUIPMENT-0.55%
Autoliv, Inc. 25,000 1,068,750
=====================================================================
BIOTECHNOLOGY-3.87%
Cephalon, Inc.(a) 21,000 1,001,070
---------------------------------------------------------------------
Charles River Laboratories International,
Inc.(a) 22,000 1,029,380
---------------------------------------------------------------------
Gen-Probe Inc.(a) 32,000 1,121,280
---------------------------------------------------------------------
Gilead Sciences, Inc.(a) 35,000 1,212,050
---------------------------------------------------------------------
Invitrogen Corp.(a) 17,200 995,880
---------------------------------------------------------------------
Martek Biosciences Corp.(a) 26,000 1,223,456
---------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 15,000 974,700
=====================================================================
7,557,816
=====================================================================
BROADCASTING & CABLE TV-1.22%
Univision Communications Inc.-Class A(a) 77,000 2,383,920
=====================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
BUILDING PRODUCTS-1.02%
Masco Corp. 58,000 $ 1,987,080
=====================================================================
CASINOS & GAMING-0.52%
Station Casinos, Inc. 20,000 1,019,000
=====================================================================
COMMUNICATIONS EQUIPMENT-4.94%
Avaya Inc.(a) 140,000 2,016,000
---------------------------------------------------------------------
Comverse Technology, Inc.(a) 100,000 2,064,000
---------------------------------------------------------------------
Juniper Networks, Inc.(a) 40,300 1,072,383
---------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 21,000 1,852,200
---------------------------------------------------------------------
Scientific-Atlanta, Inc. 52,400 1,435,236
---------------------------------------------------------------------
UTStarcom, Inc.(a)(b) 70,000 1,198,400
=====================================================================
9,638,219
=====================================================================
COMPUTER & ELECTRONICS RETAIL-0.76%
Best Buy Co., Inc. 25,000 1,480,500
=====================================================================
COMPUTER HARDWARE-0.82%
PalmOne, Inc.(a)(b) 55,000 1,593,350
=====================================================================
COMPUTER STORAGE & PERIPHERALS-1.16%
Emulex Corp.(a) 92,000 966,920
---------------------------------------------------------------------
QLogic Corp.(a) 40,000 1,300,000
=====================================================================
2,266,920
=====================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
Cummins Inc.(b) 18,000 1,261,440
=====================================================================
CONSUMER FINANCE-0.82%
First Marblehead Corp. (The)(a) 30,000 1,608,000
=====================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.52%
Affiliated Computer Services, Inc.-Class A(a) 20,000 1,091,000
---------------------------------------------------------------------
Alliance Data Systems Corp.(a) 50,000 2,114,000
---------------------------------------------------------------------
DST Systems, Inc.(a) 30,000 1,345,500
---------------------------------------------------------------------
Fiserv, Inc.(a) 65,000 2,310,100
=====================================================================
6,860,600
=====================================================================
DEPARTMENT STORES-1.70%
Kohl's Corp.(a) 39,900 2,025,324
---------------------------------------------------------------------
Nordstrom, Inc. 30,000 1,295,400
=====================================================================
3,320,724
=====================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.35%
Apollo Group, Inc.-Class A(a) 18,000 1,188,000
---------------------------------------------------------------------
Career Education Corp.(a) 35,000 1,097,950
---------------------------------------------------------------------
Cintas Corp. 30,000 1,294,200
---------------------------------------------------------------------
|
FS-158
MARKET
SHARES VALUE
---------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Corporate Executive Board Co. (The) 32,000 $ 2,036,800
---------------------------------------------------------------------
Corrections Corp. of America(a) 48,800 1,695,800
---------------------------------------------------------------------
ITT Educational Services, Inc.(a) 31,000 1,178,310
=====================================================================
8,491,060
=====================================================================
DRUG RETAIL-0.60%
Shoppers Drug Mart Corp. (Canada)(a) 38,300 1,165,133
=====================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.25%
Agilent Technologies, Inc.(a) 97,000 2,430,820
=====================================================================
ELECTRONIC MANUFACTURING SERVICES-0.54%
Benchmark Electronics, Inc.(a) 31,000 1,053,070
=====================================================================
EMPLOYMENT SERVICES-1.69%
Manpower Inc. 42,000 1,900,500
---------------------------------------------------------------------
Monster Worldwide Inc.(a) 50,000 1,402,500
=====================================================================
3,303,000
=====================================================================
ENVIRONMENTAL SERVICES-0.65%
Stericycle, Inc.(a) 28,000 1,269,240
=====================================================================
GENERAL MERCHANDISE STORES-1.79%
Dollar Tree Stores, Inc.(a) 70,000 2,023,000
---------------------------------------------------------------------
Family Dollar Stores, Inc. 50,000 1,477,500
=====================================================================
3,500,500
=====================================================================
HEALTH CARE DISTRIBUTORS-0.80%
Schein (Henry), Inc.(a) 24,800 1,568,104
=====================================================================
HEALTH CARE EQUIPMENT-4.81%
Biomet, Inc. 22,000 1,026,960
---------------------------------------------------------------------
Fisher Scientific International Inc.(a) 25,000 1,434,000
---------------------------------------------------------------------
INAMED Corp.(a) 26,000 1,381,900
---------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 27,000 1,345,410
---------------------------------------------------------------------
PerkinElmer, Inc. 80,000 1,643,200
---------------------------------------------------------------------
Waters Corp.(a) 24,000 990,960
---------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 20,000 1,551,800
=====================================================================
9,374,230
=====================================================================
HEALTH CARE FACILITIES-1.24%
Community Health Systems Inc.(a) 90,000 2,413,800
=====================================================================
HEALTH CARE SERVICES-2.08%
Caremark Rx, Inc.(a) 65,000 1,948,050
---------------------------------------------------------------------
Express Scripts, Inc.(a) 33,000 2,112,000
=====================================================================
4,060,050
=====================================================================
HEALTH CARE SUPPLIES-0.50%
Cooper Cos., Inc. (The) 14,000 984,900
=====================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
HOME FURNISHINGS-0.52%
Mohawk Industries, Inc.(a) 12,000 $ 1,020,960
=====================================================================
HOMEBUILDING-0.93%
Pulte Homes, Inc. 33,000 1,811,040
=====================================================================
HOTELS, RESORTS & CRUISE LINES-1.33%
Kerzner International Ltd. (Bahamas)(a) 19,000 963,680
---------------------------------------------------------------------
Marriott International, Inc.-Class A 30,000 1,634,700
=====================================================================
2,598,380
=====================================================================
HOUSEWARES & SPECIALTIES-0.96%
Jarden Corp.(a) 53,500 1,878,920
=====================================================================
INDUSTRIAL MACHINERY-0.75%
Eaton Corp. 23,000 1,470,850
=====================================================================
INSURANCE BROKERS-1.08%
Willis Group Holdings Ltd. (Bermuda) 58,700 2,110,265
=====================================================================
INTEGRATED OIL & GAS-0.86%
Murphy Oil Corp. 21,000 1,680,420
=====================================================================
INTERNET SOFTWARE & SERVICES-1.28%
Ask Jeeves, Inc.(a) 45,000 1,160,100
---------------------------------------------------------------------
SINA Corp. (Cayman Islands)(a) 40,000 1,340,000
=====================================================================
2,500,100
=====================================================================
IT CONSULTING & OTHER SERVICES-1.13%
Cognizant Technology Solutions Corp.-Class
A(a) 65,000 2,210,000
=====================================================================
LEISURE PRODUCTS-1.51%
Brunswick Corp. 35,000 1,642,200
---------------------------------------------------------------------
Marvel Enterprises, Inc.(a) 85,000 1,309,000
=====================================================================
2,951,200
=====================================================================
MANAGED HEALTH CARE-2.29%
Aetna Inc. 19,000 1,805,000
---------------------------------------------------------------------
Anthem, Inc.(a) 33,000 2,653,200
=====================================================================
4,458,200
=====================================================================
MULTI-LINE INSURANCE-0.66%
Quanta Capital Holdings Ltd. (Bermuda)(a) 144,200 1,297,800
=====================================================================
OIL & GAS DRILLING-1.73%
Noble Corp. (Cayman Islands)(a) 25,000 1,142,000
---------------------------------------------------------------------
Patterson-UTI Energy, Inc. 63,000 1,211,490
---------------------------------------------------------------------
Pride International, Inc.(a) 55,000 1,016,400
=====================================================================
3,369,890
=====================================================================
OIL & GAS EQUIPMENT & SERVICES-0.50%
Varco International, Inc.(a) 35,000 968,800
=====================================================================
|
FS-159
MARKET
SHARES VALUE
---------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-1.73%
Ultra Petroleum Corp. (Canada)(a) 35,000 $ 1,701,000
---------------------------------------------------------------------
XTO Energy Inc. 50,000 1,669,000
=====================================================================
3,370,000
=====================================================================
PHARMACEUTICALS-4.14%
Barr Pharmaceuticals Inc.(a) 35,000 1,317,750
---------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 36,000 1,285,200
---------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(b) 40,000 1,626,800
---------------------------------------------------------------------
MGI Pharma, Inc.(a) 50,000 1,333,500
---------------------------------------------------------------------
Sepracor Inc.(a) 24,000 1,102,320
---------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 50,000 1,420,000
=====================================================================
8,085,570
=====================================================================
PUBLISHING-0.70%
Getty Images, Inc.(a)(b) 23,000 1,359,990
=====================================================================
REAL ESTATE-0.92%
New Century Financial Corp. 32,500 1,792,375
=====================================================================
REGIONAL BANKS-0.61%
Commerce Bancorp, Inc. 20,000 1,184,800
=====================================================================
REINSURANCE-0.77%
Everest Re Group, Ltd. (Bermuda) 19,000 1,508,030
=====================================================================
RESTAURANTS-0.65%
Brinker International, Inc.(a) 39,000 1,259,700
=====================================================================
SEMICONDUCTOR EQUIPMENT-0.99%
Novellus Systems, Inc.(a) 74,800 1,938,068
=====================================================================
SEMICONDUCTORS-3.07%
ATI Technologies Inc. (Canada)(a) 70,000 1,263,500
---------------------------------------------------------------------
Broadcom Corp.-Class A(a) 45,000 1,217,250
---------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 75,000 2,142,750
---------------------------------------------------------------------
Microchip Technology Inc. 45,000 1,361,250
=====================================================================
5,984,750
=====================================================================
SPECIALTY CHEMICALS-0.57%
Ecolab Inc. 33,000 1,117,050
=====================================================================
SPECIALTY STORES-3.64%
Advance Auto Parts, Inc.(a) 45,000 1,760,400
---------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 50,000 2,039,500
---------------------------------------------------------------------
Staples, Inc. 60,000 1,784,400
---------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,526,800
=====================================================================
7,111,100
=====================================================================
SYSTEMS SOFTWARE-3.10%
Computer Associates International, Inc. 50,000 1,385,500
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Novell, Inc.(a) 175,000 $ 1,258,250
---------------------------------------------------------------------
Red Hat, Inc.(a)(b) 80,000 1,027,200
---------------------------------------------------------------------
Symantec Corp.(a) 16,600 945,204
---------------------------------------------------------------------
VERITAS Software Corp.(a) 65,000 1,422,200
=====================================================================
6,038,354
=====================================================================
TECHNOLOGY DISTRIBUTORS-1.02%
CDW Corp. 32,000 1,984,960
=====================================================================
THRIFTS & MORTGAGE FINANCE-1.53%
Doral Financial Corp. (Puerto Rico) 40,000 1,679,200
---------------------------------------------------------------------
W Holding Co., Inc. (Puerto Rico) 65,000 1,299,350
=====================================================================
2,978,550
=====================================================================
TRADING COMPANIES & DISTRIBUTORS-1.38%
Fastenal Co. 21,000 1,159,830
---------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class A 45,000 1,536,300
=====================================================================
2,696,130
=====================================================================
TRUCKING-1.11%
Sirva Inc.(a) 90,000 2,160,000
=====================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.38%
AO VimpelCom-ADR (Russia)(a) 11,000 1,254,000
---------------------------------------------------------------------
Nextel Partners, Inc.-Class A(a) 100,000 1,684,000
---------------------------------------------------------------------
NII Holdings Inc.(a)(b) 38,000 1,682,260
---------------------------------------------------------------------
SpectraSite, Inc.(a) 38,500 1,975,050
=====================================================================
6,595,310
=====================================================================
Total Common Stocks & Other Equity
Interests (Cost $164,645,208) 191,368,038
=====================================================================
|
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
OPTIONS PURCHASED-0.01%
PUTS-0.01%
XTO Energy Inc. (Oil & Gas Exploration &
Production) (Cost $70,660) 500 $30 Nov-04 8,750
===============================================================================================
|
SHARES
MONEY MARKET FUNDS-1.86%
Liquid Assets Portfolio-Institutional
Class(c) 1,818,420 1,818,420
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 1,818,420 1,818,420
=======================================================================
Total Money Market Funds (Cost
$3,636,840) 3,636,840
=======================================================================
TOTAL INVESTMENTS-99.97% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $168,352,708) 195,013,628
=======================================================================
|
FS-160
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.48%
STIC Prime Portfolio-Institutional
Class(c)(d) 6,790,375 $ 6,790,375
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $6,790,375) 6,790,375
=======================================================================
TOTAL INVESTMENTS-103.45% (Cost $175,143,083) 201,804,003
=======================================================================
OTHER ASSETS LESS LIABILITIES-(3.45%) (6,732,117)
=======================================================================
NET ASSETS-100.00% $195,071,886
_______________________________________________________________________
=======================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-161
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$164,715,868)* $ 191,376,788
------------------------------------------------------------
Investments in affiliated money market funds
(cost $10,427,215) 10,427,215
============================================================
Total investments (cost $175,143,083) 201,804,003
============================================================
Receivables for:
Investments sold 5,998,273
------------------------------------------------------------
Fund shares sold 140,843
------------------------------------------------------------
Dividends 23,987
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 27,100
------------------------------------------------------------
Other assets 33,155
============================================================
Total assets 208,027,361
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,257,491
------------------------------------------------------------
Fund shares reacquired 663,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 32,411
------------------------------------------------------------
Collateral upon return of securities loaned 6,790,375
------------------------------------------------------------
Accrued distribution fees 104,705
------------------------------------------------------------
Accrued trustees' fees 941
------------------------------------------------------------
Accrued transfer agent fees 26,248
------------------------------------------------------------
Accrued operating expenses 79,804
============================================================
Total liabilities 12,955,475
============================================================
Net assets applicable to shares outstanding $ 195,071,886
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 307,591,806
------------------------------------------------------------
Undistributed net investment income (loss) (29,371)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (139,144,919)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 26,654,370
============================================================
$ 195,071,886
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 99,261,624
____________________________________________________________
============================================================
Class B $ 70,420,726
____________________________________________________________
============================================================
Class C $ 24,503,049
____________________________________________________________
============================================================
Class R $ 876,607
____________________________________________________________
============================================================
Institutional Class $ 9,880
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,934,912
____________________________________________________________
============================================================
Class B 8,033,455
____________________________________________________________
============================================================
Class C 2,794,530
============================================================
Class R 97,064
____________________________________________________________
============================================================
Institutional Class 1,085
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.08
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.08 divided by
94.50%) $ 9.61
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.77
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.77
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.03
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.11
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $6,544,219 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-162
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,918) $ 683,992
-------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $63,247)* 153,142
=========================================================================
Total investment income 837,134
=========================================================================
EXPENSES:
Advisory fees 1,780,749
-------------------------------------------------------------------------
Administrative services fees 86,224
-------------------------------------------------------------------------
Custodian fees 61,905
-------------------------------------------------------------------------
Distribution fees:
Class A 394,349
-------------------------------------------------------------------------
Class B 802,204
-------------------------------------------------------------------------
Class C 291,132
-------------------------------------------------------------------------
Class R 2,920
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 912,181
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 9
-------------------------------------------------------------------------
Trustees' fees and retirement benefits 16,001
-------------------------------------------------------------------------
Other 281,545
=========================================================================
Total expenses 4,629,219
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (42,438)
=========================================================================
Net expenses 4,586,781
=========================================================================
Net investment income (loss) (3,749,647)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from investment securities 9,151,671
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (2,975,847)
-------------------------------------------------------------------------
Foreign currencies (6,549)
=========================================================================
(2,982,396)
=========================================================================
Net gain from investment securities 6,169,275
=========================================================================
Net increase in net assets resulting from operations $ 2,419,628
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-163
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (3,749,647) $ (2,955,493)
------------------------------------------------------------------------------------------
Net realized gain from investment securities 9,151,671 14,307,340
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (2,982,396) 42,907,455
==========================================================================================
Net increase in net assets resulting from operations 2,419,628 54,259,302
==========================================================================================
Share transactions-net:
Class A (10,422,993) 18,339,848
------------------------------------------------------------------------------------------
Class B (11,811,705) 1,788,121
------------------------------------------------------------------------------------------
Class C (4,684,464) 5,771,210
------------------------------------------------------------------------------------------
Class R 676,095 197,900
------------------------------------------------------------------------------------------
Institutional Class 10,000 --
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (26,233,067) 26,097,079
==========================================================================================
Net increase (decrease) in net assets (23,813,439) 80,356,381
==========================================================================================
NET ASSETS:
Beginning of year 218,885,325 138,528,944
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(29,371) and $(24,611), respectively) $195,071,886 $218,885,325
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-164
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-165
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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-166
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. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 2.00%, 2.65%, 2.65%, 2.15% and 1.65% of average daily net assets, 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), or items designated as such 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. 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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $2,147.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $36,467 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $86,224 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $912,181 for Class A, Class B, Class C and Class R shares and $9 for Institutional Class shares and reimbursed fees for the Institutional Class shares of $4. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $394,349 $802,204, $291,132 and $2,920, 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, 2004, AIM Distributors advised the Fund that it retained $77,275 in front-end sales commissions from the sale of Class A shares and $120, $12,045, $4,411 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-167
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 6,039,656 $ 60,161,675 $(64,382,911) $ -- $1,818,420 $45,344 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 6,039,656 60,161,675 (64,382,911) -- 1,818,420 44,551 --
===========================================================================================================================
Subtotal $12,079,312 $120,323,350 $(128,765,822) $ -- $3,636,840 $89,895 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,593,500 $ 86,506,068 $ (88,099,568) $ -- $ -- $58,446 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 19,094,475 (12,304,100) -- 6,790,375 4,801 --
===========================================================================================================================
Subtotal $ 1,593,500 $105,600,543 $(100,403,668) $ -- $ 6,790,375 $63,247 $ --
===========================================================================================================================
Total $13,672,812 $225,923,893 $(229,169,490) $ -- $10,427,215 $153,142 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $2,622,166 and $702,736, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $3,820 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $3,820.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $5,035 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.
FS-168
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $6,544,219 were on loan to brokers. The loans were secured by cash collateral of $6,790,375 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $63,247 for securities lending transactions.
NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
---------------------------------------------------------------------------
Unrealized appreciation -- investments $ 25,453,299
---------------------------------------------------------------------------
Temporary book/tax differences (29,371)
---------------------------------------------------------------------------
Capital loss carryforward (137,943,848)
---------------------------------------------------------------------------
Shares of beneficial interest 307,591,806
===========================================================================
Total net assets $ 195,071,886
___________________________________________________________________________
===========================================================================
|
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 losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(6,550).
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-169
The Fund utilized $8,876,974 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2008 $ 407,338
-----------------------------------------------------------------------------
October 31, 2009 86,724,292
-----------------------------------------------------------------------------
October 31, 2010 50,812,218
=============================================================================
Total capital loss carryforward $137,943,848
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above 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 year ended October 31, 2004 was $358,096,030 and $382,393,967, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $29,338,178 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (3,878,329) =============================================================================== Net unrealized appreciation of investment securities $25,459,849 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $176,344,154. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $3,744,887 and shares of beneficial interest decreased by $3,744,887. This reclassification had no effect on the net assets of the Fund.
FS-170
NOTE 12--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 certain 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(a)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,366,280 $ 31,467,821 7,664,279 $ 58,252,871
----------------------------------------------------------------------------------------------------------------------
Class B 1,689,471 15,326,444 3,281,689 24,068,217
----------------------------------------------------------------------------------------------------------------------
Class C 1,055,967 9,613,286 1,644,878 12,124,964
----------------------------------------------------------------------------------------------------------------------
Class R 79,652 742,690 25,518 209,495
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 1,085 10,000 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 287,382 2,711,609 189,563 1,431,485
----------------------------------------------------------------------------------------------------------------------
Class B (296,604) (2,711,609) (194,530) (1,431,485)
======================================================================================================================
Reacquired:
Class A (4,869,016) (44,602,423) (5,404,259) (41,344,508)
----------------------------------------------------------------------------------------------------------------------
Class B (2,730,826) (24,426,540) (2,879,424) (20,848,611)
----------------------------------------------------------------------------------------------------------------------
Class C (1,595,627) (14,297,750) (872,689) (6,353,754)
----------------------------------------------------------------------------------------------------------------------
Class R (7,765) (66,595) (1,487) (11,595)
======================================================================================================================
(3,020,001) $(26,233,067) 3,453,538 $ 26,097,079
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 10% of the outstanding shares of
the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM/or AIM affiliates including but not
limited to services such as, securities brokerage, distribution, third
party record keeping and account servicing. The Trust has no knowledge
as to whether all or any portion of the shares owned of record by this
shareholder is also owned beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
FS-171
NOTE 13--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,
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) (0.13)(a) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.29 2.49 (1.91) (5.69) 4.50
=================================================================================================================================
Total from investment operations 0.16 2.38 (2.04) (5.80) 4.38
=================================================================================================================================
Net asset value, end of period $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.79% 36.39% (23.78)% (40.33)% 43.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $99,262 $108,436 $63,463 $94,457 $114,913
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.74%(c)(d) 1.90% 1.83% 1.65% 1.63%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.36)%(c) (1.42)% (1.49)% (1.06)% (0.76)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $112,671,098.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.76%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-172
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------------
NOVEMBER 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------------------- 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) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 2.43 (1.87) (5.62) 4.47
=================================================================================================================================
Total from investment operations 0.09 2.28 (2.05) (5.80) 4.25
=================================================================================================================================
Net asset value, end of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.04% 35.63% (24.26)% (40.70)% 42.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,421 $81,298 $58,654 $81,905 $103,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.39%(c)(d) 2.55% 2.48% 2.32% 2.32%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (2.01)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $80,220,450.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.41%.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
--------------------------------------------------------------------------
NOVEMBER 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------------------- 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) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 2.43 (1.87) (5.63) 4.48
=================================================================================================================================
Total from investment operations 0.09 2.28 (2.05) (5.81) 4.26
=================================================================================================================================
Net asset value, end of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.04% 35.63% (24.26)% (40.74)% 42.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,503 $28,928 $16,404 $23,971 $29,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.39%(c)(d) 2.55% 2.48% 2.32% 2.32%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (2.01)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $29,113,161.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.41%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-173
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-----------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.14)(a) (0.13)(a) (0.05)(a)
-------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 2.48 (2.14)
=======================================================================================================
Total from investment operations 0.14 2.35 (2.19)
=======================================================================================================
Net asset value, end of period $9.03 $ 8.89 $ 6.54
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 1.57% 35.93% (25.09)%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 877 $ 224 $ 7
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets 1.89%(c)(d) 2.05% 1.98%(e)
=======================================================================================================
Ratio of net investment income (loss) to average net assets (1.51)%(c) (1.57)% (1.64)%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders transactions. Not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $584,032.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.91%.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.22
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a)
-----------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.07)
===================================================================================
Total from investment operations (0.11)
===================================================================================
Net asset value, end of period $ 9.11
___________________________________________________________________________________
===================================================================================
Total return(b) (1.19)%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets 1.20%(c)(d)
===================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(e) 167%
___________________________________________________________________________________
===================================================================================
|
(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
shareholders transactions. Not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of $9,671.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.28% (annualized).
(e) Not annualized for periods less than one year.
FS-174
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-175
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-176
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-177
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of AIM Select Basic Value Fund And Board of Trustees of AIM Equity Funds:
We have audited the accompanying statement of assets and liabilities of AIM Select Basic Value Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2004, 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.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2004, 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 Select Basic Value Fund as of October 31, 2004, the results of its operations for the year then ended, the statements of 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 U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-178
AIM SELECT BASIC VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------------------------------
COMMON STOCKS--98.73%
ADVERTISING--5.49%
Interpublic Group of Cos., Inc. (The)(a) 2,500 $30,650
---------------------------------------------------------------------------------------------------
Omnicom Group Inc. 500 39,450
===================================================================================================
70,100
===================================================================================================
AEROSPACE & DEFENSE--1.85%
Honeywell International Inc. 700 23,576
===================================================================================================
APPAREL RETAIL--2.50%
Gap, Inc. (The) 1,600 31,968
===================================================================================================
BUILDING PRODUCTS--2.15%
American Standard Cos. Inc.(a) 750 27,427
===================================================================================================
DATA PROCESSING & OUTSOURCED SERVICES--5.72%
Ceridian Corp.(a) 1,600 27,600
---------------------------------------------------------------------------------------------------
First Data Corp. 1,100 45,408
===================================================================================================
73,008
===================================================================================================
DIVERSIFIED COMMERCIAL SERVICES--7.65%
Cendant Corp. 2,000 41,180
---------------------------------------------------------------------------------------------------
H&R Block, Inc. 350 16,643
---------------------------------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 1,900 39,900
===================================================================================================
97,723
===================================================================================================
ENVIRONMENTAL SERVICES--3.12%
Waste Management, Inc. 1,400 39,872
===================================================================================================
FOOD RETAIL--3.10%
Kroger Co. (The)(a) 1,650 24,932
---------------------------------------------------------------------------------------------------
Safeway Inc.(a) 800 14,592
===================================================================================================
39,524
===================================================================================================
|
FS-179
MARKET
SHARES VALUE
---------------------------------------------------------------------------------------------------
GENERAL MERCHANDISE STORES--2.35%
Target Corp. 600 $30,012
===================================================================================================
HEALTH CARE DISTRIBUTORS--4.99%
Cardinal Health, Inc. 850 39,738
---------------------------------------------------------------------------------------------------
McKesson Corp. 900 23,994
===================================================================================================
63,732
===================================================================================================
HEALTH CARE EQUIPMENT--2.59%
Waters Corp.(a) 800 33,032
===================================================================================================
HEALTH CARE FACILITIES--1.15%
HCA, Inc. 400 14,692
===================================================================================================
HEALTH CARE SERVICES--1.08%
IMS Health Inc. 650 13,767
===================================================================================================
HOTELS, RESORTS & CRUISE LINES--2.99%
Starwood Hotels & Resorts Worldwide, Inc. 800 38,184
===================================================================================================
INDUSTRIAL CONGLOMERATES--4.64%
Tyco International Ltd. (Bermuda) 1,900 59,185
===================================================================================================
INVESTMENT BANKING & BROKERAGE--3.38%
Merrill Lynch & Co., Inc. 800 43,152
===================================================================================================
LEISURE PRODUCTS--3.31%
Brunswick Corp. 900 42,228
===================================================================================================
MANAGED HEALTH CARE--3.15%
Anthem, Inc.(a) 500 40,200
===================================================================================================
OIL & GAS DRILLING--4.86%
Pride International, Inc.(a) 1,450 26,796
---------------------------------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 1,000 35,250
===================================================================================================
62,046
===================================================================================================
OIL & GAS EQUIPMENT & SERVICES--1.84%
Weatherford International Ltd. (Bermuda)(a) 450 23,517
===================================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES--7.38%
Citigroup Inc. 1,100 48,807
---------------------------------------------------------------------------------------------------
JPMorgan Chase & Co. 1,175 45,355
===================================================================================================
94,162
===================================================================================================
|
FS-180
MARKET
SHARES VALUE
---------------------------------------------------------------------------------------------------
PHARMACEUTICALS--8.37%
Pfizer Inc. 1,100 $ 31,845
---------------------------------------------------------------------------------------------------
Sanofi-Aventis (France)(b) 687 50,402
---------------------------------------------------------------------------------------------------
Wyeth 620 24,583
===================================================================================================
106,830
===================================================================================================
PROPERTY & CASUALTY INSURANCE--2.53%
ACE Ltd. (Cayman Islands) 850 32,351
===================================================================================================
SEMICONDUCTOR EQUIPMENT--1.62%
Novellus Systems, Inc.(a) 800 20,728
===================================================================================================
SYSTEMS SOFTWARE--4.78%
Computer Associates International, Inc. 2,200 60,962
===================================================================================================
THRIFTS & MORTGAGE FINANCE--6.14%
Fannie Mae 775 54,366
---------------------------------------------------------------------------------------------------
Radian Group Inc. 500 23,965
===================================================================================================
78,331
===================================================================================================
Total Common Stocks (Cost $1,028,314) 1,260,309
===================================================================================================
TOTAL INVESTMENTS--98.73%(Cost $1,028,314) 1,260,309
===================================================================================================
OTHER ASSETS LESS LIABILITIES--1.27% 16,213
===================================================================================================
NET ASSETS--100.00% $1,276,522
___________________________________________________________________________________________________
===================================================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The market value of this security at October 31, 2004 represented 4.00% of the Fund's Total Investments. See Note 1A.
See accompanying notes which are an integral part of the financial statements.
FS-181
AIM SELECT BASIC VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
ASSETS:
Investments, at market value (cost $1,028,314) $1,260,309
--------------------------------------------------------------------------------------------------------
Cash 18,783
--------------------------------------------------------------------------------------------------------
Receivables for:
Dividends 1,331
--------------------------------------------------------------------------------------------------------
Amount due from advisor 16,241
--------------------------------------------------------------------------------------------------------
Other assets 236
========================================================================================================
Total assets 1,296,900
________________________________________________________________________________________________________
========================================================================================================
LIABILITIES:
Payables for investments purchased 4,678
--------------------------------------------------------------------------------------------------------
Accrued trustees' fees 2,467
--------------------------------------------------------------------------------------------------------
Accrued transfer agent fees 7
--------------------------------------------------------------------------------------------------------
Accrued operating expenses 13,226
========================================================================================================
Total liabilities 20,378
========================================================================================================
Net assets applicable to shares outstanding $1,276,522
========================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $982,776
--------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities and foreign currencies 61,745
--------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign currencies 232,001
========================================================================================================
$1,276,522
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Class A $510,606
________________________________________________________________________________________________________
========================================================================================================
Class B $382,958
________________________________________________________________________________________________________
========================================================================================================
Class C $382,958
________________________________________________________________________________________________________
========================================================================================================
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 $12.61
--------------------------------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $12.61 (divided by) 94.50%) $13.34
________________________________________________________________________________________________________
========================================================================================================
Class B :
Net asset value and offering price per share $12.62
________________________________________________________________________________________________________
========================================================================================================
Class C :
Net asset value and offering price per share $12.62
________________________________________________________________________________________________________
========================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-182
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
OCTOBER 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $156) $ 13,424
=======================================================================================================
EXPENSES:
Advisory fees 9,586
-------------------------------------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------------------------------------
Custodian fees 1,835
-------------------------------------------------------------------------------------------------------
Distribution fees:
-------------------------------------------------------------------------------------------------------
Class A 1,790
-------------------------------------------------------------------------------------------------------
Class B 3,834
-------------------------------------------------------------------------------------------------------
Class C 3,834
-------------------------------------------------------------------------------------------------------
Transfer agent fees 211
-------------------------------------------------------------------------------------------------------
Trustees' fees 10,687
-------------------------------------------------------------------------------------------------------
Professional fees 25,771
-------------------------------------------------------------------------------------------------------
Market timing and litigation fees 17,399
-------------------------------------------------------------------------------------------------------
Other 7,345
=======================================================================================================
Total expenses 132,292
=======================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangements (109,930)
=======================================================================================================
Net expenses 22,362
=======================================================================================================
Net investment income (loss) (8,938)
=======================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 89,848
-------------------------------------------------------------------------------------------------------
Foreign currencies (2)
=======================================================================================================
89,846
=======================================================================================================
Change in net unrealized appreciation of:
Investment securities 16,783
-------------------------------------------------------------------------------------------------------
Foreign currencies 6
=======================================================================================================
16,789
=======================================================================================================
Net gain from investment securities and foreign currencies 106,635
=======================================================================================================
Net increase in net assets resulting from operations $ 97,697
_______________________________________________________________________________________________________
=======================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-183
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2004 AND 2003
2004 2003
---------- ----------
OPERATIONS:
Net investment income (loss) $ (8,938) $ (7,616)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and foreign currencies 89,846 (7,698)
-----------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities and foreign currencies 16,789 281,016
=============================================================================================================================
Net increase in net assets resulting from operations 97,697 265,702
=============================================================================================================================
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 97,697 265,702
=============================================================================================================================
NET ASSETS:
Beginning of year 1,178,825 913,123
=============================================================================================================================
End of year (including undistributed net investment income
(loss) of $0 and $(3,792), respectively) $1,276,522 $1,178,825
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-184
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Select Basic Value Fund, formerly 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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
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Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
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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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.75% of average daily net assets. 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), or items designated as such 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. 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. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $9,586 and reimbursed expenses of $72,639.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $18,019 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $50,000 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") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $211. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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. AIM Distributors waived all plan fees of $1,790, $3,834, and $3,834 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
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $16 and credits in custodian fees of $212 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $228.
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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $4,268 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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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
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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 year ended October 31, 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 SSB, 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 at 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 years ended October 31, 2004 and 2003 was as follows:
2004 2003
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Distributions paid from ordinary income $ -- $ 11,000
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TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets a tax basis were as follows:
2004
-------------------------------------------------------------
Undistributed long-term gain $ 61,745
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Unrealized appreciation - investments 232,001
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Shares of beneficial interest 982,776
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Total net assets $ 1,276,522
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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 tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation on foreign currencies of $6.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $28,102 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes.
The Fund had no capital loss carryforward as of October 31, 2004.
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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, 2004 was $235,807 and $260,695, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $ 277,994 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (45,999) =============================================================================== Net unrealized appreciation of investment securities $ 231,995 _______________________________________________________________________________ =============================================================================== Investments have the same cost for tax and financial statement purposes. |
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of nondeductible excise
tax paid and net operating losses, on October 31, 2004, undistributed net
investment income was increased by $12,730, undistributed net realized gain
(loss) was increased by $1 and shares of beneficial interest decreased by
$12,731. 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 certain 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(a)
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YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2004 2003
--------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
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Issued as reinvestment of dividends:
Class A -- $ -- 476 $ 4,400
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Class B -- -- 356 3,300
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Class C -- -- 356 3,300
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-- $ -- 1,188 $ 11,000
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(a) Currently, the Fund is not open to investors. All shares are owned by AIM.
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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 OCTOBER 31, COMMENCED) TO
-------------------------- OCTOBER 31
2004 2003 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.65 $ 9.13 $ 10.00
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Income from investment operations:
Net investment income (loss) (0.09) (0.07) (0.01)
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Net gains (losses) on securities (both realized and unrealized) 1.05 2.70 (0.86)
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Total from investment operations 0.96 2.63 (0.87)
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Less dividends from net investment income -- (0.11) --
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Net asset value, end of period $ 12.61 $ 11.65 $ 9.13
________________________________________________________________________________________________________________________
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Total return(a) 8.24% 29.12% (8.70)%
________________________________________________________________________________________________________________________
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Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 511 $ 472 $ 365
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Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.77%(b) 1.83% 1.75%(c)
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Without fee waivers and/or expense reimbursements 9.96%(b) 10.27% 23.74%(c)
________________________________________________________________________________________________________________________
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Ratio of net investment income (loss) to average net assets (0.70)%(b) (0.75)% (0.49)%(c)
________________________________________________________________________________________________________________________
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Portfolio turnover rate(d) 19% 20% 4%
________________________________________________________________________________________________________________________
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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 the returns for shareholder transactions. 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 $511,233.
(c) Annualized.
(d) Not annualized for periods less than one year.
CLASS B
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AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------- OCTOBER 31
2004 2003 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.65 $ 9.13 $ 10.00
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Income from investment operations:
Net investment income (loss) (0.09) (0.07) (0.01)
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Net gains (losses) on securities (both realized and unrealized) 1.06 2.70 (0.86)
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Total from investment operations 0.97 2.63 (0.87)
========================================================================================================================
Less dividends from net investment income -- (0.11) --
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Net asset value, end of period $ 12.62 $ 11.65 $ 9.13
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(a) 8.33% 29.12% (8.70)%
Ratios/supplemental data:
________________________________________________________________________________________________________________________
========================================================================================================================
Net assets, end of period (000s omitted) $ 383 $ 354 $ 274
________________________________________________________________________________________________________________________
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Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.77%(b) 1.83% 1.75%(c)
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Without fee waivers and/or expense reimbursements 10.61%(b) 10.92% 24.39%(c)
________________________________________________________________________________________________________________________
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Ratio of net investment income (loss) to average net assets (0.70)%(b) (0.75)% (0.49)%(c)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(d) 19% 20% 4%
________________________________________________________________________________________________________________________
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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 the returns for shareholder transactions. 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 $383,430.
(c) Annualized.
(d) Not annualized for periods less than one year.
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NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------
AUGUST 30, 2002
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------- 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) (0.09) (0.07) (0.01)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.06 2.70 (0.86)
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Total from investment operations 0.97 2.63 (0.87)
========================================================================================================================
Less dividends from net investment income -- (0.11) --
========================================================================================================================
Net asset value, end of period $ 12.62 $ 11.65 $ 9.13
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(a) 8.33% 29.12% (8.70)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 383 $ 354 $ 274
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.77%(b) 1.83% 1.75%(c)
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Without fee waivers and/or expense reimbursements 10.61%(b) 10.92% 24.39%(c)
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.70)%(b) (0.75)% (0.49)%(c)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(d) 19% 20% 4%
________________________________________________________________________________________________________________________
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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 the returns for shareholder transactions. 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 $383,430.
(c) Annualized.
(d) Not annualized for periods less than one year.
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NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an
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NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
FS-194
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a
FS-195
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM
FS-196
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
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.
FS-197
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-198
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.24%
AEROSPACE & DEFENSE-2.24%
Boeing Co. (The) 350,000 $ 17,465,000
--------------------------------------------------------------------------
General Dynamics Corp. 150,000 15,318,000
--------------------------------------------------------------------------
Honeywell International Inc. 600,000 20,208,000
==========================================================================
52,991,000
==========================================================================
AIR FREIGHT & LOGISTICS-0.58%
FedEx Corp. 150,000 13,668,000
==========================================================================
APPAREL RETAIL-1.65%
Chico's FAS, Inc.(a)(b) 400,000 16,012,000
--------------------------------------------------------------------------
Gap, Inc. (The) 1,150,000 22,977,000
==========================================================================
38,989,000
==========================================================================
APPLICATION SOFTWARE-1.76%
Amdocs Ltd. (United Kingdom)(a) 1,200,000 30,180,000
--------------------------------------------------------------------------
Intuit Inc.(a) 250,000 11,340,000
==========================================================================
41,520,000
==========================================================================
BIOTECHNOLOGY-3.13%
Biogen Idec Inc.(a) 400,000 23,264,000
--------------------------------------------------------------------------
Genentech, Inc.(a) 600,000 27,318,000
--------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 675,000 23,375,250
==========================================================================
73,957,250
==========================================================================
BROADCASTING & CABLE TV-0.79%
Univision Communications Inc.-Class A(a) 600,000 18,576,000
==========================================================================
COMMUNICATIONS EQUIPMENT-6.69%
Avaya Inc.(a) 475,000 6,840,000
--------------------------------------------------------------------------
Cisco Systems, Inc.(a) 2,500,000 48,025,000
--------------------------------------------------------------------------
Motorola, Inc. 2,000,000 34,520,000
--------------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 23,130,000
--------------------------------------------------------------------------
QUALCOMM Inc. 400,000 16,724,000
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 325,000 28,665,000
==========================================================================
157,904,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.75%
Best Buy Co., Inc. 300,000 17,766,000
==========================================================================
COMPUTER HARDWARE-4.47%
Apple Computer, Inc.(a) 675,000 35,457,750
--------------------------------------------------------------------------
Dell Inc.(a) 1,500,000 52,590,000
--------------------------------------------------------------------------
PalmOne, Inc.(a)(c) 600,000 17,382,000
==========================================================================
105,429,750
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS-1.06%
Lexmark International, Inc.-Class A(a) 300,000 $ 24,933,000
==========================================================================
CONSUMER FINANCE-2.27%
American Express Co. 550,000 29,188,500
--------------------------------------------------------------------------
MBNA Corp. 950,000 24,348,500
==========================================================================
53,537,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.66%
Alliance Data Systems Corp.(a) 62,100 2,625,588
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 300,000 13,017,000
==========================================================================
15,642,588
==========================================================================
DEPARTMENT STORES-3.83%
J.C. Penney Co., Inc. 650,000 22,483,500
--------------------------------------------------------------------------
Kohl's Corp.(a) 1,000,000 50,760,000
--------------------------------------------------------------------------
Nordstrom, Inc. 400,000 17,272,000
==========================================================================
90,515,500
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.67%
Apollo Group, Inc.-Class A(a) 175,000 11,550,000
--------------------------------------------------------------------------
Cendant Corp. 2,500,000 51,475,000
==========================================================================
63,025,000
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.41%
Rockwell Automation, Inc. 800,000 33,352,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.70%
Agilent Technologies, Inc.(a) 1,600,000 40,096,000
==========================================================================
FOOTWEAR-1.03%
NIKE, Inc.-Class B 300,000 24,393,000
==========================================================================
GENERAL MERCHANDISE STORES-2.01%
Target Corp. 950,000 47,519,000
==========================================================================
HEALTH CARE EQUIPMENT-1.51%
Bard (C.R.), Inc. 300,000 17,040,000
--------------------------------------------------------------------------
Waters Corp.(a) 450,000 18,580,500
==========================================================================
35,620,500
==========================================================================
HEALTH CARE SERVICES-1.37%
Caremark Rx, Inc.(a) 550,000 16,483,500
--------------------------------------------------------------------------
IMS Health Inc. 750,000 15,885,000
==========================================================================
32,368,500
==========================================================================
|
FS-199
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE SUPPLIES-1.06%
Alcon, Inc. (Switzerland) 350,000 $ 24,920,000
==========================================================================
HOME IMPROVEMENT RETAIL-0.87%
Home Depot, Inc. (The) 500,000 20,540,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.01%
Starwood Hotels & Resorts Worldwide, Inc. 500,000 23,865,000
==========================================================================
HOUSEHOLD PRODUCTS-1.73%
Procter & Gamble Co. (The) 800,000 40,944,000
==========================================================================
HOUSEWARES & SPECIALTIES-1.08%
Fortune Brands, Inc. 350,000 25,487,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-1.22%
Costco Wholesale Corp. 600,000 28,764,000
==========================================================================
INDUSTRIAL CONGLOMERATES-4.45%
3M Co. 150,000 11,635,500
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 3,000,000 93,450,000
==========================================================================
105,085,500
==========================================================================
INDUSTRIAL MACHINERY-2.81%
Danaher Corp. 600,000 33,078,000
--------------------------------------------------------------------------
Eaton Corp. 200,000 12,790,000
--------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 300,000 20,532,000
==========================================================================
66,400,000
==========================================================================
INTEGRATED OIL & GAS-1.33%
BP PLC-ADR (United Kingdom) 175,000 10,193,750
--------------------------------------------------------------------------
ChevronTexaco Corp. 200,000 10,612,000
--------------------------------------------------------------------------
ConocoPhillips 125,000 10,538,750
==========================================================================
31,344,500
==========================================================================
INTERNET RETAIL-1.88%
Amazon.com, Inc.(a) 300,000 10,239,000
--------------------------------------------------------------------------
eBay Inc.(a) 350,000 34,163,500
==========================================================================
44,402,500
==========================================================================
INTERNET SOFTWARE & SERVICES-3.49%
Google Inc.-Class A(a)(c) 100,000 19,070,500
--------------------------------------------------------------------------
Yahoo! Inc.(a) 1,750,000 63,332,500
==========================================================================
82,403,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.85%
Goldman Sachs Group, Inc. (The) 400,000 39,352,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 300,000 24,645,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 26,970,000
==========================================================================
90,967,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MANAGED HEALTH CARE-3.90%
Aetna Inc. 600,000 $ 57,000,000
--------------------------------------------------------------------------
UnitedHealth Group Inc. 485,000 35,114,000
==========================================================================
92,114,000
==========================================================================
MOTORCYCLE MANUFACTURERS-0.73%
Harley-Davidson, Inc. 300,000 17,271,000
==========================================================================
MOVIES & ENTERTAINMENT-0.86%
Walt Disney Co. (The) 800,000 20,176,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.65%
Varco International, Inc.(a) 550,000 15,224,000
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.67%
Citigroup Inc. 550,000 24,403,500
--------------------------------------------------------------------------
JPMorgan Chase & Co. 1,000,000 38,600,000
==========================================================================
63,003,500
==========================================================================
PERSONAL PRODUCTS-3.62%
Avon Products, Inc. 450,000 17,797,500
--------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 900,000 38,655,000
--------------------------------------------------------------------------
Gillette Co. (The) 700,000 29,036,000
==========================================================================
85,488,500
==========================================================================
PHARMACEUTICALS-6.35%
Johnson & Johnson 800,000 46,704,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 250,000 13,727,500
--------------------------------------------------------------------------
Pfizer Inc. 1,200,000 34,740,000
--------------------------------------------------------------------------
Sepracor Inc.(a)(c) 500,000 22,965,000
--------------------------------------------------------------------------
Wyeth 800,000 31,720,000
==========================================================================
149,856,500
==========================================================================
PROPERTY & CASUALTY INSURANCE-0.61%
Allstate Corp. (The) 300,000 14,427,000
==========================================================================
RESTAURANTS-2.34%
McDonald's Corp. 1,000,000 29,150,000
--------------------------------------------------------------------------
Yum! Brands, Inc. 600,000 26,100,000
==========================================================================
55,250,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.65%
Novellus Systems, Inc.(a) 1,500,000 38,865,000
==========================================================================
SEMICONDUCTORS-2.69%
Analog Devices, Inc. 900,000 36,234,000
--------------------------------------------------------------------------
Microchip Technology Inc. 900,000 27,225,000
==========================================================================
63,459,000
==========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 400,000 19,832,000
==========================================================================
|
FS-200
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.57%
Ecolab Inc. 400,000 $ 13,540,000
==========================================================================
SYSTEMS SOFTWARE-3.81%
Microsoft Corp. 850,000 23,791,500
--------------------------------------------------------------------------
Oracle Corp.(a) 1,600,000 20,256,000
--------------------------------------------------------------------------
Symantec Corp.(a) 500,000 28,470,000
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 800,000 17,504,000
==========================================================================
90,021,500
==========================================================================
THRIFTS & MORTGAGE FINANCE-0.59%
Fannie Mae 200,000 14,030,000
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,847,833,159) 2,319,483,588
==========================================================================
MONEY MARKET FUNDS-0.55%
Liquid Assets Portfolio-Institutional
Class(d) 6,546,085 6,546,085
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 6,546,085 $ 6,546,085
==========================================================================
Total Money Market Funds (Cost
$13,092,170) 13,092,170
==========================================================================
TOTAL INVESTMENTS-98.79% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,860,925,329) 2,332,575,758
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.74%
STIC Prime Portfolio-Institutional
Class(d)(e) 40,952,850 40,952,850
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $40,952,850) 40,952,850
==========================================================================
TOTAL INVESTMENTS-100.53% (Cost
$1,901,878,179) 2,373,528,608
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.53%) (12,485,091)
==========================================================================
NET ASSETS-100.00% $2,361,043,517
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 1H
and Note 9.
(c) All or a portion of this security has been pledged as collateral for
security lending transactions at October 31, 2004.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-201
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$1,847,833,159)* $ 2,319,483,588
------------------------------------------------------------
Investments in affiliated money market
funds (cost $54,045,020) 54,045,020
============================================================
Total investments (cost $1,901,878,179) 2,373,528,608
============================================================
Receivables for:
Investments sold 50,411,057
------------------------------------------------------------
Fund shares sold 448,667
------------------------------------------------------------
Dividends 1,592,101
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 269,768
------------------------------------------------------------
Other assets 104,007
============================================================
Total assets 2,426,354,208
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 15,055,134
------------------------------------------------------------
Fund shares reacquired 5,956,291
------------------------------------------------------------
Options written, at market value
(premiums received $421,040) 397,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 534,825
------------------------------------------------------------
Collateral upon return of securities
loaned 40,952,850
------------------------------------------------------------
Accrued distribution fees 865,367
------------------------------------------------------------
Accrued trustees' fees 3,163
------------------------------------------------------------
Accrued transfer agent fees 963,599
------------------------------------------------------------
Accrued operating expenses 581,962
============================================================
Total liabilities 65,310,691
============================================================
Net assets applicable to shares outstanding $ 2,361,043,517
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,229,262,118
------------------------------------------------------------
Undistributed net investment income (loss) (484,385)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (3,339,408,185)
------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 471,673,969
============================================================
$ 2,361,043,517
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,844,930,443
____________________________________________________________
============================================================
Class B $ 434,572,230
____________________________________________________________
============================================================
Class C $ 78,330,084
____________________________________________________________
============================================================
Class R $ 1,448,080
____________________________________________________________
============================================================
Institutional Class $ 1,762,680
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 153,486,063
____________________________________________________________
============================================================
Class B 39,386,838
____________________________________________________________
============================================================
Class C 7,092,782
____________________________________________________________
============================================================
Class R 121,135
____________________________________________________________
============================================================
Institutional Class 138,489
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.02
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.02 divided by
94.50%) $ 12.72
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.03
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.04
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.95
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.73
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $39,055,836 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-202
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $168,938) $ 18,735,081
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $91,112)* 336,832
===========================================================================
Total investment income 19,071,913
===========================================================================
EXPENSES:
Advisory fees 17,028,857
---------------------------------------------------------------------------
Administrative services fees 533,540
---------------------------------------------------------------------------
Custodian fees 272,422
---------------------------------------------------------------------------
Distribution fees:
Class A 6,122,534
---------------------------------------------------------------------------
Class B 5,114,549
---------------------------------------------------------------------------
Class C 873,155
---------------------------------------------------------------------------
Class R 5,355
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 9,316,175
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,931
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 61,515
---------------------------------------------------------------------------
Other 1,785,513
===========================================================================
Total expenses 41,115,546
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (276,057)
===========================================================================
Net expenses 40,839,489
===========================================================================
Net investment income (loss) (21,767,576)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 236,255,290
---------------------------------------------------------------------------
Foreign currencies 24
===========================================================================
236,255,314
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,844,681)
---------------------------------------------------------------------------
Foreign currencies (7)
---------------------------------------------------------------------------
Option contracts written 23,540
===========================================================================
(114,821,148)
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 121,434,166
===========================================================================
Net increase in net assets resulting from operations $ 99,666,590
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-203
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (21,767,576) $ (22,244,366)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and options contracts 236,255,314 (152,819,227)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (114,821,148) 703,701,978
==============================================================================================
Net increase in net assets resulting from operations 99,666,590 528,638,385
==============================================================================================
Share transactions-net:
Class A (395,056,301) (354,029,189)
----------------------------------------------------------------------------------------------
Class B (138,803,397) (78,758,321)
----------------------------------------------------------------------------------------------
Class C (15,793,039) (11,803,823)
----------------------------------------------------------------------------------------------
Class R 1,126,374 190,176
----------------------------------------------------------------------------------------------
Institutional Class (547,138) (83,682)
==============================================================================================
Net increase (decrease) in net assets resulting from share
transactions (549,073,501) (444,484,839)
==============================================================================================
Net increase (decrease) in net assets (449,406,911) 84,153,546
==============================================================================================
NET ASSETS:
Beginning of year 2,810,450,428 2,726,296,882
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(484,385) and $(462,775), respectively) $2,361,043,517 $2,810,450,428
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-204
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-205
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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-206
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 (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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $5,987. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $227,266 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $533,540 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $9,316,175 for Class A, Class B, Class C and Class R shares and $1,931 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $6,122,534, $5,114,549, $873,155 and $5,355, 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, 2004, AIM Distributors advised the Fund that it retained $252,306 in front-end sales commissions from the sale of Class A shares and $1,900, $55,846, $6,948 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004.
FS-207
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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $36,428,079 $ 401,226,654 $ (431,108,648) $ -- $ 6,546,085 $124,213 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 36,428,079 401,226,654 (431,108,648) -- 6,546,085 121,507 --
==================================================================================================================================
Subtotal $72,856,158 $ 802,453,308 $ (862,217,296) $ -- $13,092,170 $245,720 $ --
==================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $38,996,800 $ 574,759,331 $ (613,756,131) $ -- $ -- $ 79,923 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class -- 125,196,850 (84,244,000) -- 40,952,850 $ 11,189 --
==================================================================================================================================
Subtotal $38,996,800 $ 699,956,181 $ (698,000,131) $ -- $40,952,850 $ 91,112 $ --
==================================================================================================================================
Total $111,852,958 $1,502,409,489 $(1,560,217,427) $ -- $54,045,020 $336,832 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $79,267,272 and $21,738,445, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $42,804 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $42,804.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $13,966 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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.
FS-208
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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $39,055,836 were on loan to brokers. The loans were secured by cash collateral of $40,952,850 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $91,112 for securities lending transactions.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------------------
Beginning of year -- $ --
-----------------------------------------------------------------------------------
Written 3,000 421,040
===================================================================================
End of year 3,000 $421,040
___________________________________________________________________________________
===================================================================================
|
OPEN OPTIONS WRITTEN AT PERIOD END
-----------------------------------------------------------------------------------------------------------------------------
OCTOBER 31, 2004
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET UNREALIZED
CALLS MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
-----------------------------------------------------------------------------------------------------------------------------
Chico's FAS, Inc. Nov-04 $40.0 3,000 $421,040 $397,500 $23,540
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
FS-209
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 450,268,418
-----------------------------------------------------------------------------
Temporary book/tax differences (484,385)
-----------------------------------------------------------------------------
Capital loss carryforward (3,318,002,634)
-----------------------------------------------------------------------------
Shares of beneficial interest 5,229,262,118
=============================================================================
Total net assets $ 2,361,043,517
_____________________________________________________________________________
=============================================================================
|
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 difference is attributable primarily to the tax deferral of losses on wash sales and the deferral of losses on certain straddles. The tax-basis unrealized appreciation on investments amount includes appreciation on option contracts of $23,539.
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $200,737,719 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------------------------
October 31, 2009 $2,358,363,619
------------------------------------------------------------------------------
October 31, 2010 763,027,747
------------------------------------------------------------------------------
October 31, 2011 196,611,268
==============================================================================
Total capital loss carryforward $3,318,002,634
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $1,931,481,698 and $2,445,456,487, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $466,806,274 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (16,561,395) ============================================================================== Net unrealized appreciation of investment securities $450,244,879 ______________________________________________________________________________ ============================================================================== |
Cost of investments for tax purposes is $1,923,283,729.
NOTE 12--RECLASSIFICATIONS OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2004, undistributed net
investment income increased by $21,745,966, undistributed net realized gain
(loss) was decreased by $25 and shares of beneficial interest decreased by
$21,745,941. This reclassification had no effect on the net assets of the Fund.
FS-210
NOTE 13--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 certain 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(A)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,161,430 $ 74,474,713 10,192,956 $ 102,256,843
--------------------------------------------------------------------------------------------------------------------------
Class B 2,836,554 31,535,843 5,051,931 47,044,808
--------------------------------------------------------------------------------------------------------------------------
Class C 1,109,204 12,390,482 1,715,252 15,941,057
--------------------------------------------------------------------------------------------------------------------------
Class R 139,257 1,669,192 23,136 234,973
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 13,498 172,948 16,638 177,847
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 4,502,782 54,704,748 1,369,192 14,331,798
--------------------------------------------------------------------------------------------------------------------------
Class B (4,888,349) (54,704,748) (1,477,850) (14,331,798)
==========================================================================================================================
Reacquired:
Class A (43,655,916) (524,235,762) (47,251,093) (470,617,830)
--------------------------------------------------------------------------------------------------------------------------
Class B (10,449,964) (115,634,492) (12,154,199) (111,471,331)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,535,106) (28,183,521) (2,990,841) (27,744,880)
--------------------------------------------------------------------------------------------------------------------------
Class R (45,049) (542,818) (4,184) (44,797)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (56,324) (720,086) (25,361) (261,529)
==========================================================================================================================
(46,867,983) $(549,073,501) (45,534,423) $(444,484,839)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 17% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-211
NOTE 14--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,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.07) (0.07)(a) (0.10) (0.14)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.51 2.19 (3.11) (11.87) 3.18
============================================================================================================================
Total from investment operations 0.43 2.12 (3.18) (11.97) 3.04
============================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
============================================================================================================================
Net asset value, end of period $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 3.71% 22.39% (25.14)% (47.38)% 10.61%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,844,930 $2,160,823 $2,104,660 $4,001,552 $8,948,781
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.39%(c) 1.47% 1.33% 1.21% 1.03%
----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.40%(c) 1.47% 1.33% 1.22% 1.07%
============================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.67)%(c) (0.68)% (0.64)% (0.56)% (0.45)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $2,040,844,523.
CLASS B
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.14) (0.15)(a) (0.21) (0.36)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.47 2.03 (2.89) (11.21) 3.08
==========================================================================================================================
Total from investment operations 0.32 1.89 (3.04) (11.42) 2.72
==========================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
==========================================================================================================================
Net asset value, end of period $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 2.99% 21.43% (25.63)% (47.75)% 9.76%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $434,572 $555,779 $533,224 $922,476 $1,927,514
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.09%(c) 2.17% 2.04% 1.92% 1.78%
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(c) 2.17% 2.04% 1.93% 1.82%
==========================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.37)%(c) (1.38)% (1.34)% (1.27)% (1.20)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $511,454,890.
FS-212
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.14) (0.15)(a) (0.21) (0.36)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.47 2.03 (2.89) (11.23) 3.10
======================================================================================================================
Total from investment operations 0.32 1.89 (3.04) (11.44) 2.74
======================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
======================================================================================================================
Net asset value, end of period $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.99% 21.40% (25.61)% (47.77)% 9.83%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $78,330 $91,325 $86,455 $150,604 $301,590
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.09%(c) 2.17% 2.04% 1.92% 1.78%
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(c) 2.17% 2.04% 1.93% 1.82%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.38)% (1.34)% (1.27)% (1.20)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $87,315,520.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.06) (0.03)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.49 2.15 (1.86)
====================================================================================================
Total from investment operations 0.39 2.09 (1.89)
====================================================================================================
Net asset value, end of period $ 11.95 $11.56 $ 9.47
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 3.37% 22.07% (16.64)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,448 $ 311 $ 76
====================================================================================================
Ratio of expenses to average net assets 1.59%(c)(d) 1.67% 1.53%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.87)%(c) (0.88)% (0.84)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate 74% 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 based on average daily net assets of $1,071,094.
(d) After fee waivers and/or expense reimbursements. Ratio of expense to
average net asset prior to fee waivers and/or expense reimbursements is
1.60%.
(e) Annualized.
FS-213
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.20 $ 9.91 $13.16 $29.00 $ 28.96
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.00 (0.01)(a) (0.01) (0.06)(a)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.54 2.29 (3.24) (12.29) 3.29
================================================================================================================
Total from investment operations 0.53 2.29 (3.25) (12.30) 3.23
================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
================================================================================================================
Net asset value, end of period $12.73 $12.20 $ 9.91 $13.16 $ 29.00
________________________________________________________________________________________________________________
================================================================================================================
Total return(b) 4.34% 23.11% (24.70)% (47.11)% 11.07%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,763 $2,213 $1,883 $7,667 $18,634
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.84%(c) 0.78% 0.82% 0.69% 0.64%
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.85%(c) 0.78% 0.82% 0.70% 0.68%
================================================================================================================
Ratio of net investment income (loss) to average net assets (0.12)%(c) 0.01% (0.12)% (0.04)% (0.04)%
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
________________________________________________________________________________________________________________
================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,931,035.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
FS-214
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-215
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-216
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-217
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.65%
ADVERTISING-1.51%
Lamar Advertising Co.-Class A(a) 700,000 $ 26,166,000
==========================================================================
AEROSPACE & DEFENSE-0.72%
L-3 Communications Holdings, Inc. 175,000 12,419,750
==========================================================================
APPAREL RETAIL-1.26%
Aeropostale, Inc.(a) 400,000 11,172,000
--------------------------------------------------------------------------
Hot Topic, Inc.(a) 531,000 10,614,690
==========================================================================
21,786,690
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.71%
Fossil, Inc.(a) 530,000 12,327,800
==========================================================================
APPLICATION SOFTWARE-2.22%
Amdocs Ltd. (United Kingdom)(a) 400,000 10,684,000
--------------------------------------------------------------------------
BEA Systems, Inc.(a) 1,250,000 8,625,000
--------------------------------------------------------------------------
Synopsys, Inc.(a) 579,947 9,534,329
--------------------------------------------------------------------------
TIBCO Software Inc.(a) 1,350,000 9,639,000
==========================================================================
38,482,329
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.84%
Affiliated Managers Group, Inc.(a) 250,000 15,632,500
--------------------------------------------------------------------------
Investors Financial Services Corp. 850,000 35,657,500
--------------------------------------------------------------------------
Nuveen Investments-Class A 443,700 15,081,363
==========================================================================
66,371,363
==========================================================================
BIOTECHNOLOGY-3.75%
Amylin Pharmaceuticals, Inc.(a) 675,000 11,475,000
--------------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 370,000 8,506,300
--------------------------------------------------------------------------
MedImmune, Inc.(a) 500,000 12,685,000
--------------------------------------------------------------------------
Neurocrine Biosciences, Inc.(a) 350,000 12,236,000
--------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 165,000 7,810,275
--------------------------------------------------------------------------
QLT Inc. (Canada)(a)(b) 1,130,000 12,113,600
==========================================================================
64,826,175
==========================================================================
BREWERS-0.71%
Molson Coors Brewing Co.-Class B 200,000 12,350,000
==========================================================================
BROADCASTING & CABLE TV-2.92%
Radio One, Inc.-Class D(a) 1,100,000 14,377,000
--------------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 1,375,000 36,148,750
==========================================================================
50,525,750
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
BUILDING PRODUCTS-1.08%
American Standard Cos. Inc. 300,000 $ 13,413,000
--------------------------------------------------------------------------
York International Corp. 135,000 5,282,550
==========================================================================
18,695,550
==========================================================================
CASINOS & GAMING-1.25%
Aztar Corp.(a) 400,000 10,924,000
--------------------------------------------------------------------------
International Game Technology 400,000 10,756,000
==========================================================================
21,680,000
==========================================================================
COMMUNICATIONS EQUIPMENT-1.00%
Juniper Networks, Inc.(a) 625,000 14,118,750
--------------------------------------------------------------------------
Tekelec(a) 231,169 3,146,210
==========================================================================
17,264,960
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.87%
Best Buy Co., Inc. 300,000 15,102,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.97%
Brocade Communications Systems, Inc.(a) 1,500,000 6,540,000
--------------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 625,000 10,262,500
==========================================================================
16,802,500
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.48%
Terex Corp.(a) 224,000 8,373,120
==========================================================================
CONSUMER ELECTRONICS-0.45%
Harman International Industries, Inc. 100,000 7,858,000
==========================================================================
CONSUMER FINANCE-0.62%
SLM Corp. 225,000 10,719,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-7.89%
Affiliated Computer Services, Inc.-Class A(a) 350,000 16,684,500
--------------------------------------------------------------------------
Alliance Data Systems Corp.(a) 1,000,000 40,400,000
--------------------------------------------------------------------------
Fiserv, Inc.(a) 575,000 24,322,500
--------------------------------------------------------------------------
Iron Mountain Inc.(a) 825,000 24,502,500
--------------------------------------------------------------------------
Paychex, Inc. 1,000,000 30,600,000
==========================================================================
136,509,500
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.95%
ARAMARK Corp.-Class B 600,000 14,706,000
--------------------------------------------------------------------------
Career Education Corp.(a) 267,000 8,394,480
--------------------------------------------------------------------------
ChoicePoint Inc.(a) 471,500 18,610,105
--------------------------------------------------------------------------
Cintas Corp. 450,000 17,365,500
--------------------------------------------------------------------------
CoStar Group Inc.(a) 205,000 8,107,750
--------------------------------------------------------------------------
|
FS-218
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-(CONTINUED)
Jackson Hewitt Tax Service Inc. 625,000 $ 11,512,500
--------------------------------------------------------------------------
Sirva Inc.(a) 1,000,000 6,980,000
==========================================================================
85,676,335
==========================================================================
ELECTRIC UTILITIES-0.60%
DPL Inc. 405,000 10,303,200
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.60%
EnerSys(a) 1,100,000 10,373,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.56%
Amphenol Corp.-Class A 250,000 9,860,000
--------------------------------------------------------------------------
Cogent Inc.(a) 375,000 8,437,500
--------------------------------------------------------------------------
Tektronix, Inc. 400,000 8,664,000
==========================================================================
26,961,500
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.27%
Molex Inc. 183,800 4,670,358
==========================================================================
GENERAL MERCHANDISE STORES-0.61%
Tuesday Morning Corp.(a) 400,000 10,504,000
==========================================================================
HEALTH CARE EQUIPMENT-7.77%
Biomet, Inc. 500,000 19,345,000
--------------------------------------------------------------------------
Cytyc Corp.(a) 900,000 19,179,000
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 425,000 25,236,500
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 425,000 26,116,250
--------------------------------------------------------------------------
Kyphon Inc.(a) 425,000 11,113,750
--------------------------------------------------------------------------
PerkinElmer, Inc. 500,000 9,250,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 305,000 10,290,700
--------------------------------------------------------------------------
Waters Corp.(a) 350,000 13,870,500
==========================================================================
134,401,700
==========================================================================
HEALTH CARE FACILITIES-0.59%
Triad Hospitals, Inc.(a) 200,000 10,250,000
==========================================================================
HEALTH CARE SERVICES-3.35%
Caremark Rx, Inc.(a) 475,000 19,023,750
--------------------------------------------------------------------------
Cerner Corp.(a)(c) 210,000 12,192,600
--------------------------------------------------------------------------
DaVita, Inc.(a) 450,000 18,135,000
--------------------------------------------------------------------------
Omnicare, Inc. 250,000 8,667,500
==========================================================================
58,018,850
==========================================================================
HEALTH CARE SUPPLIES-1.88%
Advanced Medical Optics, Inc.(a) 435,000 16,086,300
--------------------------------------------------------------------------
Cooper Cos., Inc. (The) 100,000 6,755,000
--------------------------------------------------------------------------
Millipore Corp.(a) 200,000 9,644,000
==========================================================================
32,485,300
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.09%
Royal Caribbean Cruises Ltd. (Liberia) 450,000 18,909,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOUSEHOLD APPLIANCES-1.01%
Blount International, Inc.(a) 1,173,900 $ 17,385,459
==========================================================================
INDUSTRIAL CONGLOMERATES-1.09%
Textron Inc. 250,000 18,837,500
==========================================================================
INDUSTRIAL GASES-0.30%
Airgas, Inc. 239,000 5,238,880
==========================================================================
INDUSTRIAL MACHINERY-1.21%
Dover Corp. 300,000 10,908,000
--------------------------------------------------------------------------
Pentair, Inc. 250,000 9,945,000
==========================================================================
20,853,000
==========================================================================
INTERNET SOFTWARE & SERVICES-0.76%
VeriSign, Inc.(a) 500,000 13,230,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.99%
Acxiom Corp. 500,000 9,500,000
--------------------------------------------------------------------------
Perot Systems Corp.-Class A(a) 600,000 7,578,000
==========================================================================
17,078,000
==========================================================================
METAL & GLASS CONTAINERS-0.53%
Owens-Illinois, Inc.(a) 375,000 9,195,000
==========================================================================
MOVIES & ENTERTAINMENT-0.88%
Regal Entertainment Group-Class A 750,000 15,217,500
==========================================================================
OFFICE SERVICES & SUPPLIES-0.78%
Mine Safety Appliances Co. 380,000 13,566,000
==========================================================================
OIL & GAS DRILLING-1.33%
ENSCO International Inc. 525,000 17,115,000
--------------------------------------------------------------------------
Rowan Cos., Inc. 225,000 5,969,250
==========================================================================
23,084,250
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.49%
BJ Services Co. 175,000 8,531,250
==========================================================================
PAPER PRODUCTS-0.21%
Sappi Ltd.-ADR (South Africa) 371,500 3,707,570
==========================================================================
PHARMACEUTICALS-4.54%
Endo Pharmaceuticals Holdings Inc.(a) 500,000 9,925,000
--------------------------------------------------------------------------
Impax Laboratories, Inc.(a) 400,000 6,508,000
--------------------------------------------------------------------------
IVAX Corp.(a) 937,500 17,718,750
--------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 542,200 15,235,820
--------------------------------------------------------------------------
MGI Pharma, Inc.(a) 720,000 15,876,000
--------------------------------------------------------------------------
Valeant Pharmaceuticals International 636,900 13,215,675
==========================================================================
78,479,245
==========================================================================
PUBLISHING-0.63%
Dow Jones & Co., Inc. 325,000 10,868,000
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.75%
CB Richard Ellis Group, Inc.-Class A(a) 375,000 13,031,250
==========================================================================
|
FS-219
MARKET
SHARES VALUE
--------------------------------------------------------------------------
REGIONAL BANKS-1.91%
Amegy Bancorp., Inc. 800,000 $ 13,280,000
--------------------------------------------------------------------------
North Fork Bancorp., Inc. 700,000 19,705,000
==========================================================================
32,985,000
==========================================================================
RESTAURANTS-1.65%
RARE Hospitality International, Inc.(a) 500,000 13,910,000
--------------------------------------------------------------------------
Ruby Tuesday, Inc. 650,000 14,625,000
==========================================================================
28,535,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.23%
KLA-Tencor Corp. 540,600 21,094,212
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 750,000 17,572,500
==========================================================================
38,666,712
==========================================================================
SEMICONDUCTORS-8.51%
Altera Corp.(a) 775,000 16,065,750
--------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 1,124,900 12,666,374
--------------------------------------------------------------------------
ATI Technologies Inc. (Canada)(a) 875,000 12,950,000
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 475,000 14,207,250
--------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 850,000 15,529,500
--------------------------------------------------------------------------
Maxim Integrated Products, Inc. 700,000 26,180,000
--------------------------------------------------------------------------
Microchip Technology Inc. 1,000,000 28,480,000
--------------------------------------------------------------------------
Micron Technology, Inc.(a) 875,000 8,496,250
--------------------------------------------------------------------------
Semtech Corp.(a) 750,000 12,667,500
==========================================================================
147,242,624
==========================================================================
SOFT DRINKS-0.73%
Coca-Cola Enterprises Inc. 625,000 12,687,500
==========================================================================
SPECIALIZED FINANCE-0.57%
Chicago Mercantile Exchange Holdings Inc. 50,000 9,776,000
==========================================================================
SPECIALTY CHEMICALS-0.98%
Nalco Holding Co.(a) 393,300 7,079,400
--------------------------------------------------------------------------
Rohm & Haas Co. 225,000 9,823,500
==========================================================================
16,902,900
==========================================================================
SPECIALTY STORES-4.11%
Bed Bath & Beyond Inc.(a) 400,000 14,884,000
--------------------------------------------------------------------------
Linens 'n Things, Inc.(a) 750,000 17,497,500
--------------------------------------------------------------------------
PETCO Animal Supplies, Inc.(a) 550,000 17,215,000
--------------------------------------------------------------------------
Staples, Inc. 1,125,000 21,453,750
==========================================================================
71,050,250
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-1.58%
Internet Security Systems, Inc.(a) 302,100 $ 5,875,845
--------------------------------------------------------------------------
McAfee Inc.(a) 600,000 12,546,000
--------------------------------------------------------------------------
RSA Security Inc.(a) 833,000 8,946,420
==========================================================================
27,368,265
==========================================================================
TECHNOLOGY DISTRIBUTORS-1.42%
CDW Corp. 450,000 24,610,500
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.34%
Independence Community Bank Corp. 400,000 14,272,000
--------------------------------------------------------------------------
New York Community Bancorp, Inc.(b) 500,000 8,850,000
==========================================================================
23,122,000
==========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.60%
WESCO International, Inc.(a) 428,000 10,349,040
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,672,089,105) 1,672,412,425
==========================================================================
MONEY MARKET FUNDS-3.33%
Liquid Assets Portfolio-Institutional
Class(d) 28,814,361 28,814,361
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 28,814,361 28,814,361
==========================================================================
Total Money Market Funds (Cost
$57,628,722) 57,628,722
==========================================================================
TOTAL INVESTMENTS-99.98% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,729,717,827) 1,730,041,147
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.50%
Liquid Assets Portfolio-Institutional
Class(d)(e) 4,312,476 4,312,476
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 4,312,476 4,312,476
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $8,624,952) 8,624,952
==========================================================================
TOTAL INVESTMENTS-100.48% (Cost
$1,738,342,779) 1,738,666,099
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.48%) (8,222,318)
==========================================================================
NET ASSETS-100.00% $1,730,443,781
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) A portion of this security is subject to call options written. See Note 1F
and Note 9.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-220
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,672,089,105)* $1,672,412,425
------------------------------------------------------------
Investments in affiliated money market funds
(cost $66,253,674) 66,253,674
============================================================
Total investments (cost $1,738,342,779) 1,738,666,099
============================================================
Cash 430,787
------------------------------------------------------------
Receivables for:
Investments sold 51,570,142
------------------------------------------------------------
Fund shares sold 645,511
------------------------------------------------------------
Dividends 884,416
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 122,564
------------------------------------------------------------
Other assets 37,058
============================================================
Total assets 1,792,356,577
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 45,868,921
------------------------------------------------------------
Fund shares reacquired 3,945,753
------------------------------------------------------------
Options written, at market value (premiums
received $894,670) 1,039,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 277,955
------------------------------------------------------------
Collateral upon return of securities
loaned 8,624,952
------------------------------------------------------------
Accrued distribution fees 527,070
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,991
------------------------------------------------------------
Accrued transfer agent fees 1,365,362
------------------------------------------------------------
Accrued operating expenses 259,292
============================================================
Total liabilities 61,912,796
============================================================
Net assets applicable to shares outstanding $1,730,443,781
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,042,444,909
------------------------------------------------------------
Undistributed net investment income (loss) (7,810,218)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (304,369,400)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 178,490
============================================================
$1,730,443,781
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,436,493,212
____________________________________________________________
============================================================
Class B $ 225,604,269
____________________________________________________________
============================================================
Class C $ 61,741,279
____________________________________________________________
============================================================
Class R $ 2,893,402
____________________________________________________________
============================================================
Institutional Class $ 3,711,619
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 149,077,981
____________________________________________________________
============================================================
Class B 24,708,549
____________________________________________________________
============================================================
Class C 6,762,746
____________________________________________________________
============================================================
Class R 302,664
____________________________________________________________
============================================================
Institutional Class 378,464
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.64
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.64 divided by
94.50%) $ 10.20
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.56
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.81
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $8,607,138 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-221
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends $ 5,692,958
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $26,928 after rebates of
$1,816,491) 1,329,242
===========================================================================
Total investment income 7,022,200
===========================================================================
EXPENSES:
Advisory fees 6,107,255
---------------------------------------------------------------------------
Administrative services fees 218,543
---------------------------------------------------------------------------
Custodian fees 104,525
---------------------------------------------------------------------------
Distribution fees:
Class A 1,987,892
---------------------------------------------------------------------------
Class B 1,237,604
---------------------------------------------------------------------------
Class C 346,921
---------------------------------------------------------------------------
Class R 7,650
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 4,188,297
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,065
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 43,044
---------------------------------------------------------------------------
Other 395,650
===========================================================================
Total expenses 14,638,446
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (62,902)
===========================================================================
Net expenses 14,575,544
===========================================================================
Net investment income (loss) (7,553,344)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $3,518,942) 284,356,269
---------------------------------------------------------------------------
Option contracts written 2,927,072
===========================================================================
287,283,341
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (266,505,753)
---------------------------------------------------------------------------
Option contracts written 25,372
===========================================================================
(266,480,381)
===========================================================================
Net gain from investment securities and option contracts 20,802,960
===========================================================================
Net increase in net assets resulting from operations $ 13,249,616
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-222
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (7,553,344) $ (21,355,366)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 287,283,341 456,200,097
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (266,480,381) (288,045,284)
==============================================================================================
Net increase in net assets resulting from operations 13,249,616 146,799,447
==============================================================================================
Share transactions-net:
Class A (216,309,735) (469,733,957)
----------------------------------------------------------------------------------------------
Class B (23,412,369) (28,990,427)
----------------------------------------------------------------------------------------------
Class C (9,786,533) (14,524,768)
----------------------------------------------------------------------------------------------
Class R 60,180 1,554,735
----------------------------------------------------------------------------------------------
Institutional Class 3,737,875 (2,730,852)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (245,710,582) (514,425,269)
==============================================================================================
Net increase (decrease) in net assets (232,460,966) (367,625,822)
==============================================================================================
NET ASSETS:
Beginning of period 1,962,904,747 2,330,530,569
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(7,810,218) and $(256,874),
respectively) $1,730,443,781 $1,962,904,747
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-223
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-224
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $150 million 0.80% ---------------------------------------------------------------------- Over $150 million 0.625% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $13,901.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $20,795 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $218,543.
FS-225
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,188,297 for Class A, Class B, Class C and Class R share classes and $1,065 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $1,987,892, $1,237,604, $346,921 and $7,650, 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, 2005, ADI advised the Fund that it retained $92,801 in front-end sales commissions from the sale of Class A shares and $4,696, $43,974, $4,385 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS FROM APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/04 AT COST SALES (DEPRECIATION) 04/30/05 INCOME
-----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $48,442,076 $354,337,510 $(373,965,225) $ -- $28,814,361 $ 645,683
-----------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 48,442,076 354,337,510 (373,965,225) -- 28,814,361 656,631
=======================================================================================================================
Subtotal $96,884,152 $708,675,020 $(747,930,450) $ -- $57,628,722 $1,302,314
_______________________________________________________________________________________________________________________
=======================================================================================================================
REALIZED
FUND GAIN (LOSS)
------------------------
Liquid Assets Portfolio-
Institutional Class $ --
------------------------
STIC Prime
Portfolio-Institutional
Class --
========================
Subtotal $ --
________________________
========================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
PROCEEDS UNREALIZED
MARKET VALUE PURCHASES FROM APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/04 AT COST SALES (DEPRECIATION) 04/30/05 INCOME*
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $127,900,554 $ 59,176,773 $ (182,764,851) $ -- $ 4,312,476 $ 13,350
--------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 127,900,554 58,845,661 (182,433,739) -- 4,312,476 13,578
__________________________________________________________________________________________________________________________
==========================================================================================================================
Subtotal $255,801,108 $118,022,434 $ (365,198,590) $ -- $ 8,624,952 $ 26,928
==========================================================================================================================
Total $352,685,260 $826,697,454 $(1,113,129,040) $ -- $66,253,674 $1,329,242
__________________________________________________________________________________________________________________________
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
-------------------------
Liquid Assets
Portfolio-Institutional
Class $ --
-------------------------
STIC Prime Portfolio-
Institutional Class --
_________________________
=========================
Subtotal $ --
=========================
Total $ --
_________________________
=========================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $14,639,624 and sales of $24,480,661, which resulted in net realized gains of $3,518,942.
FS-226
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $28,206.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $5,289 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $8,607,138 were on loan to brokers. The loans were secured by cash collateral of $8,624,952 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $26,928 for securities lending transactions, which are net of rebates.
FS-227
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
--------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------------------------------------------------------------------------------------
Beginning of period 16,109 $ 830,758
--------------------------------------------------------------------------------------
Written 40,896 4,782,450
--------------------------------------------------------------------------------------
Closed (8,000) (730,416)
--------------------------------------------------------------------------------------
Exercised (11,375) (1,036,938)
--------------------------------------------------------------------------------------
Expired (35,530) (2,951,184)
======================================================================================
End of period 2,100 $ 894,670
______________________________________________________________________________________
======================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
-------------------------------------------------------------------------------------------------------------------------------
APRIL 30,
2005 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE DEPRECIATION
-------------------------------------------------------------------------------------------------------------------------------
Cerner Corp. Jun-05 $55 2,100 $894,670 $1,039,500 $(144,830)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2009 $125,040,407
-----------------------------------------------------------------------------
October 31, 2010 463,739,024
=============================================================================
Total capital loss carryforward $588,779,431
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2005 was $1,757,362,997 and $1,974,761,207, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $120,864,846 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (120,799,591) ============================================================================== Net unrealized appreciation of investment securities $ 65,255 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,738,600,844. |
FS-228
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,661,755 $ 56,828,822 19,503,343 $ 183,246,538
--------------------------------------------------------------------------------------------------------------------------
Class B 1,430,698 13,608,333 2,785,031 24,931,760
--------------------------------------------------------------------------------------------------------------------------
Class C 560,427 5,341,131 1,454,243 13,022,624
--------------------------------------------------------------------------------------------------------------------------
Class R 66,443 664,409 233,461 2,175,865
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 466,025 4,770,693 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 192,845 1,939,103 366,882 3,476,875
--------------------------------------------------------------------------------------------------------------------------
Class B (203,182) (1,939,103) (384,365) (3,476,875)
==========================================================================================================================
Reacquired:
Class A (27,322,010) (275,077,660) (69,860,562) (656,457,370)
--------------------------------------------------------------------------------------------------------------------------
Class B (3,676,528) (35,081,599) (5,651,768) (50,445,312)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,585,192) (15,127,664) (3,075,625) (27,547,392)
--------------------------------------------------------------------------------------------------------------------------
Class R (60,437) (604,229) (66,756) (621,130)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (100,702) (1,032,818) (272,069) (2,730,852)
==========================================================================================================================
(24,569,858) $(245,710,582) (54,968,185) $(514,425,269)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are record owners of more than 5% of the outstanding shares of the Fund and in aggregate they own 16% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third part record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
NOTE 13--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Emerging Growth Fund and AIM Libra Fund ("Selling Funds"), a series of AIM Equity Funds and AIM Investment Funds, respectively ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Funds will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Funds, and Selling Funds will cease operations.
The Agreement requires approval of Selling Funds' shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Funds and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
FS-229
NOTE 14--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, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.08)(a) (0.07)(a) (0.09)(a) (0.09)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.06 0.71 1.76 (1.29) (6.34) 11.08
=================================================================================================================================
Total from investment
operations 0.02 0.63 1.69 (1.38) (6.43) 10.95
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.64 $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.21% 7.01% 23.15% (15.90)% (40.51)% 47.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,436,493 $1,640,288 $1,983,600 $1,798,318 $2,516,407 $4,444,515
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.41%(c) 1.29%(d) 1.30% 1.32% 1.17% 1.04%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.67)%(c) (0.86)% (0.96)% (1.00)% (0.79)% (0.77)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of
$1,603,492,960.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.30%.
(e) Not annualized for periods less than one year.
CLASS B
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(d) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.05 0.67 1.71 (1.26) (6.20) 11.04
=================================================================================================================================
Total from investment operations (0.02) 0.53 1.58 (1.41) (6.37) 10.75
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.13 $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.22)% 6.15% 22.44% (16.69)% (40.90)% 46.29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $225,604 $248,425 $262,098 $226,806 $294,303 $374,010
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.16%(c) 2.04%(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.42)%(c) (1.61)% (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of $249,572,126.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
(e) Not annualized for periods less than one year.
FS-230
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.05 0.67 1.71 (1.26) (6.19) 11.03
=================================================================================================================================
Total from investment operations (0.02) 0.53 1.58 (1.41) (6.36) 10.74
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.13 $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.22)% 6.15% 22.44% (16.69)% (40.86)% 46.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 61,741 $ 71,229 $ 81,079 $ 72,676 $ 96,640 $120,591
=================================================================================================================================
Ratio of expenses to average net assets 2.16%(c) 2.04%(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.42)%(c) (1.61)% (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of $69,959,234.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
(e) Not annualized for periods less than one year.
CLASS R
----------------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.55 $ 8.96 $ 7.29 $ 8.89
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.10)(a) (0.10)(a) (0.04)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.06 0.69 1.77 (1.56)
==============================================================================================================================
Total from investment operations 0.01 0.59 1.67 (1.60)
==============================================================================================================================
Net asset value, end of period $ 9.56 $ 9.55 $ 8.96 $ 7.29
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 0.10% 6.58% 22.91% (18.00)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,893 $ 2,834 $ 1,164 $ 137
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 1.66%(c) 1.54%(d) 1.55% 1.62%(e)
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.92)%(c) (1.11)% (1.21)% (1.30)%(e)
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(f) 98% 115% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,085,426.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-231
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------- OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.76 $ 9.08 $ 7.32 $ 9.53
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.03)(a) (0.03)(a) (0.02)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.05 0.71 1.79 (2.19)
===============================================================================================================================
Total from investment operations 0.05 0.68 1.76 (2.21)
===============================================================================================================================
Net asset value, end of period $ 9.81 $ 9.76 $ 9.08 $ 7.32
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 0.51% 7.49% 24.04% (23.19)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 3,712 $ 128 $ 2,589 $ 138
===============================================================================================================================
Ratio of expenses to average net assets 0.81%(c) 0.72%(d) 0.71% 0.81%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.29)% (0.37)% (0.49)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 98% 115% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,408,044.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.73%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits
FS-232
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-233
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.64%
AEROSPACE & DEFENSE-1.10%
United Technologies Corp. 240,000 $ 24,412,800
==========================================================================
AIR FREIGHT & LOGISTICS-0.86%
FedEx Corp. 225,000 19,113,750
==========================================================================
ALUMINUM-0.50%
Alcoa Inc. 385,000 11,172,700
==========================================================================
APPLICATION SOFTWARE-1.14%
Amdocs Ltd. (United Kingdom)(a) 950,000 25,374,500
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.70%
Franklin Resources, Inc. 225,000 15,453,000
==========================================================================
BIOTECHNOLOGY-2.28%
Amgen Inc.(a) 475,000 27,649,750
--------------------------------------------------------------------------
Genentech, Inc.(a)(b) 325,000 23,055,500
==========================================================================
50,705,250
==========================================================================
COMMUNICATIONS EQUIPMENT-3.67%
Cisco Systems, Inc.(a) 2,500,000 43,200,000
--------------------------------------------------------------------------
QUALCOMM Inc.(c) 1,100,000 38,379,000
==========================================================================
81,579,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.79%
Best Buy Co., Inc. 350,000 17,619,000
==========================================================================
COMPUTER HARDWARE-2.77%
Dell Inc.(a) 1,250,000 43,537,500
--------------------------------------------------------------------------
International Business Machines Corp. 235,000 17,949,300
==========================================================================
61,486,800
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.54%
EMC Corp.(a) 2,600,000 34,112,000
==========================================================================
CONSUMER FINANCE-2.42%
American Express Co. 600,000 31,620,000
--------------------------------------------------------------------------
SLM Corp. 465,000 22,152,600
==========================================================================
53,772,600
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.78%
Automatic Data Processing, Inc. 400,000 17,376,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DEPARTMENT STORES-1.58%
J.C. Penney Co., Inc. 365,000 $ 17,304,650
--------------------------------------------------------------------------
Nordstrom, Inc. 350,000 17,790,500
==========================================================================
35,095,150
==========================================================================
DIVERSIFIED BANKS-3.00%
Bank of America Corp. 760,000 34,230,400
--------------------------------------------------------------------------
U.S. Bancorp 410,000 11,439,000
--------------------------------------------------------------------------
Wells Fargo & Co. 350,000 20,979,000
==========================================================================
66,648,400
==========================================================================
DIVERSIFIED CHEMICALS-0.98%
Dow Chemical Co. (The) 475,000 21,816,750
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.69%
Cendant Corp. 770,000 15,330,700
==========================================================================
ELECTRIC UTILITIES-1.03%
FPL Group, Inc. 560,000 22,859,200
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.94%
Cooper Industries, Ltd.-Class A (Bermuda) 160,000 10,185,600
--------------------------------------------------------------------------
Rockwell Automation, Inc. 230,000 10,632,900
==========================================================================
20,818,500
==========================================================================
FOOTWEAR-1.16%
NIKE, Inc.-Class B 335,000 25,731,350
==========================================================================
HEALTH CARE EQUIPMENT-4.20%
Bard (C.R.), Inc. 175,000 12,454,750
--------------------------------------------------------------------------
Becton, Dickinson & Co. 225,000 13,167,000
--------------------------------------------------------------------------
Medtronic, Inc. 470,000 24,769,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 350,000 11,809,000
--------------------------------------------------------------------------
Waters Corp.(a) 375,000 14,861,250
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 200,000 16,284,000
==========================================================================
93,345,000
==========================================================================
HEALTH CARE FACILITIES-0.69%
HCA Inc. 275,000 15,356,000
==========================================================================
HEALTH CARE SERVICES-0.54%
Express Scripts, Inc.(a) 134,061 12,017,228
==========================================================================
HOME IMPROVEMENT RETAIL-1.75%
Home Depot, Inc. (The) 1,100,000 38,907,000
==========================================================================
|
FS-234
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOTELS, RESORTS & CRUISE LINES-1.24%
Carnival Corp. (Panama)(d) 315,000 $ 15,397,200
--------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(d) 225,000 12,226,500
==========================================================================
27,623,700
==========================================================================
HOUSEHOLD PRODUCTS-2.64%
Clorox Co. (The)(c) 200,000 12,660,000
--------------------------------------------------------------------------
Procter & Gamble Co. (The) 850,000 46,027,500
==========================================================================
58,687,500
==========================================================================
HOUSEWARES & SPECIALTIES-0.95%
Fortune Brands, Inc. 250,000 21,145,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-2.75%
Costco Wholesale Corp. 400,000 16,232,000
--------------------------------------------------------------------------
Wal-Mart Stores, Inc. 950,000 44,783,000
==========================================================================
61,015,000
==========================================================================
INDUSTRIAL CONGLOMERATES-5.00%
General Electric Co. 1,940,000 70,228,000
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,300,000 40,703,000
==========================================================================
110,931,000
==========================================================================
INDUSTRIAL GASES-0.53%
Air Products & Chemicals, Inc. 200,000 11,746,000
==========================================================================
INDUSTRIAL MACHINERY-1.03%
Danaher Corp. 453,000 22,935,390
==========================================================================
INTEGRATED OIL & GAS-4.05%
Exxon Mobil Corp. 1,575,000 89,822,250
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.78%
SBC Communications Inc. 725,000 17,255,000
==========================================================================
INTERNET RETAIL-0.43%
eBay Inc.(a) 300,000 9,519,000
==========================================================================
INTERNET SOFTWARE & SERVICES-1.46%
VeriSign, Inc.(a) 575,000 15,214,500
--------------------------------------------------------------------------
Yahoo! Inc.(a) 500,000 17,255,000
==========================================================================
32,469,500
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.38%
Goldman Sachs Group, Inc. (The) 400,000 42,716,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 600,000 32,358,000
==========================================================================
75,074,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.73%
Accenture Ltd.-Class A (Bermuda)(a) 750,000 16,275,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MANAGED HEALTH CARE-3.17%
UnitedHealth Group Inc. 475,000 $ 44,892,250
--------------------------------------------------------------------------
WellPoint Inc.(a) 200,000 25,550,000
==========================================================================
70,442,250
==========================================================================
MOVIES & ENTERTAINMENT-1.04%
Walt Disney Co. (The) 875,000 23,100,000
==========================================================================
MULTI-LINE INSURANCE-0.78%
Genworth Financial Inc.-Class A 616,400 17,228,380
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.88%
Dominion Resources, Inc. 260,000 19,604,000
==========================================================================
OIL & GAS DRILLING-1.23%
ENSCO International Inc. 425,000 13,855,000
--------------------------------------------------------------------------
GlobalSantaFe Corp. (Cayman Islands) 400,000 13,440,000
==========================================================================
27,295,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.88%
BJ Services Co. 325,000 15,843,750
--------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 380,000 25,995,800
==========================================================================
41,839,550
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-0.79%
Valero Energy Corp. 255,000 17,475,150
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.27%
Citigroup Inc. 1,300,000 61,048,000
--------------------------------------------------------------------------
JPMorgan Chase & Co. 950,000 33,715,500
==========================================================================
94,763,500
==========================================================================
PERSONAL PRODUCTS-1.28%
Gillette Co. (The) 550,000 28,402,000
==========================================================================
PHARMACEUTICALS-6.90%
Allergan, Inc. 190,000 13,374,100
--------------------------------------------------------------------------
Johnson & Johnson 1,100,000 75,493,000
--------------------------------------------------------------------------
Pfizer Inc. 1,455,000 39,532,350
--------------------------------------------------------------------------
Wyeth 550,000 24,717,000
==========================================================================
153,116,450
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.05%
Allstate Corp. (The) 415,000 23,306,400
==========================================================================
RAILROADS-1.24%
Burlington Northern Santa Fe Corp. 225,000 10,856,250
--------------------------------------------------------------------------
Canadian National Railway Co. (Canada) 290,000 16,590,900
==========================================================================
27,447,150
==========================================================================
|
FS-235
MARKET
SHARES VALUE
--------------------------------------------------------------------------
RESTAURANTS-1.79%
McDonald's Corp. 850,000 $ 24,913,500
--------------------------------------------------------------------------
Starbucks Corp.(a) 300,000 14,856,000
==========================================================================
39,769,500
==========================================================================
SEMICONDUCTOR EQUIPMENT-0.75%
KLA-Tencor Corp.(c) 425,000 16,583,500
==========================================================================
SEMICONDUCTORS-4.37%
Analog Devices, Inc. 475,000 16,202,250
--------------------------------------------------------------------------
Intel Corp. 1,535,000 36,103,200
--------------------------------------------------------------------------
Linear Technology Corp. 450,000 16,083,000
--------------------------------------------------------------------------
Microchip Technology Inc. 300,000 8,544,000
--------------------------------------------------------------------------
Xilinx, Inc.(c) 750,000 20,205,000
==========================================================================
97,137,450
==========================================================================
SOFT DRINKS-0.75%
PepsiCo, Inc. 300,000 16,692,000
==========================================================================
SPECIALTY STORES-1.06%
Bed Bath & Beyond Inc.(a) 360,000 13,395,600
--------------------------------------------------------------------------
Staples, Inc. 525,000 10,011,750
==========================================================================
23,407,350
==========================================================================
STEEL-0.43%
United States Steel Corp. 225,000 9,621,000
==========================================================================
SYSTEMS SOFTWARE-5.08%
Microsoft Corp. 2,300,000 58,190,000
--------------------------------------------------------------------------
Oracle Corp.(a) 3,300,000 38,148,000
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Symantec Corp.(a) 875,000 $ 16,432,500
==========================================================================
112,770,500
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.82%
Vodafone Group PLC-ADR (United Kingdom) 700,000 18,298,000
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,784,461,037) 2,212,900,148
==========================================================================
MONEY MARKET FUNDS-0.06%
Liquid Assets Portfolio-Institutional
Class(e) 728,931 728,931
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 728,931 728,931
==========================================================================
Total Money Market Funds (Cost
$1,457,862) 1,457,862
==========================================================================
TOTAL INVESTMENTS-99.70% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,785,918,899) 2,214,358,010
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-1.25%
STIC Prime Portfolio-Institutional
Class(e)(f) 27,735,550 27,735,550
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $27,735,550) 27,735,550
==========================================================================
TOTAL INVESTMENTS-100.95% (Cost
$1,813,654,449) 2,242,093,560
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.95%) (21,162,361)
==========================================================================
NET ASSETS-100.00% $2,220,931,199
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 1H
and Note 9.
(c) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2005.
(d) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common, preferred or
trust shares of the issuer.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-236
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,784,461,037)* $2,212,900,148
------------------------------------------------------------
Investments in affiliated money market funds
(cost $29,193,412) 29,193,412
============================================================
Total investments (cost $1,813,654,449) 2,242,093,560
============================================================
Receivables for:
Investments sold 15,164,479
------------------------------------------------------------
Fund shares sold 1,042,706
------------------------------------------------------------
Dividends 2,212,152
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 132,704
------------------------------------------------------------
Other assets 80,139
============================================================
Total assets 2,260,725,740
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,375,000
------------------------------------------------------------
Fund shares reacquired 7,325,367
------------------------------------------------------------
Options written, at market value (premiums
received $139,114) 232,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 279,087
------------------------------------------------------------
Collateral upon return of securities
loaned 27,735,550
------------------------------------------------------------
Accrued distribution fees 1,203,930
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,909
------------------------------------------------------------
Accrued transfer agent fees 1,377,934
------------------------------------------------------------
Accrued operating expenses 260,264
============================================================
Total liabilities 39,794,541
============================================================
Net assets applicable to shares outstanding $2,220,931,199
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,350,918,043
------------------------------------------------------------
Undistributed net investment income 6,173,924
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (1,564,506,493)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 428,345,725
============================================================
$2,220,931,199
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,084,894,105
____________________________________________________________
============================================================
Class B $ 862,550,699
____________________________________________________________
============================================================
Class C $ 179,232,106
____________________________________________________________
============================================================
Class R $ 6,521,732
____________________________________________________________
============================================================
Investor Class $ 27,844,659
____________________________________________________________
============================================================
Institutional Class $ 59,887,898
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 98,831,301
____________________________________________________________
============================================================
Class B 82,968,000
____________________________________________________________
============================================================
Class C 17,240,922
____________________________________________________________
============================================================
Class R 596,503
____________________________________________________________
============================================================
Investor Class 2,530,825
____________________________________________________________
============================================================
Institutional Class 5,340,504
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.98
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.98 divided by
94.50%) $ 11.62
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.40
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.40
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.93
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 11.00
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.21
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $26,790,416 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-237
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $18,373) $ 27,140,718
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $7,985 after rebates of
$140,546) 194,118
---------------------------------------------------------------------------
Interest 4,703
===========================================================================
Total investment income 27,339,539
===========================================================================
EXPENSES:
Advisory fees 7,911,958
---------------------------------------------------------------------------
Administrative services fees 259,234
---------------------------------------------------------------------------
Custodian fees 50,615
---------------------------------------------------------------------------
Distribution fees:
Class A 2,069,237
---------------------------------------------------------------------------
Class B 4,910,433
---------------------------------------------------------------------------
Class C 1,025,952
---------------------------------------------------------------------------
Class R 16,350
---------------------------------------------------------------------------
Investor Class 38,481
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 4,370,253
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,297
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 53,798
---------------------------------------------------------------------------
Other 379,535
===========================================================================
Total expenses 21,088,143
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (151,220)
===========================================================================
Net expenses 20,936,923
===========================================================================
Net investment income 6,402,616
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 126,480,417
---------------------------------------------------------------------------
Option contracts written 1,315,993
===========================================================================
127,796,410
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,441,959)
---------------------------------------------------------------------------
Option contracts written (93,386)
===========================================================================
(114,535,345)
===========================================================================
Net gain from investment securities and option contracts 13,261,065
===========================================================================
Net increase in net assets resulting from operations $ 19,663,681
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-238
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 6,402,616 $ (14,677,760)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures
contracts and option contracts 127,796,410 141,551,945
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (114,535,345) (63,358,526)
==============================================================================================
Net increase in net assets resulting from operations 19,663,681 63,515,659
==============================================================================================
Share transactions-net:
Class A (162,427,892) (236,834,043)
----------------------------------------------------------------------------------------------
Class B (176,861,515) (213,672,955)
----------------------------------------------------------------------------------------------
Class C (45,473,256) (73,035,331)
----------------------------------------------------------------------------------------------
Class R 528,612 4,401,189
----------------------------------------------------------------------------------------------
Investor Class (4,551,113) 30,994,771
----------------------------------------------------------------------------------------------
Institutional Class 10,877,834 48,256,952
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (377,907,330) (439,889,417)
==============================================================================================
Net increase (decrease) in net assets (358,243,649) (376,373,758)
==============================================================================================
NET ASSETS:
Beginning of period 2,579,174,848 2,955,548,606
==============================================================================================
End of period (including undistributed net investment
income (loss) of $6,173,924 and $(228,692),
respectively) $2,220,931,199 $2,579,174,848
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-239
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-240
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. COVERED CALL OPTIONS -- The Fund may write and buy call options, including securities index options. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a 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.
A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has
FS-241
given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written.
An option on a securities index gives the holder the right to receive a cash "exercise settlement amount" equal to the difference between the exercise price of the option and the value of the underlying stock index on the exercise date, multiplied by a fixed "index multiplier." A securities index fluctuates with changes in the market values of the securities included in the index. In the purchase of securities index options, the principal risk is that the premium and transaction costs paid by the Fund in purchasing an option will be lost if the changes in the level of the index do not exceed the cost of the option. In writing securities index options, the principal risk is that the Fund could bear a loss on the options that would be only partially offset (or not offset at all) by the increased value or reduced cost of hedged securities. Moreover, in the event the Fund was unable to close an option it had written, it might be unable to sell the securities used as cover.
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 received or made 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------- First $350 million 0.75% --------------------------------------------------------------------- Over $350 million 0.625% _____________________________________________________________________ ===================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------- First $250 million 0.695% --------------------------------------------------------------------- Next $250 million 0.67% --------------------------------------------------------------------- Next $500 million 0.645% --------------------------------------------------------------------- Next $1.5 billion 0.62% --------------------------------------------------------------------- Next $2.5 billion 0.595% --------------------------------------------------------------------- Next $2.5 billion 0.57% --------------------------------------------------------------------- Next $2.5 billion 0.545% --------------------------------------------------------------------- Over $10 billion 0.52% _____________________________________________________________________ ===================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $41,822.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $79,427 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $259,234.
FS-242
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,370,253 for Class A, Class B, Class C, Class R and Investor Class share classes and $2,297 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $2,069,237, $4,910,433, $1,025,952, $16,350 and $38,481, 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, 2005, ADI advised the Fund that it retained $120,144 in front-end sales commissions from the sale of Class A shares and $1,482, $165,460, $9,526 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 7,279,701 $162,259,621 $(168,810,391) $ -- $ 728,931 $ 92,216 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 7,279,701 162,259,621 (168,810,391) -- 728,931 93,917 --
==================================================================================================================================
Subtotal $14,559,402 $324,519,242 $(337,620,782) $ -- $1,457,862 $186,133 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $34,975,975 $227,795,300 $ (235,035,725) $ -- $27,735,550 $ 7,985 $ --
==================================================================================================================================
Total $49,535,377 $552,314,542 $ (572,656,507) $ -- $29,193,412 $194,118 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
FS-243
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $10,662,464 and sales of $0, which resulted in net realized gain (loss) of $0.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $29,971.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $6,356 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-244
At April 30, 2005, securities with an aggregate value of $26,790,416 were on loan to brokers. The loans were secured by cash collateral of $27,735,550 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,985 for securities lending transactions, which are net of rebates.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of period -- $ --
-------------------------------------------------------------------------------------
Written 20,528 1,858,250
-------------------------------------------------------------------------------------
Closed (11,772) (965,369)
-------------------------------------------------------------------------------------
Exercised (2,900) (306,290)
-------------------------------------------------------------------------------------
Expired (4,856) (447,477)
=====================================================================================
End of period 1,000 $ 139,114
_____________________________________________________________________________________
=====================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
-------------------------------------------------------------------------------------------------------------------------------
APRIL 30,
2005 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------------------
Genentech, Inc. Jun-05 $75.0 1,000 $139,114 $232,500 $(93,386)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,642,177,803 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2008 $ 85,920,513
------------------------------------------------------------------------------
October 31, 2009 845,288,837
------------------------------------------------------------------------------
October 31, 2010 617,527,392
------------------------------------------------------------------------------
October 31, 2011 102,944,109
==============================================================================
Total capital loss carryforward $1,651,680,851
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth & Income Fund into the Fund, are realized on securities held in each fund on such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
FS-245
NOTE 11--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, 2005 was $591,303,464 and $947,944,913, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $448,627,717 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (51,140,090) ============================================================================== Net unrealized appreciation of investment securities $397,487,627 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,844,605,933. |
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,359,730 $ 72,482,429 21,493,299 $ 237,822,246
--------------------------------------------------------------------------------------------------------------------------
Class B 2,254,845 24,336,885 7,106,647 75,074,355
--------------------------------------------------------------------------------------------------------------------------
Class C 878,657 9,489,987 2,785,689 29,371,888
--------------------------------------------------------------------------------------------------------------------------
Class R 119,906 1,364,272 672,346 7,394,140
--------------------------------------------------------------------------------------------------------------------------
Investor Class 155,266 1,763,079 513,156 5,688,744
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 975,823 11,324,304 4,421,094 48,593,658
==========================================================================================================================
Issued in connection with acquisitions:(b)
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 3,171,481 35,902,680 2,357,674 26,110,071
--------------------------------------------------------------------------------------------------------------------------
Class B (3,345,084) (35,902,680) (2,474,910) (26,110,071)
==========================================================================================================================
Reacquired:
Class A (23,714,089) (270,813,001) (45,616,888) (501,443,066)
--------------------------------------------------------------------------------------------------------------------------
Class B (15,296,751) (165,295,720) (25,052,874) (262,781,002)
--------------------------------------------------------------------------------------------------------------------------
Class C (5,076,515) (54,963,243) (9,864,695) (103,409,473)
--------------------------------------------------------------------------------------------------------------------------
Class R (73,643) (835,660) (270,057) (2,992,951)
--------------------------------------------------------------------------------------------------------------------------
Investor Class (551,773) (6,314,192) (1,149,919) (12,707,797)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (38,700) (446,470) (30,273) (336,706)
==========================================================================================================================
(34,180,847) $(377,907,330) (41,379,465) $(439,889,417)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 8% of the outstanding shares of
the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but
not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by this entity are also owned beneficially.
(b) 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 of 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-246
NOTE 13--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, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.05(a) (0.02) (0.02) (0.04)(b) (0.04) (0.05)(b)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) (0.01) 0.27 1.49 (1.96) (6.03) 1.85
============================================================================================================================
Total from investment
operations 0.04 0.25 1.47 (2.00) (6.07) 1.80
============================================================================================================================
Net asset value, end of period $ 10.98 $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(c) 0.37% 2.34% 15.94% (17.82)% (35.11)% 11.60%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $1,084,894 $1,236,434 $1,439,518 $1,402,589 $2,067,602 $3,163,453
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average
net assets 1.41%(d)(e) 1.44%(e) 1.47% 1.40% 1.28% 1.19%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.81%(a)(d) (0.19)% (0.17)% (0.33)% (0.29)% (0.31)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.01 and 0.08%, respectively.
(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 the 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
$1,192,220,397.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.42% (annualized) and 1.45% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-247
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
---------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.01(a) (0.10) (0.08) (0.10)(b) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.00 0.27 1.42 (1.89) (5.87) 1.82
===========================================================================================================================
Total from investment
operations 0.01 0.17 1.34 (1.99) (6.00) 1.65
===========================================================================================================================
Net asset value, end of period $ 10.40 $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 0.10% 1.66% 15.09% (18.31)% (35.57)% 10.87%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $862,551 $1,032,774 $1,223,821 $1,198,513 $1,806,464 $2,746,149
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average
net assets 2.06%(d)(e) 2.09%(e) 2.12% 2.05% 1.94% 1.88%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.16%(a)(d) (0.84)% (0.82)% (0.98)% (0.94)% (1.00)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.03) and (0.57)%, respectively.
(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 the 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
$990,225,357.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.07% (annualized) and 2.10% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-248
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2005 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
-----------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.01(a) (0.10) (0.08) (0.10)(b) (0.13) (0.17)(b)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.00 0.27 1.42 (1.89) (5.86) 1.82
=================================================================================================================
Total from investment
operations 0.01 0.17 1.34 (1.99) (5.99) 1.65
=================================================================================================================
Net asset value, end of period $ 10.40 $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(c) 0.10% 1.66% 15.09% (18.31)% (35.53)% 10.82%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $179,232 $222,840 $290,396 $302,555 $487,838 $720,186
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average
net assets 2.06%(d)(e) 2.09%(e) 2.12% 2.05% 1.94% 1.88%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.16%(a)(d) (0.84)% (0.82)% (0.98)% (0.94)% (1.00)%
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
_________________________________________________________________________________________________________________
=================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.03) and (0.57)%, respectively.
(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 the 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
$206,890,847.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.07% (annualized) and 2.10% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-249
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.91 $10.66 $ 9.22 $ 10.53
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) (0.03) (0.00) (0.02)(b)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.28 1.44 (1.29)
================================================================================================================
Total from investment operations 0.02 0.25 1.44 (1.31)
================================================================================================================
Net asset value, end of period $10.93 $10.91 $10.66 $ 9.22
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) 0.18% 2.35% 15.62% (12.44)%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,522 $6,000 $1,578 $ 37
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets 1.56%(d)(e) 1.59%(e) 1.62% 1.55%(f)
________________________________________________________________________________________________________________
================================================================================================================
Ratio of net investment income (loss) to average net assets 0.66%(a)(d) (0.34)% (0.32)% (0.49)(f)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(g) 24% 29% 28% 28%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.00) and (0.07)%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$6,594,065.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.57% (annualized) and 1.60% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Annualized.
(g) Not annualized for periods less than one year.
FS-250
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
--------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.96 $ 10.69 $10.16
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.24 (0.00)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.03 0.53
================================================================================================================
Total from investment operations 0.04 0.27 0.53
================================================================================================================
Net asset value, end of period $ 11.00 $ 10.96 $10.69
________________________________________________________________________________________________________________
================================================================================================================
Total return(b) 0.37% 2.53% 5.22%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $27,845 $32,084 $ 100
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets 1.31%(c)(d) 1.34%(d) 1.29%(e)
________________________________________________________________________________________________________________
================================================================================================================
Ratio of net investment income (loss) to average net assets 0.91%(a)(c) (0.09)% (0.01)(e)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(f) 24% 29% 28%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.01 and 0.18%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$31,040,288.
(d) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.32% (annualized) and 1.35% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-251
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
----------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.14 $ 10.81 $ 9.26 $ 12.13
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08(a) 0.04 0.06 0.02(b)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01) 0.29 1.49 (2.89)
==================================================================================================================
Total from investment operations 0.07 0.33 1.55 (2.87)
==================================================================================================================
Net asset value, end of period $ 11.21 $ 11.14 $10.81 $ 9.26
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 0.63% 3.05% 16.74% (23.66)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $59,888 $49,044 $ 136 $ 160
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 0.70%(d)(e) 0.74%(e) 0.77% 0.77%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of net investment income to average net assets 1.52%(a)(d) 0.51% 0.53% 0.30%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(g) 24% 29% 28% 28%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.04 and 0.79%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$55,837,682.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.71% (annualized) and 0.75% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Annualized.
(g) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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
FS-252
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-253
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS OTHER EQUITY INTERESTS-93.62%
ADVERTISING-1.59%
Omnicom Group Inc. 67,800 $ 5,620,620
--------------------------------------------------------------------------
R.H. Donnelley Corp.(a) 210,700 11,999,365
==========================================================================
17,619,985
==========================================================================
AEROSPACE & DEFENSE-1.04%
L-3 Communications Holdings, Inc.(b) 161,800 11,482,946
==========================================================================
AIR FREIGHT & LOGISTICS-0.84%
Robinson (C.H.) Worldwide, Inc.(b) 179,700 9,272,520
==========================================================================
APPAREL RETAIL-2.40%
Abercrombie & Fitch Co.-Class A 271,900 14,669,005
--------------------------------------------------------------------------
Ross Stores, Inc. 446,900 11,941,168
==========================================================================
26,610,173
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.48%
Polo Ralph Lauren Corp. 152,100 5,338,710
==========================================================================
APPLICATION SOFTWARE-4.27%
Amdocs Ltd. (United Kingdom)(a) 412,200 11,009,862
--------------------------------------------------------------------------
Autodesk, Inc. 395,900 12,601,497
--------------------------------------------------------------------------
Hyperion Solutions Corp.(a) 195,000 7,930,650
--------------------------------------------------------------------------
Macromedia, Inc.(a) 125,200 4,959,172
--------------------------------------------------------------------------
Mercury Interactive Corp.(a)(b) 262,700 10,857,391
==========================================================================
47,358,572
==========================================================================
AUTO PARTS & EQUIPMENT-0.71%
Autoliv, Inc. 176,600 7,814,550
==========================================================================
BIOTECHNOLOGY-1.74%
Charles River Laboratories International,
Inc.(a) 246,600 11,681,442
--------------------------------------------------------------------------
Martek Biosciences Corp.(a) 200,000 7,654,000
==========================================================================
19,335,442
==========================================================================
BUILDING PRODUCTS-1.02%
American Standard Cos. Inc. 253,800 11,347,398
==========================================================================
CASINOS & GAMING-2.53%
Harrah's Entertainment, Inc.(b) 234,400 15,381,328
--------------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 590,600 12,680,182
==========================================================================
28,061,510
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMODITY CHEMICALS-0.89%
Celanese Corp.-Series A(a) 677,200 $ 9,853,260
==========================================================================
COMMUNICATIONS EQUIPMENT-4.42%
Avaya Inc.(a)(b) 857,200 7,440,496
--------------------------------------------------------------------------
Corning Inc.(a) 489,900 6,736,125
--------------------------------------------------------------------------
Harris Corp. 347,800 9,807,960
--------------------------------------------------------------------------
Juniper Networks, Inc.(a) 275,800 6,230,322
--------------------------------------------------------------------------
Plantronics, Inc. 324,700 10,224,803
--------------------------------------------------------------------------
Scientific-Atlanta, Inc. 278,200 8,507,356
==========================================================================
48,947,062
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.12%
Emulex Corp.(a)(b) 463,700 7,201,261
--------------------------------------------------------------------------
Storage Technology Corp.(a)(b) 187,200 5,204,160
==========================================================================
12,405,421
==========================================================================
CONSUMER FINANCE-1.05%
AmeriCredit Corp.(a)(b) 497,100 11,632,140
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.64%
Alliance Data Systems Corp.(a)(b) 268,600 10,851,440
--------------------------------------------------------------------------
CSG Systems International, Inc.(a) 644,400 11,077,236
--------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 246,650 7,325,505
==========================================================================
29,254,181
==========================================================================
DEPARTMENT STORES-1.42%
Kohl's Corp.(a) 216,200 10,291,120
--------------------------------------------------------------------------
Nordstrom, Inc. 106,100 5,393,063
==========================================================================
15,684,183
==========================================================================
DISTILLERS & VINTNERS-1.07%
Constellation Brands, Inc.-Class A(a) 224,000 11,807,040
==========================================================================
DIVERSIFIED BANKS-0.83%
Centennial Bank Holdings, Inc. (Acquired
12/27/2004; Cost $8,963,850)(a)(c) 853,700 9,219,960
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.42%
Career Education Corp.(a) 212,900 6,693,576
--------------------------------------------------------------------------
ChoicePoint Inc.(a) 315,300 12,444,891
--------------------------------------------------------------------------
Corrections Corp. of America(a) 349,300 13,221,005
--------------------------------------------------------------------------
|
FS-254
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Jackson Hewitt Tax Service Inc. 299,300 $ 5,513,106
==========================================================================
37,872,578
==========================================================================
DRUG RETAIL-1.05%
Shoppers Drug Mart Corp. (Canada) 374,800 11,690,626
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.00%
Cooper Industries, Ltd.-Class A (Bermuda)(b) 174,100 11,083,206
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.71%
Aeroflex Inc.(a) 616,500 4,888,845
--------------------------------------------------------------------------
Amphenol Corp.-Class A 327,500 12,916,600
--------------------------------------------------------------------------
Dolby Laboratories Inc.-Class A(a) 57,600 1,177,920
==========================================================================
18,983,365
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.84%
Benchmark Electronics, Inc.(a) 346,100 9,358,544
==========================================================================
GAS UTILITIES-0.95%
Questar Corp.(b) 180,000 10,512,000
==========================================================================
GENERAL MERCHANDISE STORES-1.56%
Dollar General Corp. 565,600 11,509,960
--------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a)(b) 235,900 5,777,191
==========================================================================
17,287,151
==========================================================================
HEALTH CARE DISTRIBUTORS-0.86%
Henry Schein, Inc.(a)(b) 253,800 9,520,038
==========================================================================
HEALTH CARE EQUIPMENT-6.21%
Biomet, Inc. 237,600 9,192,744
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 205,900 12,226,342
--------------------------------------------------------------------------
INAMED Corp.(a) 96,000 5,840,640
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a)(b) 204,200 12,548,090
--------------------------------------------------------------------------
PerkinElmer, Inc. 545,500 10,091,750
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)(b) 258,900 8,735,286
--------------------------------------------------------------------------
Waters Corp.(a) 256,500 10,165,095
==========================================================================
68,799,947
==========================================================================
HEALTH CARE FACILITIES-2.22%
Community Health Systems Inc.(a) 300,000 10,935,000
--------------------------------------------------------------------------
VCA Antech, Inc.(a)(b) 586,200 13,646,736
==========================================================================
24,581,736
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE SERVICES-6.23%
Caremark Rx, Inc.(a) 290,000 $ 11,614,500
--------------------------------------------------------------------------
Cerner Corp.(a)(b) 114,000 6,618,840
--------------------------------------------------------------------------
Covance Inc.(a) 198,900 9,077,796
--------------------------------------------------------------------------
DaVita, Inc.(a) 270,000 10,881,000
--------------------------------------------------------------------------
Express Scripts, Inc.(a)(b) 115,000 10,308,600
--------------------------------------------------------------------------
Omnicare, Inc.(b) 255,000 8,840,850
--------------------------------------------------------------------------
Renal Care Group, Inc.(a)(b) 306,900 11,708,235
==========================================================================
69,049,821
==========================================================================
HEALTH CARE SUPPLIES-0.97%
Cooper Cos., Inc. (The) 159,600 10,780,980
==========================================================================
HOME FURNISHINGS-0.89%
Tempur-Pedic International Inc.(a) 518,200 9,892,438
==========================================================================
HOMEBUILDING-1.07%
Ryland Group, Inc. (The) 192,700 11,831,780
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.10%
Hilton Hotels Corp. 557,800 12,176,774
==========================================================================
HOUSEHOLD PRODUCTS-0.19%
Central Garden & Pet Co.(a) 50,900 2,116,931
==========================================================================
HOUSEWARES & SPECIALTIES-1.66%
Fortune Brands, Inc. 65,300 5,523,074
--------------------------------------------------------------------------
Jarden Corp.(a)(b) 287,700 12,851,559
==========================================================================
18,374,633
==========================================================================
INDUSTRIAL MACHINERY-1.06%
Ingersoll-Rand Co.-Class A (Bermuda) 152,100 11,691,927
==========================================================================
INTEGRATED OIL & GAS-1.04%
Murphy Oil Corp.(b) 129,500 11,537,155
==========================================================================
INTERNET SOFTWARE & SERVICES-1.40%
Digital River, Inc.(a) 252,600 6,719,160
--------------------------------------------------------------------------
VeriSign, Inc.(a)(b) 331,200 8,763,552
==========================================================================
15,482,712
==========================================================================
LEISURE PRODUCTS-1.00%
Brunswick Corp.(b) 262,700 11,033,400
==========================================================================
MANAGED HEALTH CARE-0.51%
Molina Healthcare Inc.(a) 130,000 5,687,500
==========================================================================
MULTI-LINE INSURANCE-0.19%
Quanta Capital Holdings Ltd. (Bermuda)(a)(d) 264,441 2,115,528
==========================================================================
OFFICE ELECTRONICS-0.61%
Zebra Technologies Corp.-Class A(a)(b) 140,825 6,725,802
==========================================================================
|
FS-255
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS DRILLING-1.84%
Nabors Industries, Ltd. (Bermuda)(a) 100,000 $ 5,387,000
--------------------------------------------------------------------------
Noble Corp. (Cayman Islands)(b) 190,000 9,671,000
--------------------------------------------------------------------------
Pride International, Inc.(a) 237,900 5,305,170
==========================================================================
20,363,170
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.17%
National-Oilwell Varco Inc.(a) 250,000 9,935,000
--------------------------------------------------------------------------
Smith International, Inc. 92,000 5,352,560
--------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 168,000 8,761,200
==========================================================================
24,048,760
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.38%
Williams Cos., Inc. (The) 900,000 15,318,000
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.05%
Alliance Capital Management Holding L.P.(b) 256,300 11,518,122
--------------------------------------------------------------------------
CapitalSource Inc.(a)(b) 531,400 11,159,400
==========================================================================
22,677,522
==========================================================================
PHARMACEUTICALS-0.48%
Medicis Pharmaceutical Corp.-Class A(b) 191,000 5,367,100
==========================================================================
RAILROADS-0.48%
CSX Corp. 132,100 5,301,173
==========================================================================
REAL ESTATE-3.21%
Aames Investment Corp. 877,800 7,417,410
--------------------------------------------------------------------------
Fieldstone Investment Corp.(d) 574,779 7,339,928
--------------------------------------------------------------------------
KKR Financial Corp. (Acquired 08/05/2004;
Cost $10,250,000)(a)(c) 1,025,000 10,506,250
--------------------------------------------------------------------------
People's Choice Financial Corp. (Acquired
12/21/2004; Cost $10,296,000)(a)(c) 1,029,600 10,296,000
==========================================================================
35,559,588
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.04%
CB Richard Ellis Group, Inc.-Class A(a) 332,300 11,547,425
==========================================================================
REGIONAL BANKS-0.55%
Signature Bank(a) 48,100 1,184,703
--------------------------------------------------------------------------
UCBH Holdings, Inc. 314,000 4,939,220
==========================================================================
6,123,923
==========================================================================
RESTAURANTS-0.69%
Applebee's International, Inc. 307,400 7,617,372
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-0.93%
KLA-Tencor Corp.(b) 128,800 $ 5,025,776
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 223,900 5,245,977
==========================================================================
10,271,753
==========================================================================
SEMICONDUCTORS-2.53%
ATI Technologies Inc. (Canada)(a) 717,100 10,613,080
--------------------------------------------------------------------------
Microchip Technology Inc. 374,762 10,673,222
--------------------------------------------------------------------------
National Semiconductor Corp.(b) 351,300 6,702,804
==========================================================================
27,989,106
==========================================================================
SPECIALIZED FINANCE-0.65%
Chicago Mercantile Exchange Holdings Inc.(b) 36,700 7,175,584
==========================================================================
SPECIALTY CHEMICALS-0.55%
Minerals Technologies Inc. 92,700 6,055,164
==========================================================================
SPECIALTY STORES-3.23%
Advance Auto Parts, Inc.(a) 281,200 15,002,020
--------------------------------------------------------------------------
Office Depot, Inc.(a) 476,700 9,333,786
--------------------------------------------------------------------------
Williams-Sonoma, Inc.(a)(b) 341,600 11,440,184
==========================================================================
35,775,990
==========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.47%
W.W. Grainger, Inc. 93,300 5,158,557
==========================================================================
TRUCKING-0.52%
Swift Transportation Co., Inc.(a)(b) 268,000 5,716,440
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.05%
American Tower Corp.-Class A(a)(b) 668,500 11,518,255
--------------------------------------------------------------------------
NII Holdings Inc.(a)(b) 205,800 10,304,406
--------------------------------------------------------------------------
SpectraSite, Inc.(a) 213,100 11,961,303
==========================================================================
33,783,964
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $904,282,154) 1,037,082,216
==========================================================================
MONEY MARKET FUNDS-4.73%
Liquid Assets Portfolio-Institutional
Class(e) 26,175,446 26,175,446
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 26,175,446 26,175,446
==========================================================================
Total Money Market Funds (Cost
$52,350,892) 52,350,892
==========================================================================
TOTAL INVESTMENTS-98.35% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $956,633,046) 1,089,433,108
==========================================================================
|
FS-256
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-15.50%
Liquid Assets Portfolio-Institutional
Class(e)(f) 85,882,352 $ 85,882,352
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(e)(f) 85,882,352 85,882,352
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $171,764,704) 171,764,704
==========================================================================
TOTAL INVESTMENTS--113.85% (Cost
$1,128,397,750) 1,261,197,812
==========================================================================
OTHER ASSETS LESS LIABILITIES-(13.85%) (153,404,137)
==========================================================================
NET ASSETS-100.00% $1,107,793,675
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) 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 April 30, 2005 was
$30,022,210, which represented 2.71% of the Fund's Net Assets. These
securities are considered to be illiquid; the portfolio is limited to
investing 15% of net assets in illiquid securities.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate market value of these
securities at April 30, 2005 was $9,455,456, which represented 0.75% of the
Fund's Total Investments. See Note 1A.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-257
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$904,282,154)* $1,037,082,216
------------------------------------------------------------
Investments in affiliated money market funds
(cost $224,115,596) 224,115,596
============================================================
Total investments (cost $1,128,397,750) 1,261,197,812
============================================================
Receivables for:
Investments sold 24,437,428
------------------------------------------------------------
Fund shares sold 3,065,688
------------------------------------------------------------
Dividends 688,950
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 64,460
------------------------------------------------------------
Other assets 88,497
============================================================
Total assets 1,289,542,835
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,313,971
------------------------------------------------------------
Fund shares reacquired 2,332,651
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 119,733
------------------------------------------------------------
Collateral upon return of securities
loaned 171,764,704
------------------------------------------------------------
Accrued distribution fees 623,293
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,831
------------------------------------------------------------
Accrued transfer agent fees 510,896
------------------------------------------------------------
Accrued operating expenses 81,081
============================================================
Total liabilities 181,749,160
============================================================
Net assets applicable to shares outstanding $1,107,793,675
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 831,763,514
------------------------------------------------------------
Undistributed net investment income (loss) (4,501,168)
------------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 147,731,267
------------------------------------------------------------
Unrealized appreciation of investment
securities 132,800,062
============================================================
$1,107,793,675
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 686,699,298
____________________________________________________________
============================================================
Class B $ 331,944,271
____________________________________________________________
============================================================
Class C $ 76,854,483
____________________________________________________________
============================================================
Class R $ 6,683,041
____________________________________________________________
============================================================
Investor Class $ 899,915
____________________________________________________________
============================================================
Institutional Class $ 4,712,667
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 40,349,814
____________________________________________________________
============================================================
Class B 20,922,648
____________________________________________________________
============================================================
Class C 4,847,990
____________________________________________________________
============================================================
Class R 394,803
____________________________________________________________
============================================================
Investor Class 52,857
____________________________________________________________
============================================================
Institutional Class 271,604
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 17.02
------------------------------------------------------------
Offering price per share:
(Net asset value of $17.02 divided by
94.50%) $ 18.01
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 15.87
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 15.85
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 16.93
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 17.03
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 17.35
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $168,399,005 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-258
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,612) $ 4,268,388
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $187,500 after rebates of
$1,315,192) 554,377
===========================================================================
Total investment income 4,822,765
===========================================================================
EXPENSES:
Advisory fees 3,798,809
---------------------------------------------------------------------------
Administrative services fees 155,785
---------------------------------------------------------------------------
Custodian fees 25,623
---------------------------------------------------------------------------
Distribution fees:
Class A 1,193,863
---------------------------------------------------------------------------
Class B 1,866,911
---------------------------------------------------------------------------
Class C 396,294
---------------------------------------------------------------------------
Class R 16,255
---------------------------------------------------------------------------
Investor Class 772
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor Class 1,614,175
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,114
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 26,242
---------------------------------------------------------------------------
Other 158,613
===========================================================================
Total expenses 9,255,456
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (29,830)
===========================================================================
Net expenses 9,225,626
===========================================================================
Net investment income (loss) (4,402,861)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (includes gains from securities sold
to affiliates of $3,329,583) 148,146,801
---------------------------------------------------------------------------
Foreign currencies (14,460)
===========================================================================
148,132,341
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,816,847)
---------------------------------------------------------------------------
Foreign currencies 36,281
===========================================================================
(114,780,566)
===========================================================================
Net gain from investment securities and foreign currencies 33,351,775
===========================================================================
Net increase in net assets resulting from operations $ 28,948,914
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-259
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,402,861) $ (7,843,507)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 148,132,341 92,544,722
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (114,780,566) 9,256,653
==============================================================================================
Net increase in net assets resulting from operations 28,948,914 93,957,868
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (50,048,191) (13,528,020)
----------------------------------------------------------------------------------------------
Class B (30,864,454) (10,257,718)
----------------------------------------------------------------------------------------------
Class C (6,304,794) (1,789,455)
----------------------------------------------------------------------------------------------
Class R (466,191) (30,198)
----------------------------------------------------------------------------------------------
Investor Class (46,094) --
----------------------------------------------------------------------------------------------
Institutional Class (282,499) (242)
==============================================================================================
Decrease in net assets resulting from distributions (88,012,223) (25,605,633)
==============================================================================================
Share transactions-net:
Class A 104,559,478 31,588,830
----------------------------------------------------------------------------------------------
Class B (25,649,780) (40,086,908)
----------------------------------------------------------------------------------------------
Class C 7,461,334 1,351,823
----------------------------------------------------------------------------------------------
Class R 1,424,126 4,312,014
----------------------------------------------------------------------------------------------
Investor Class 991,725 --
----------------------------------------------------------------------------------------------
Institutional Class 4,903,915 55,370
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions 93,690,798 (2,778,871)
==============================================================================================
Net increase in net assets 34,627,489 65,573,364
==============================================================================================
NET ASSETS:
Beginning of period 1,073,166,186 1,007,592,822
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(4,501,168) and $(98,307),
respectively) $1,107,793,675 $1,073,166,186
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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
FS-260
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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
FS-261
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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $350 million 0.75% ---------------------------------------------------------------------- Over $350 million 0.625% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $3,995.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $10,778 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $155,785.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $1,614,175 for Class A, Class B, Class C, Class R and Investor Class share classes and $2,114 for Institutional Class shares.
FS-262
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $1,193,863, $1,866,911, $396,294, $16,255 and $772, 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, 2005, ADI advised the Fund that it retained $91,807 in front-end sales commissions from the sale of Class A shares and $2,662, $34,307, $2,747 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 10,261,930 $159,404,328 $(143,490,812) $ -- $ 26,175,446 $181,994 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 10,261,930 159,404,328 (143,490,812) -- 26,175,446 184,883 --
==================================================================================================================================
Subtotal $ 20,523,860 $318,808,656 $(286,981,624) $ -- $ 52,350,892 $366,877 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 69,189,281 $123,289,477 $(106,596,406) $ -- $ 85,882,352 $ 92,867 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 69,189,281 123,002,865 (106,309,794) -- 85,882,352 94,633 --
==================================================================================================================================
Subtotal $138,378,562 $246,292,342 $(212,906,200) $ -- $171,764,704 $187,500 $ --
==================================================================================================================================
Total $158,902,422 $565,100,998 $(499,887,824) $ -- $224,115,596 $554,377 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $12,999,593 and sales of $9,146,726, which resulted in net realized gains of $3,329,583.
FS-263
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $15,057.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $3,791 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $168,399,005 were on loan to brokers. The loans were secured by cash collateral of $171,764,704 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $187,500 for securities lending transactions, which are net of rebates.
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
FS-264
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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of October 31, 2004.
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, 2005 was $723,195,929 and $767,399,814, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $176,331,788 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (43,860,098) ============================================================================== Net unrealized appreciation of investment securities $132,471,690 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,128,726,122. |
NOTE 11--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, Investor Class and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A 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(a)
-----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,997,225 $109,076,125 6,956,116 $ 121,226,684
-----------------------------------------------------------------------------------------------------------------------
Class B 1,700,765 28,882,787 2,589,525 42,660,392
-----------------------------------------------------------------------------------------------------------------------
Class C 716,719 12,158,309 1,128,395 18,630,607
-----------------------------------------------------------------------------------------------------------------------
Class R 104,427 1,883,794 275,328 4,806,109
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 52,336 981,692 -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class 299,603 5,486,891 3,080 55,129
=======================================================================================================================
Issued as reinvestment of dividends:
Class A 2,609,949 47,005,175 727,483 12,170,787
-----------------------------------------------------------------------------------------------------------------------
Class B 1,735,416 29,207,056 564,080 8,923,747
-----------------------------------------------------------------------------------------------------------------------
Class C 358,665 6,032,748 96,104 1,519,408
-----------------------------------------------------------------------------------------------------------------------
Class R 25,963 465,263 1,810 30,198
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 2,559 46,113 -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class 15,412 282,498 14 241
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,032,011 36,812,905 834,769 14,693,499
-----------------------------------------------------------------------------------------------------------------------
Class B (2,173,866) (36,812,905) (886,014) (14,693,499)
=======================================================================================================================
Reacquired:
Class A (4,855,136) (88,334,727) (6,701,600) (116,502,140)
-----------------------------------------------------------------------------------------------------------------------
Class B (2,761,426) (46,926,718) (4,698,851) (76,977,548)
-----------------------------------------------------------------------------------------------------------------------
Class C (634,973) (10,729,723) (1,149,534) (18,798,192)
-----------------------------------------------------------------------------------------------------------------------
Class R (51,771) (924,931) (30,395) (524,293)
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) (2,038) (36,080) -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class (47,085) (865,474) -- --
=======================================================================================================================
5,124,755 $ 93,690,798 (289,690) $ (2,778,871)
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 6% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this entity are also owned
beneficially.
(b) Investor Class shares commenced sales on November 30, 2004.
FS-265
NOTE 12--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Mid Cap Stock Fund ("Selling Fund"), a series of AIM Stock Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
NOTE 13--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, -----------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.08)(a) (0.08)(a) (0.04)(a) (0.04) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.63 1.70 3.94 (1.85) (4.27) 6.68
=================================================================================================================================
Total from investment operations 0.58 1.62 3.86 (1.89) (4.31) 6.55
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 17.02 $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.81% 9.87% 30.16% (12.87)% (21.76)% 42.98%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $686,699 $617,194 $545,691 $456,268 $576,660 $759,838
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.36%(c) 1.40%(d) 1.53% 1.38% 1.33% 1.28%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.51)%(c) (0.46)% (0.56)% (0.29)% (0.21)% (0.60)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$687,861,007.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.41%.
(e) Not annualized for periods less than one year.
FS-266
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.18)(a) (0.16)(a) (0.14)(a) (0.15) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.60 1.60 3.74 (1.75) (4.12) 6.52
=================================================================================================================================
Total from investment operations 0.50 1.42 3.58 (1.89) (4.27) 6.26
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 15.87 $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.50% 9.13% 29.32% (13.40)% (22.29)% 42.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $331,944 $376,355 $392,382 $346,456 $454,018 $617,576
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.05%(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.16)%(c) (1.11)% (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$376,476,499.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
(e) Not annualized for periods less than one year.
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.18)(a) (0.16)(a) (0.14)(a) (0.14) (0.25)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.60 1.59 3.74 (1.76) (4.12) 6.51
=================================================================================================================================
Total from investment operations 0.50 1.41 3.58 (1.90) (4.26) 6.26
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 15.85 $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.49% 9.07% 29.34% (13.48)% (22.24)% 42.04%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $76,854 $73,929 $68,356 $56,298 $66,127 $82,982
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.05%(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.16)%(c) (1.11)% (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$79,915,759.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
(e) Not annualized for periods less than one year.
FS-267
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.78 $16.62 $12.79 $ 16.62
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.10)(a) (0.10)(a) (0.03)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.63 1.68 3.93 (3.80)
======================================================================================================================
Total from investment operations 0.57 1.58 3.83 (3.83)
======================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- --
======================================================================================================================
Net asset value, end of period $16.93 $17.78 $16.62 $ 12.79
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.77% 9.65% 29.95% (23.05)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,683 $5,622 $1,154 $ 10
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 1.51%(c) 1.55%(d) 1.68% 1.54%(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.66)%(c) (0.61)% (0.71)% (0.44)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f) 65% 74% 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 assets 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
$6,555,819.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.56%.
(e) Annualized.
(f) Not annualized for periods less than one year.
INVESTOR CLASS
--------------
NOVEMBER 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2005
------------------------------------------------------------------------------
Net asset value, beginning of period $18.95
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a)
------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.47)
==============================================================================
Total from investment operations (0.50)
==============================================================================
Less distributions from net realized gains (1.42)
==============================================================================
Net asset value, end of period $17.03
______________________________________________________________________________
==============================================================================
Total return(b) (3.05)%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 900
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets 1.26%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (0.41)%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 65%
______________________________________________________________________________
==============================================================================
|
(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 assets 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 $741,486.
(d) Not annualized for periods less than one year.
FS-268
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
---------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $18.13 $16.83 $12.84 $ 17.25
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00(a) 0.01(a) 0.01(a) 0.02(a)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.71 3.98 (4.43)
=================================================================================================================
Total from investment operations 0.64 1.72 3.99 (4.41)
=================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- --
=================================================================================================================
Net asset value, end of period $17.35 $18.13 $16.83 $ 12.84
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 3.11% 10.38% 31.08% (25.57)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,713 $ 67 $ 10 $ 7
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.83%(c) 0.86% 0.87% 0.84%(d)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.83%(c) 1.15% 1.25% 0.99%(d)
=================================================================================================================
Ratio of net investment income to average net assets 0.02%(c) 0.08% 0.10% 0.25%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 65% 74% 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 assets 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
$4,261,254.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-269
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-270
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-72.76%
AEROSPACE & DEFENSE-1.48%
Northrop Grumman Corp. 700,000 $ 38,388,000
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.99%
Bank of New York Co., Inc. (The) 915,000 25,565,100
==========================================================================
COMPUTER HARDWARE-1.23%
International Business Machines Corp. 418,000 31,926,840
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.36%
Lexmark International, Inc.-Class A(a) 507,900 35,273,655
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.00%
First Data Corp. 685,000 26,050,550
==========================================================================
DEPARTMENT STORES-1.88%
Kohl's Corp.(a) 1,022,100 48,651,960
==========================================================================
DIVERSIFIED BANKS-1.40%
Bank of America Corp. 807,000 36,347,280
==========================================================================
DIVERSIFIED CHEMICALS-1.34%
Dow Chemical Co. (The) 758,000 34,814,940
==========================================================================
ELECTRIC UTILITIES-1.19%
FPL Group, Inc. 759,100 30,986,462
==========================================================================
ENVIRONMENTAL SERVICES-2.20%
Waste Management, Inc. 2,006,500 57,165,185
==========================================================================
FOOD RETAIL-1.77%
Kroger Co. (The)(a) 2,912,000 45,922,240
==========================================================================
HOUSEHOLD PRODUCTS-1.23%
Kimberly-Clark Corp. 513,000 32,036,850
==========================================================================
INDUSTRIAL CONGLOMERATES-2.00%
General Electric Co. 1,434,500 51,928,900
==========================================================================
INDUSTRIAL MACHINERY-1.43%
Dover Corp. 1,023,800 37,225,368
==========================================================================
INTEGRATED OIL & GAS-3.75%
Amerada Hess Corp.(b) 400,600 37,516,190
--------------------------------------------------------------------------
Exxon Mobil Corp. 603,500 34,417,605
--------------------------------------------------------------------------
Murphy Oil Corp. 284,650 25,359,468
==========================================================================
97,293,263
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.27%
SBC Communications Inc. 1,382,000 32,891,600
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-1.36%
Morgan Stanley 668,250 35,163,315
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.29%
Dominion Resources, Inc. 445,000 $ 33,553,000
==========================================================================
OFFICE ELECTRONICS-1.61%
Xerox Corp.(a) 3,156,300 41,820,975
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.78%
Baker Hughes Inc. 638,000 28,148,560
--------------------------------------------------------------------------
BJ Services Co. 830,000 40,462,500
--------------------------------------------------------------------------
Smith International, Inc. 504,800 29,369,264
==========================================================================
97,980,324
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.96%
Apache Corp. 442,200 24,891,438
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.21%
Citigroup Inc. 670,000 31,463,200
==========================================================================
PACKAGED FOODS & MEATS-6.25%
Campbell Soup Co. 1,507,000 44,818,180
--------------------------------------------------------------------------
General Mills, Inc. 1,610,000 79,534,000
--------------------------------------------------------------------------
Kraft Foods Inc.-Class A(b) 1,170,000 37,919,700
==========================================================================
162,271,880
==========================================================================
PAPER PRODUCTS-1.44%
Georgia-Pacific Corp. 1,087,000 37,251,490
==========================================================================
PHARMACEUTICALS-7.68%
Bristol-Myers Squibb Co. 1,635,000 42,510,000
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 1,070,000 38,177,600
--------------------------------------------------------------------------
Merck & Co. Inc. 2,420,000 82,038,000
--------------------------------------------------------------------------
Wyeth 815,000 36,626,100
==========================================================================
199,351,700
==========================================================================
PROPERTY & CASUALTY INSURANCE-4.70%
Berkshire Hathaway Inc.-Class A(a) 710 59,888,500
--------------------------------------------------------------------------
Chubb Corp. (The) 398,000 32,548,440
--------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 828,122 29,646,768
==========================================================================
122,083,708
==========================================================================
PUBLISHING-2.67%
Gannett Co., Inc. 450,000 34,650,000
--------------------------------------------------------------------------
Tribune Co. 900,000 34,740,000
==========================================================================
69,390,000
==========================================================================
RAILROADS-1.33%
Union Pacific Corp. 538,000 34,394,340
==========================================================================
|
FS-271
MARKET
SHARES VALUE
--------------------------------------------------------------------------
REGIONAL BANKS-1.06%
Fifth Third Bancorp 631,400 $ 27,465,900
==========================================================================
SEMICONDUCTORS-4.55%
Analog Devices, Inc. 751,000 25,616,610
--------------------------------------------------------------------------
Intel Corp. 1,441,500 33,904,080
--------------------------------------------------------------------------
National Semiconductor Corp.(b) 1,771,000 33,790,680
--------------------------------------------------------------------------
Xilinx, Inc. 915,000 24,650,100
==========================================================================
117,961,470
==========================================================================
SOFT DRINKS-1.52%
Coca-Cola Co. (The) 910,000 39,530,400
==========================================================================
SYSTEMS SOFTWARE-4.66%
Computer Associates International, Inc. 1,403,093 37,743,202
--------------------------------------------------------------------------
Microsoft Corp. 3,287,000 83,161,100
==========================================================================
120,904,302
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.17%
Washington Mutual, Inc. 734,560 30,352,019
==========================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $1,706,485,623) 1,888,297,654
==========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-20.59%
BERMUDA-4.57%
Accenture Ltd.-Class A (IT Consulting & Other
Services)(a) 1,812,800 39,337,760
--------------------------------------------------------------------------
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 585,200 31,524,724
--------------------------------------------------------------------------
Tyco International Ltd. (Industrial
Conglomerates) 1,523,000 47,685,130
==========================================================================
118,547,614
==========================================================================
CAYMAN ISLANDS-2.81%
ACE Ltd. (Property & Casualty Insurance) 1,030,000 44,248,800
--------------------------------------------------------------------------
GlobalSantaFe Corp. (Oil & Gas Drilling) 852,100 28,630,560
==========================================================================
72,879,360
==========================================================================
FINLAND-1.18%
Nokia Oyj-ADR (Communications Equipment) 1,924,100 30,747,118
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
FRANCE-1.80%
TOTAL S.A. (Integrated Oil & Gas)(c) 210,000 46,697,625
==========================================================================
ISRAEL-1.83%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals)(b) 1,518,000 $ 47,422,320
==========================================================================
NETHERLANDS-4.27%
Heineken N.V. (Brewers)(c) 1,347,106 42,780,158
--------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Consumer Electronics)(a)(c) 1,570,900 38,967,777
--------------------------------------------------------------------------
Unilever N.V. (Packaged Foods & Meats)(c) 450,000 28,961,162
==========================================================================
110,709,097
==========================================================================
UNITED KINGDOM-4.13%
BP PLC-ADR (Integrated Oil & Gas) 573,100 34,901,790
--------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals)(b) 1,430,000 72,286,500
==========================================================================
107,188,290
==========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $461,517,613) 534,191,424
==========================================================================
MONEY MARKET FUNDS-7.64%
Liquid Assets Portfolio-Institutional
Class(d) 99,092,267 99,092,267
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 99,092,267 99,092,267
==========================================================================
Total Money Market Funds (Cost
$198,184,534) 198,184,534
==========================================================================
TOTAL INVESTMENTS-100.99% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,366,187,770) 2,620,673,612
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.87%
STIC Prime Portfolio-Institutional
Class(d)(e) 48,554,750 48,554,750
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $48,554,750) 48,554,750
==========================================================================
TOTAL INVESTMENTS-102.86% (Cost
$2,414,742,520) 2,669,228,362
==========================================================================
OTHER ASSETS LESS LIABILITIES-(2.86%) (74,116,177)
==========================================================================
NET ASSETS-100.00% $2,595,112,185
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at April 30, 2005 was
$157,406,722, which represented 5.90% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-272
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,168,003,236)* $2,422,489,078
------------------------------------------------------------
Investments in affiliated money market funds
(cost $246,739,284) 246,739,284
============================================================
Total Investments (Cost $2,414,742,520) 2,669,228,362
============================================================
Receivables for:
Investments sold 10,259,283
------------------------------------------------------------
Fund shares sold 1,154,630
------------------------------------------------------------
Dividends 3,504,023
------------------------------------------------------------
Investments matured (Note 10) 3,726,980
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 182,582
------------------------------------------------------------
Other assets 77,730
============================================================
Total assets 2,688,133,590
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 35,732,912
------------------------------------------------------------
Fund shares reacquired 5,459,001
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 427,471
------------------------------------------------------------
Collateral upon return of securities
loaned 48,554,750
------------------------------------------------------------
Accrued distribution fees 1,154,170
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,283
------------------------------------------------------------
Accrued transfer agent fees 1,401,614
------------------------------------------------------------
Accrued operating expenses 287,204
============================================================
Total liabilities 93,021,405
============================================================
Net assets applicable to shares outstanding $2,595,112,185
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,864,487,450
------------------------------------------------------------
Undistributed net investment income 7,469,377
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (531,341,969)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 254,497,327
============================================================
$2,595,112,185
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,728,245,191
____________________________________________________________
============================================================
Class B $ 737,901,802
____________________________________________________________
============================================================
Class C $ 122,064,170
____________________________________________________________
============================================================
Class R $ 2,638,154
____________________________________________________________
============================================================
Institutional Class $ 4,262,868
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 138,840,425
____________________________________________________________
============================================================
Class B 61,847,517
____________________________________________________________
============================================================
Class C 10,202,499
____________________________________________________________
============================================================
Class R 212,871
____________________________________________________________
============================================================
Institutional Class 333,492
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.45
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.45 divided by
94.50%) $ 13.17
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.93
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.96
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.39
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.78
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $47,654,302 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-273
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $311,181) $ 37,178,554
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $7,888 after rebates of
$302,180) 2,434,220
--------------------------------------------------------------------------
Interest 3,097
==========================================================================
Total investment income 39,615,871
==========================================================================
EXPENSES:
Advisory fees 8,856,261
--------------------------------------------------------------------------
Administrative services fees 275,722
--------------------------------------------------------------------------
Custodian fees 125,795
--------------------------------------------------------------------------
Distribution fees:
Class A 2,728,904
--------------------------------------------------------------------------
Class B 4,171,339
--------------------------------------------------------------------------
Class C 661,778
--------------------------------------------------------------------------
Class R 6,750
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,726,604
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,879
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 57,881
--------------------------------------------------------------------------
Other 446,148
==========================================================================
Total expenses 21,059,061
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (226,717)
==========================================================================
Net expenses 20,832,344
==========================================================================
Net investment income 18,783,527
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains (losses) from
securities sold to affiliates of $(5,982)) 136,018,869
--------------------------------------------------------------------------
Foreign currencies 174,782
==========================================================================
136,193,651
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (59,923,704)
--------------------------------------------------------------------------
Foreign currencies 11,485
==========================================================================
(59,912,219)
==========================================================================
Net gain from investment securities and foreign currencies 76,281,432
==========================================================================
Net increase in net assets resulting from operations $ 95,064,959
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-274
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 18,783,527 $ 8,535,340
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 136,193,651 284,944,396
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (59,912,219) (662,843)
==============================================================================================
Net increase in net assets resulting from operations 95,064,959 292,816,893
==============================================================================================
Distributions to shareholders from net investment income:
Class A (16,183,702) (4,234,798)
----------------------------------------------------------------------------------------------
Class B (655,402) --
----------------------------------------------------------------------------------------------
Class C (102,493) --
----------------------------------------------------------------------------------------------
Class R (17,158) (2,682)
----------------------------------------------------------------------------------------------
Institutional Class (51,616) (14,410)
==============================================================================================
Decrease in net assets resulting from distributions (17,010,371) (4,251,890)
==============================================================================================
Share transactions-net:
Class A (161,731,225) (343,025,821)
----------------------------------------------------------------------------------------------
Class B (174,967,858) (360,933,716)
----------------------------------------------------------------------------------------------
Class C (20,451,511) (39,355,393)
----------------------------------------------------------------------------------------------
Class R 40,302 642,358
----------------------------------------------------------------------------------------------
Institutional Class 921,463 1,074,851
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (356,188,829) (741,597,721)
==============================================================================================
Net increase (decrease) in net assets (278,134,241) (453,032,718)
==============================================================================================
NET ASSETS:
Beginning of period 2,873,246,426 3,326,279,144
==============================================================================================
End of period (including undistributed net investment
income of $7,469,377 and $5,696,221, respectively) $2,595,112,185 $2,873,246,426
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-275
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-276
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $30 million 1.00% -------------------------------------------------------------------- Next $120 million 0.75% -------------------------------------------------------------------- Over $150 million 0.625% ____________________________________________________________________ ==================================================================== |
FS-277
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $150 million 0.75% -------------------------------------------------------------------- Next $4.85 billion 0.615% -------------------------------------------------------------------- Next $2.5 billion 0.57% -------------------------------------------------------------------- Next $2.5 billion 0.545% -------------------------------------------------------------------- Over $10 billion 0.52% ____________________________________________________________________ ==================================================================== |
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $138,646.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $54,403 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $275,722.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $3,726,604 for Class A, Class B, Class C and Class R share classes and $1,879 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $2,728,904, $4,171,339, $661,778 and $6,750, 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, 2005, ADI advised the Fund that it retained $102,930 in front-end sales commissions from the sale of Class A shares and $2,228, $80,265, $3,803 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 ADI.
FS-278
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 83,058,993 $250,248,566 $(234,215,292) $ -- $ 99,092,267 $1,201,857 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 83,058,993 250,248,566 (234,215,292) -- 99,092,267 1,224,475 --
===================================================================================================================================
Subtotal $166,117,986 $500,497,132 $(468,430,584) $ -- $198,184,534 $2,426,332 $ --
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 27,336,279 $290,566,923 $(269,348,452) $ -- $ 48,554,750 $ 7,888 $ --
===================================================================================================================================
Total $193,454,265 $791,064,055 $(737,779,036) $ -- $246,739,284 $2,434,220 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $23,943,012 and sales of $8,615,715, which resulted in net realized gain (loss) of $(5,982).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement, which resulted in a reduction of the Fund's total expenses of $33,667.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $6,892 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.
FS-279
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $47,654,302 were on loan to brokers. The loans were secured by cash collateral of $48,554,750 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,888 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
October 31, 2009 $488,443,372
---------------------------------------------------------------------------
October 31, 2011 $132,068,900
===========================================================================
Total capital loss carryforward $620,512,272
___________________________________________________________________________
===========================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-280
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, 2005 was $722,356,914 and $1,084,721,610, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
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 $ 285,511,965
----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (79,006,777)
================================================================================================================
Net unrealized appreciation of investment securities $ 206,505,188
________________________________________________________________________________________________________________
================================================================================================================
Cost of investments for tax purposes is $2,462,723,174.
|
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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,028,590 $ 38,274,928 7,951,437 $ 94,832,462
--------------------------------------------------------------------------------------------------------------------------
Class B 1,649,847 19,959,859 3,877,677 44,222,154
--------------------------------------------------------------------------------------------------------------------------
Class C 459,742 5,576,546 1,217,568 13,934,813
--------------------------------------------------------------------------------------------------------------------------
Class R 52,966 666,019 95,004 1,120,376
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 125,562 1,627,068 515,765 6,344,104
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,116,893 14,139,862 345,517 3,966,625
--------------------------------------------------------------------------------------------------------------------------
Class B 48,619 591,693 -- --
--------------------------------------------------------------------------------------------------------------------------
Class C 7,040 85,899 -- --
--------------------------------------------------------------------------------------------------------------------------
Class R 1,361 17,157 234 2,681
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,820 49,552 714 8,400
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 5,558,543 70,151,827 12,968,092 155,893,419
--------------------------------------------------------------------------------------------------------------------------
Class B (5,800,147) (70,151,827) (13,548,346) (155,893,419)
==========================================================================================================================
Reacquired:
Class A (22,452,411) (284,297,842) (50,261,476) (597,718,327)
--------------------------------------------------------------------------------------------------------------------------
Class B (10,349,655) (125,367,583) (21,841,949) (249,262,451)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,147,970) (26,113,956) (4,652,957) (53,290,206)
--------------------------------------------------------------------------------------------------------------------------
Class R (50,942) (642,874) (40,399) (480,699)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (58,123) (755,157) (434,182) (5,277,653)
==========================================================================================================================
(28,806,265) $(356,188,829) (63,807,301) $(741,597,721)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 13% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell the Fund Shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third part record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-281
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, ----------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.10(a) 0.06(b) 0.04(b) 0.01(c) (0.03) (0.04)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized and
unrealized) 0.30 1.00 1.51 (0.90) (6.70) 2.30
=================================================================================================================================
Total from investment
operations 0.40 1.06 1.55 (0.89) (6.73) 2.26
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.11) (0.02) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.11) (0.02) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 12.45 $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 3.27% 9.58% 16.20% (8.51)% (38.75)% 13.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,728,245 $1,843,623 $2,008,702 $2,096,866 $3,159,304 $5,801,869
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.25%(e) 1.26% 1.30% 1.22% 1.16% 1.06%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.27%(e) 1.27% 1.30% 1.22% 1.17% 1.08%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 1.59%(e) 0.54% 0.39% 0.09%(c) (0.24)% (0.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.88%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$1,834,345,939.
(f) Not annualized for periods less than one year.
FS-282
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) (0.02)(b) (0.03)(b) (0.08)(c) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.27 0.96 1.46 (0.86) (6.53) 2.27
=================================================================================================================================
Total from investment
operations 0.33 0.94 1.43 (0.94) (6.66) 2.10
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.01) -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.01) -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.93 $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 2.83% 8.81% 15.48% (9.23)% (39.14)% 12.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $737,902 $885,500 $1,149,943 $1,204,617 $1,719,470 $3,088,611
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.95%(e) 1.96% 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.97%(e) 1.97% 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.89%(e) (0.16)% (0.31)% (0.61)%(c) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.01 and 0.18%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$841,181,541.
(f) Not annualized for periods less than one year.
FS-283
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) (0.02)(b) (0.03)(b) (0.08)(c) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 0.96 1.46 (0.86) (6.55) 2.28
=================================================================================================================================
Total from investment operations 0.33 0.94 1.43 (0.94) (6.68) 2.11
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.01) -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.01) -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.96 $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 2.82% 8.79% 15.43% (9.21)% (39.14)% 12.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,064 $138,305 $163,859 $170,444 $248,533 $412,872
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.95%(e) 1.96% 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(e) 1.97% 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.89%(e) (0.16)% (0.31)% (0.61)%(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.01 and 0.18%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$133,452,530.
(f) Not annualized for periods less than one year.
FS-284
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
---------------------------------------------------
JUNE 3,
2002
(DATE SALES
SIX MONTHS YEAR ENDED COMMENCED)
ENDED OCTOBER 31, TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.10 $11.08 $ 9.56 $ 10.94
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09(a) 0.04(b) 0.02(b) (0.00)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 1.00 1.50 (1.38)
=================================================================================================================
Total from investment operations 0.37 1.04 1.52 (1.38)
=================================================================================================================
Less distributions from net investment income (0.08) (0.02) -- --
=================================================================================================================
Net asset value, end of period $12.39 $12.10 $11.08 $ 9.56
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(c) 3.06% 9.35% 15.90% (12.61)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,638 $2,534 $1,714 $ 16
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.45%(d) 1.46% 1.50% 1.42%(e)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.47%(d) 1.47% 1.50% 1.42%(e)
=================================================================================================================
Ratio of net investment income (loss) to average net assets 1.39%(d) 0.34% 0.19% (0.11)%(e)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103%
_________________________________________________________________________________________________________________
=================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.04 and 0.68%, respectively.
(b) Calculated using average shares outstanding.
(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 annualized and based on average daily net assets of
$2,722,410.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-285
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.53 $11.45 $ 9.80 $10.67 $18.33 $17.33
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.13(b) 0.09(b) 0.06(c) 0.04 0.52
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.03 1.56 (0.93) (6.82) 1.83
=================================================================================================================================
Total from investment operations 0.43 1.16 1.65 (0.87) (6.78) 2.35
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.18) (0.08) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.18) (0.08) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $12.78 $12.53 $11.45 $ 9.80 $10.67 $18.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 3.42% 10.21% 16.84% (8.15)% (38.46)% 14.02%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,263 $3,285 $2,061 $1,457 $1,648 $3,234
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.78%(e) 0.74% 0.79% 0.79% 0.68% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.80%(e) 0.75% 0.79% 0.83% 0.69% 0.68%
=================================================================================================================================
Ratio of net investment income to average net assets 2.06%(e) 1.06% 0.90% 0.52%(c) 0.25% 0.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.10 and 1.35%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$3,787,313.
(f) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-286
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-287
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.09%
ADVERTISING-0.73%
Lamar Advertising Co.-Class A(a) 1,117,100 $ 41,757,198
========================================================================
AEROSPACE & DEFENSE-0.79%
Honeywell International Inc. 1,250,000 44,700,000
========================================================================
AIR FREIGHT & LOGISTICS-0.75%
FedEx Corp. 500,000 42,475,000
========================================================================
ALUMINUM-0.62%
Alcoa Inc. 1,208,500 35,070,670
========================================================================
APPAREL RETAIL-0.81%
Abercrombie & Fitch Co.-Class A 500,000 26,975,000
------------------------------------------------------------------------
Ross Stores, Inc. 711,200 19,003,264
========================================================================
45,978,264
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.94%
Coach, Inc.(a) 2,000,000 53,600,000
========================================================================
APPLICATION SOFTWARE-2.13%
Amdocs Ltd. (United Kingdom)(a) 800,000 21,368,000
------------------------------------------------------------------------
Autodesk, Inc. 1,200,000 38,196,000
------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 500,000 18,920,000
------------------------------------------------------------------------
Mercury Interactive Corp.(a) 600,000 24,798,000
------------------------------------------------------------------------
NAVTEQ Corp.(a) 500,000 18,210,000
========================================================================
121,492,000
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.64%
Franklin Resources, Inc. 300,000 20,604,000
------------------------------------------------------------------------
Investors Financial Services Corp. 380,000 15,941,000
========================================================================
36,545,000
========================================================================
BIOTECHNOLOGY-2.12%
Amgen Inc.(a) 744,700 43,348,987
------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 1,527,600 56,673,960
------------------------------------------------------------------------
Protein Design Labs, Inc.(a) 1,142,800 20,433,264
========================================================================
120,456,211
========================================================================
BROADCASTING & CABLE TV-1.18%
Univision Communications Inc.-Class A(a) 1,500,000 39,435,000
------------------------------------------------------------------------
XM Satellite Radio Holdings Inc.-Class
A(a)(b) 1,000,000 27,740,000
========================================================================
67,175,000
========================================================================
CASINOS & GAMING-0.08%
Las Vegas Sands Corp.(a) 120,800 4,523,960
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.55%
Cisco Systems, Inc.(a) 4,000,000 $ 69,120,000
------------------------------------------------------------------------
Comverse Technology, Inc.(a) 1,000,000 22,790,000
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 1,074,764 24,278,919
------------------------------------------------------------------------
QUALCOMM Inc. 826,600 28,840,074
========================================================================
145,028,993
========================================================================
COMPUTER & ELECTRONICS RETAIL-0.53%
Best Buy Co., Inc. 600,000 30,204,000
========================================================================
COMPUTER HARDWARE-3.63%
Apple Computer, Inc.(a) 2,100,000 75,726,000
------------------------------------------------------------------------
Dell Inc.(a) 3,750,000 130,612,500
========================================================================
206,338,500
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.69%
EMC Corp.(a) 3,000,000 39,360,000
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.48%
Caterpillar Inc. 600,000 52,830,000
------------------------------------------------------------------------
Deere & Co. 500,000 31,270,000
========================================================================
84,100,000
========================================================================
CONSUMER ELECTRONICS-1.23%
Garmin Ltd. (Cayman Islands)(b) 400,000 15,800,000
------------------------------------------------------------------------
Harman International Industries, Inc. 693,200 54,471,656
========================================================================
70,271,656
========================================================================
CONSUMER FINANCE-1.53%
American Express Co. 750,000 39,525,000
------------------------------------------------------------------------
SLM Corp. 1,000,000 47,640,000
========================================================================
87,165,000
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.40%
Automatic Data Processing, Inc. 1,000,000 43,440,000
------------------------------------------------------------------------
Fiserv, Inc.(a) 1,500,000 63,450,000
------------------------------------------------------------------------
Iron Mountain Inc.(a) 1,000,000 29,700,000
========================================================================
136,590,000
========================================================================
DEPARTMENT STORES-0.79%
Kohl's Corp.(a) 500,000 23,800,000
------------------------------------------------------------------------
Sears Holdings Corp.(a) 157,372 21,282,989
========================================================================
45,082,989
========================================================================
DIVERSIFIED BANKS-0.79%
Bank of America Corp. 1,000,000 45,040,000
========================================================================
|
FS-288
MARKET
SHARES VALUE
------------------------------------------------------------------------
DIVERSIFIED CHEMICALS-1.92%
Dow Chemical Co. (The) 650,000 $ 29,854,500
------------------------------------------------------------------------
E. I. du Pont de Nemours & Co. 1,000,000 47,110,000
------------------------------------------------------------------------
Eastman Chemical Co. 600,000 32,400,000
========================================================================
109,364,500
========================================================================
DIVERSIFIED METALS & MINING-0.90%
Peabody Energy Corp. 390,300 17,083,431
------------------------------------------------------------------------
Phelps Dodge Corp. 400,000 34,340,000
========================================================================
51,423,431
========================================================================
DRUG RETAIL-0.76%
Walgreen Co. 1,000,000 43,060,000
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.13%
Emerson Electric Co. 510,500 31,993,035
------------------------------------------------------------------------
Rockwell Automation, Inc. 700,000 32,361,000
========================================================================
64,354,035
========================================================================
EMPLOYMENT SERVICES-0.98%
Robert Half International Inc. 2,250,000 55,845,000
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.11%
Dolby Laboratories Inc.-Class A(a)(c) 300,800 6,151,360
========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.72%
Monsanto Co. 700,000 41,034,000
========================================================================
FOOD DISTRIBUTORS-0.33%
Sysco Corp. 550,000 19,030,000
========================================================================
FOOD RETAIL-0.38%
Whole Foods Market, Inc. 214,700 21,409,884
========================================================================
FOOTWEAR-0.67%
NIKE, Inc.-Class B 500,000 38,405,000
========================================================================
GOLD-0.62%
Newmont Mining Corp. 545,500 20,712,635
------------------------------------------------------------------------
Placer Dome Inc. (Canada) 1,076,000 14,375,360
========================================================================
35,087,995
========================================================================
HEALTH CARE EQUIPMENT-6.85%
Bard (C.R.), Inc. 520,600 37,051,102
------------------------------------------------------------------------
Becton, Dickinson & Co. 1,034,200 60,521,384
------------------------------------------------------------------------
Biomet, Inc. 2,253,175 87,175,341
------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 665,300 39,505,514
------------------------------------------------------------------------
Medtronic, Inc. 815,700 42,987,390
------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 1,254,500 48,963,135
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 1,040,900 35,119,966
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
HEALTH CARE EQUIPMENT -- (CONTINUED)
Zimmer Holdings, Inc.(a) 475,600 38,723,352
========================================================================
390,047,184
========================================================================
HEALTH CARE FACILITIES-0.93%
HCA Inc. 500,000 $ 27,920,000
------------------------------------------------------------------------
Health Management Associates, Inc.-Class A 1,000,000 24,730,000
========================================================================
52,650,000
========================================================================
HEALTH CARE SERVICES-1.71%
Caremark Rx, Inc.(a) 2,427,881 97,236,634
========================================================================
HEALTH CARE SUPPLIES-1.15%
Alcon, Inc. (Switzerland)(a) 677,400 65,707,800
========================================================================
HOME ENTERTAINMENT SOFTWARE-0.52%
Electronic Arts Inc.(a) 550,000 29,364,500
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.49%
Carnival Corp. (Panama)(d) 900,000 43,992,000
------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(e) 750,000 40,755,000
========================================================================
84,747,000
========================================================================
HOUSEHOLD PRODUCTS-0.57%
Procter & Gamble Co. (The) 600,000 32,490,000
========================================================================
HYPERMARKETS & SUPER CENTERS-0.51%
Wal-Mart Stores, Inc. 613,400 28,915,676
========================================================================
INDUSTRIAL CONGLOMERATES-1.64%
General Electric Co. 1,500,000 54,300,000
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,250,000 39,137,500
========================================================================
93,437,500
========================================================================
INDUSTRIAL GASES-1.31%
Air Products & Chemicals, Inc. 600,000 35,238,000
------------------------------------------------------------------------
Praxair, Inc. 841,400 39,402,762
========================================================================
74,640,762
========================================================================
INDUSTRIAL MACHINERY-4.06%
Danaher Corp. 1,000,000 50,630,000
------------------------------------------------------------------------
Eaton Corp. 500,000 29,325,000
------------------------------------------------------------------------
Illinois Tool Works Inc. 363,300 30,451,806
------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd-Class A (Bermuda) 1,100,000 84,557,000
------------------------------------------------------------------------
Parker Hannifin Corp. 600,000 35,964,000
========================================================================
230,927,806
========================================================================
INTEGRATED OIL & GAS-3.37%
Chevron Corp. 488,000 25,376,000
------------------------------------------------------------------------
ConocoPhillips 500,000 52,425,000
------------------------------------------------------------------------
Exxon Mobil Corp. 1,500,000 85,545,000
------------------------------------------------------------------------
Occidental Petroleum Corp. 414,400 28,593,600
========================================================================
191,939,600
========================================================================
|
FS-289
MARKET
SHARES VALUE
------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-3.40%
Google Inc.-Class A(a) 250,413 $ 55,090,860
------------------------------------------------------------------------
VeriSign, Inc.(a) 1,000,000 26,460,000
------------------------------------------------------------------------
Yahoo! Inc.(a) 3,250,000 112,157,500
========================================================================
193,708,360
========================================================================
INVESTMENT BANKING & BROKERAGE-0.72%
Goldman Sachs Group, Inc. (The)(b) 250,000 26,697,500
------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 267,400 14,420,882
========================================================================
41,118,382
========================================================================
LIFE & HEALTH INSURANCE-0.52%
AFLAC Inc. 725,450 29,489,542
========================================================================
MANAGED HEALTH CARE-2.62%
Aetna Inc. 826,800 60,662,316
------------------------------------------------------------------------
PacifiCare Health Systems, Inc.(a) 479,300 28,642,968
------------------------------------------------------------------------
UnitedHealth Group Inc. 463,100 43,767,581
------------------------------------------------------------------------
WellPoint, Inc.(a) 126,600 16,173,150
========================================================================
149,246,015
========================================================================
MOVIES & ENTERTAINMENT-0.63%
DreamWorks Animation SKG, Inc.-Class A(a) 187,900 7,046,250
------------------------------------------------------------------------
Viacom Inc.-Class B 838,064 29,013,776
========================================================================
36,060,026
========================================================================
OIL & GAS DRILLING-1.66%
ENSCO International Inc. 1,062,000 34,621,200
------------------------------------------------------------------------
GlobalSantaFe Corp. (Cayman Islands) 850,000 28,560,000
------------------------------------------------------------------------
Patterson-UTI Energy, Inc. 1,300,000 31,161,000
========================================================================
94,342,200
========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.22%
Baker Hughes Inc. 840,000 37,060,800
------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 625,000 32,593,750
========================================================================
69,654,550
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.72%
Apache Corp. 400,000 22,516,000
------------------------------------------------------------------------
Burlington Resources Inc. 565,500 27,488,955
------------------------------------------------------------------------
Devon Energy Corp. 1,130,000 51,042,100
------------------------------------------------------------------------
Newfield Exploration Co.(a) 300,000 21,309,000
------------------------------------------------------------------------
XTO Energy, Inc. 1,066,666 32,181,313
========================================================================
154,537,368
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.02%
Valero Energy Corp. 850,000 58,250,500
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-0.92%
Citigroup Inc. 1,116,000 $ 52,407,360
========================================================================
PACKAGED FOODS & MEATS-0.92%
Hershey Co. (The) 500,000 31,950,000
------------------------------------------------------------------------
Kellogg Co. 451,700 20,303,915
========================================================================
52,253,915
========================================================================
PERSONAL PRODUCTS-0.95%
Gillette Co. (The) 1,042,000 53,808,880
========================================================================
PHARMACEUTICALS-4.09%
Johnson & Johnson 1,696,100 116,403,343
------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 1,323,600 37,193,160
------------------------------------------------------------------------
Pfizer Inc. 1,293,200 35,136,244
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,410,700 44,070,268
========================================================================
232,803,015
========================================================================
RESTAURANTS-1.45%
Brinker International, Inc.(a) 554,200 18,731,960
------------------------------------------------------------------------
McDonald's Corp. 1,000,000 29,310,000
------------------------------------------------------------------------
Starbucks Corp.(a) 700,000 34,664,000
========================================================================
82,705,960
========================================================================
SEMICONDUCTOR EQUIPMENT-0.76%
Applied Materials, Inc.(a) 1,583,600 23,548,132
------------------------------------------------------------------------
KLA-Tencor Corp. 500,000 19,510,000
========================================================================
43,058,132
========================================================================
SEMICONDUCTORS-4.43%
Analog Devices, Inc. 1,750,000 59,692,500
------------------------------------------------------------------------
Linear Technology Corp. 1,450,000 51,823,000
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 750,000 25,110,000
------------------------------------------------------------------------
Maxim Integrated Products, Inc. 806,985 30,181,239
------------------------------------------------------------------------
Microchip Technology Inc. 3,000,052 85,441,481
========================================================================
252,248,220
========================================================================
SOFT DRINKS-0.59%
PepsiCo, Inc. 600,000 33,384,000
========================================================================
SPECIALIZED FINANCE-0.14%
Chicago Mercantile Exchange Holdings Inc. 41,200 8,055,424
========================================================================
SPECIALTY CHEMICALS-1.23%
Ecolab Inc. 800,000 26,168,000
------------------------------------------------------------------------
Rohm & Haas Co. 1,000,000 43,660,000
========================================================================
69,828,000
========================================================================
|
FS-290
MARKET
SHARES VALUE
------------------------------------------------------------------------
SPECIALTY STORES-2.15%
Bed Bath & Beyond Inc.(a) 1,200,000 $ 44,652,000
------------------------------------------------------------------------
Office Depot, Inc.(a) 1,163,800 22,787,204
------------------------------------------------------------------------
Staples, Inc. 2,895,000 55,207,650
========================================================================
122,646,854
========================================================================
STEEL-1.14%
Nucor Corp. 600,000 30,660,000
------------------------------------------------------------------------
United States Steel Corp. 796,900 34,075,444
========================================================================
64,735,444
========================================================================
SYSTEMS SOFTWARE-3.99%
Adobe Systems Inc. 474,400 28,212,568
------------------------------------------------------------------------
McAfee Inc.(a) 1,000,000 20,910,000
------------------------------------------------------------------------
Microsoft Corp. 5,000,000 126,500,000
------------------------------------------------------------------------
Oracle Corp.(a) 4,438,800 51,312,528
========================================================================
226,935,096
========================================================================
TECHNOLOGY DISTRIBUTORS-0.77%
CDW Corp. 800,000 43,752,000
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.26%
UAP Holding Corp.(a) 1,021,100 14,693,629
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.75%
Nextel Communications, Inc.-Class A(a) 987,200 27,631,728
------------------------------------------------------------------------
Syniverse Holdings Inc.(a) 1,266,600 15,325,860
========================================================================
42,957,588
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $4,397,459,758) 5,582,904,568
========================================================================
|
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
-------------------------------------------------------------------------
PUT OPTIONS
PURCHASED-0.00%
INTERNET SOFTWARE &
SERVICES-0.00%
Google Inc.-Class A 2,504 $180 May-05 $ 37,560
-------------------------------------------------------------------------
Yahoo! Inc. 16,250 30 May-05 121,875
=========================================================================
Total Put Options
Purchased (Cost
$2,939,040) 159,435
=========================================================================
|
SHARES
MONEY MARKET FUNDS-1.54%
Liquid Assets Portfolio-Institutional
Class(f) 43,885,756 43,885,756
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 43,885,756 43,885,756
==========================================================================
Total Money Market Funds (Cost
$87,771,512) 87,771,512
==========================================================================
TOTAL INVESTMENTS-99.63% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$4,488,170,310) 5,670,835,515
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.69%
Liquid Assets Portfolio-Institutional
Class(f)(g) 2 2
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(f)(g) 38,996,778 38,996,778
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $38,996,780) 38,996,780
==========================================================================
TOTAL INVESTMENTS-100.32% (Cost
$4,527,167,090) 5,709,832,295
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.32%) (18,379,168)
==========================================================================
NET ASSETS-100.00% $5,691,453,127
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) The Investment Company Act of 1940 defines affiliates as those companies in
which a fund holds 5% or more of the outstanding voting securities. The Fund
has not owned enough of the outstanding voting securities of the issuer to
have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value of this security at April 30, 2005 represented
0.11% of the Fund's Net Assets.
(d) Each unit represents one common share with paired trust share.
(e) Each unit represents one common share and one Class B share.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-291
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$4,394,419,464)* $ 5,576,912,643
------------------------------------------------------------
Investments in affiliates (cost
$132,747,626) 132,919,652
============================================================
Total investments (cost
$4,527,167,090) 5,709,832,295
============================================================
Receivables for:
Investments sold 101,291,425
------------------------------------------------------------
Fund shares sold 1,449,469
------------------------------------------------------------
Dividends 2,539,653
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 381,376
------------------------------------------------------------
Other assets 120,475
============================================================
Total assets 5,815,614,693
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 62,326,885
------------------------------------------------------------
Fund shares reacquired 15,717,121
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 999,652
------------------------------------------------------------
Collateral upon return of securities
loaned 38,996,780
------------------------------------------------------------
Accrued distribution fees 1,682,958
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 8,930
------------------------------------------------------------
Accrued transfer agent fees 3,747,717
------------------------------------------------------------
Accrued operating expenses 681,523
============================================================
Total liabilities 124,161,566
============================================================
Net assets applicable to shares outstanding $ 5,691,453,127
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 6,382,754,251
------------------------------------------------------------
Undistributed net investment income 1,640,148
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (1,875,606,477)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,182,665,205
============================================================
$ 5,691,453,127
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 4,875,650,421
____________________________________________________________
============================================================
Class B $ 542,849,216
____________________________________________________________
============================================================
Class C $ 135,737,907
____________________________________________________________
============================================================
Class R $ 7,273,813
____________________________________________________________
============================================================
Institutional Class $ 129,941,770
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 229,513,312
____________________________________________________________
============================================================
Class B 27,345,549
____________________________________________________________
============================================================
Class C 6,839,787
____________________________________________________________
============================================================
Class R 343,228
____________________________________________________________
============================================================
Institutional Class 5,639,934
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.24
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.24 divided by
94.50%) $ 22.48
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.85
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.85
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.19
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 23.04
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $38,055,509 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-292
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $67,357) $ 45,172,916
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $142,364 after rebates of
$4,903,339) 1,393,186
---------------------------------------------------------------------------
Interest 10,823
===========================================================================
Total investment income 46,576,925
===========================================================================
EXPENSES:
Advisory fees 19,936,223
---------------------------------------------------------------------------
Administrative services fees 338,055
---------------------------------------------------------------------------
Custodian fees 232,154
---------------------------------------------------------------------------
Distribution fees:
Class A 8,145,938
---------------------------------------------------------------------------
Class B 3,012,810
---------------------------------------------------------------------------
Class C 770,271
---------------------------------------------------------------------------
Class R 17,717
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 11,451,505
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 71,826
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 125,927
---------------------------------------------------------------------------
Other 624,384
===========================================================================
Total expenses 44,726,810
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (697,411)
===========================================================================
Net expenses 44,029,399
===========================================================================
Net investment income 2,547,526
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $14,506,408) 293,774,554
---------------------------------------------------------------------------
Foreign currencies 538,963
===========================================================================
294,313,517
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (266,545,569)
---------------------------------------------------------------------------
Foreign currencies (38)
===========================================================================
(266,545,607)
===========================================================================
Net gain from investment securities and foreign currencies 27,767,910
===========================================================================
Net increase in net assets resulting from operations $ 30,315,436
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-293
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
===============================================================================================
OPERATIONS:
Net investment income (loss) $ 2,547,526 $ (49,011,984)
-----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 294,313,517 750,199,227
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (266,545,607) (467,700,236)
===============================================================================================
Net increase in net assets resulting from operations 30,315,436 233,487,007
===============================================================================================
Share transactions-net:
Class A (768,061,208) (1,414,942,300)
-----------------------------------------------------------------------------------------------
Class B (74,499,696) (88,166,720)
-----------------------------------------------------------------------------------------------
Class C (27,428,925) (35,344,446)
-----------------------------------------------------------------------------------------------
Class R 1,136,036 3,284,897
-----------------------------------------------------------------------------------------------
Institutional Class (36,658,102) 4,128,631
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (905,511,895) (1,531,039,938)
===============================================================================================
Net increase (decrease) in net assets (875,196,459) (1,297,552,931)
===============================================================================================
NET ASSETS:
Beginning of period 6,566,649,586 7,864,202,517
===============================================================================================
End of period (including undistributed net investment
income (loss) of $1,640,148 and $(907,378),
respectively) $5,691,453,127 $ 6,566,649,586
_______________________________________________________________________________________________
===============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-294
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-295
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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
FS-296
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $30 million 1.00% ---------------------------------------------------------------------- Next $120 million 0.75% ---------------------------------------------------------------------- Over $150 million 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $150 million 0.75% ---------------------------------------------------------------------- Next $4.85 billion 0.615% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $496,001.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $120,475 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $338,055.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $11,451,505 for Class A, Class B, Class C and Class R share classes and $71,826 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $8,145,938, $3,012,810, $770,271 and $17,717, 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, 2005, ADI advised the Fund that it retained $296,082 in front-end sales commissions from the sale of Class A shares and $3,902, $119,082, $7,708 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 ADI.
FS-297
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 21,040,807 $ 586,477,578 $ (563,632,629) $ -- $ 43,885,756 $ 618,555 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 21,040,807 586,477,578 (563,632,629) -- 43,885,756 632,267 --
====================================================================================================================================
SUBTOTAL $ 42,081,614 $1,172,955,156 $(1,127,265,258) $ -- $ 87,771,512 $1,250,822 $ --
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 969,136,004 $ 898,782,312 $(1,867,918,314) $ -- $ 2 $ 112,977 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 4,938,485 762,611,137 (728,552,844) -- 38,996,778 29,387 --
====================================================================================================================================
SUBTOTAL $ 974,074,489 $1,661,393,449 $(2,596,471,158) $ -- $ 38,996,780 $ 142,364 $ --
====================================================================================================================================
|
* Net of rebates.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the transactions with affiliates for the six months ended April 30, 2005.
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Dolby
Laboratories
Inc.- Class A $ -- $ 5,979,335 $ -- $172,025 $ 6,151,360 $ -- $ --
====================================================================================================================================
TOTAL $1,016,156,103 $2,840,327,940 $(3,723,736,416) $172,025 $132,919,652 $1,393,186 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $28,568,696 and sales of $52,459,430, which resulted in net realized gains of $14,506,408.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $80,935.
FS-298
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $13,342 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $38,055,509 were on loan to brokers. The loans were secured by cash collateral of $38,996,780 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $142,364 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-299
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $ 478,530,901
------------------------------------------------------------------------------
October 31, 2010 1,223,985,487
------------------------------------------------------------------------------
October 31, 2011 461,767,558
==============================================================================
Total capital loss carryforward $2,164,283,946
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above 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, 2005 was $1,593,183,924 and $2,572,446,999, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,353,183,814 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (170,602,114) ============================================================================== Net unrealized appreciation of investment securities $1,182,581,700 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $4,527,250,595. |
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 certain 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(a)
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,423,747 $ 164,532,085 21,730,966 $ 462,412,977
----------------------------------------------------------------------------------------------------------------------------
Class B 919,817 19,093,505 2,742,938 54,987,929
----------------------------------------------------------------------------------------------------------------------------
Class C 380,953 7,899,072 1,295,928 26,018,679
----------------------------------------------------------------------------------------------------------------------------
Class R 87,649 1,945,667 215,406 4,599,852
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 173,102 4,183,720 1,641,747 36,786,966
============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 202,798 4,494,364 403,007 8,647,784
----------------------------------------------------------------------------------------------------------------------------
Class B (216,717) (4,494,364) (428,243) (8,647,784)
============================================================================================================================
Reacquired:
Class A (42,114,293) (937,087,657) (89,250,664) (1,886,003,061)
----------------------------------------------------------------------------------------------------------------------------
Class B (4,288,080) (89,098,837) (6,761,489) (134,506,865)
----------------------------------------------------------------------------------------------------------------------------
Class C (1,700,000) (35,327,997) (3,085,701) (61,363,125)
----------------------------------------------------------------------------------------------------------------------------
Class R (36,395) (809,631) (61,955) (1,314,955)
----------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,690,242) (40,841,822) (1,437,940) (32,658,335)
============================================================================================================================
(40,857,661) $(905,511,895) (72,996,000) $(1,531,039,938)
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 14% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund. AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially.
FS-300
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, -------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.13)(b) (0.12)(b) (0.15)(b) (0.12) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.05) 0.79 3.53 (2.37) (16.24) 12.39
=================================================================================================================================
Total from investment operations (0.03) 0.66 3.41 (2.52) (16.36) 12.13
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 21.24 $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.14)% 3.20% 19.83% (12.78)% (43.10)% 36.56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,875,650 $5,616,072 $6,825,023 $6,780,055 $9,703,277 $19,268,977
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.32%(d) 1.27% 1.29% 1.26% 1.14% 1.08%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.34%(d) 1.29% 1.30% 1.27% 1.17% 1.11%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.15%(a)(d) (0.59)% (0.67)% (0.74)% (0.46)% (0.61)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.05) and (0.42)%, respectively.
(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
$5,475,630,201.
(e) Not annualized for periods less than one year.
FS-301
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.26)(b) (0.23)(b) (0.27)(b) (0.28) (0.58)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.04) 0.75 3.33 (2.26) (15.69) 12.14
=================================================================================================================================
Total from investment operations (0.10) 0.49 3.10 (2.53) (15.97) 11.56
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 19.85 $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.50)% 2.52% 18.95% (13.39)% (43.49)% 35.51%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $542,849 $617,005 $688,587 $625,294 $818,343 $1,315,524
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.02%(d) 1.97% 1.99% 1.96% 1.86% 1.85%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.04%(d) 1.99% 2.00% 1.97% 1.89% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.55)%(a)(d) (1.29)% (1.37)% (1.44)% (1.17)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.13) and (1.12)%, respectively.
(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
$607,555,611.
(e) Not annualized for periods less than one year.
FS-302
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.26)(b) (0.23)(b) (0.27)(b) (0.29) (0.59)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.03) 0.74 3.33 (2.25) (15.68) 12.15
=================================================================================================================================
Total from investment operations (0.09) 0.48 3.10 (2.52) (15.97) 11.56
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 19.85 $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.45)% 2.47% 18.95% (13.35)% (43.51)% 35.52%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $135,738 $162,707 $193,585 $184,393 $258,786 $ 434,544
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.02%(d) 1.97% 1.99% 1.96% 1.86% 1.85%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.04%(d) 1.99% 2.00% 1.97% 1.89% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.55)%(a)(d) (1.29)% (1.37)% (1.44)% (1.17)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.13) and (1.12)%, respectively.
(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
$155,330,883.
(e) Not annualized for periods less than one year.
FS-303
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $21.24 $20.63 $17.26 $ 19.82
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.17)(b) (0.16)(b) (0.07)(b)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.05) 0.78 3.53 (2.49)
================================================================================================================
Total from investment operations (0.05) 0.61 3.37 (2.56)
================================================================================================================
Net asset value, end of period $21.19 $21.24 $20.63 $ 17.26
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) (0.24)% 2.96% 19.52% (12.92)%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,274 $6,202 $2,857 $ 226
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.52%(d) 1.47% 1.49% 1.53%(e)
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.54%(d) 1.49% 1.50% 1.54%(e)
================================================================================================================
Ratio of net investment income (loss) to average net assets (0.05)%(a)(d) (0.79)% (0.87)% (1.01)%(e)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(f) 25% 50% 47% 57%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.07) and (0.62)%, respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$7,145,464.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-304
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) (0.01)(b) (0.03)(b) (0.06) 0.01 (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.06) 0.85 3.80 (2.54) (17.14) 12.91
=================================================================================================================================
Total from investment operations 0.03 0.84 3.77 (2.60) (17.13) 12.82
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 23.04 $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.13% 3.79% 20.49% (12.38)% (42.80)% 37.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $129,942 $164,664 $154,150 $122,746 $150,609 $288,097
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.75%(d) 0.72% 0.75% 0.80% 0.65% 0.65%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.77%(d) 0.74% 0.76% 0.81% 0.68% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.72%(a)(d) (0.04)% (0.13)% (0.28)% 0.03% (0.18)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net Investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $0.02 and 0.15% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$144,798,872.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-305
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-306
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-89.08%
ADVERTISING-0.51%
Omnicom Group Inc. 14,000 $ 1,160,600
=========================================================================
AEROSPACE & DEFENSE-1.97%
Raytheon Co. 95,900 3,606,799
-------------------------------------------------------------------------
United Technologies Corp. 8,400 854,448
=========================================================================
4,461,247
=========================================================================
APPAREL RETAIL-2.55%
Limited Brands, Inc. 141,000 3,058,290
-------------------------------------------------------------------------
TJX Cos., Inc. (The) 119,300 2,702,145
=========================================================================
5,760,435
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.19%
V. F. Corp. 47,500 2,688,025
=========================================================================
APPLICATION SOFTWARE-0.74%
SAP A.G.-ADR (Germany) 42,500 1,675,804
=========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.47%
Federated Investors, Inc.-Class B 94,600 2,691,370
-------------------------------------------------------------------------
State Street Corp. 62,600 2,893,998
=========================================================================
5,585,368
=========================================================================
AUTO PARTS & EQUIPMENT-1.35%
Johnson Controls, Inc. 55,500 3,045,285
=========================================================================
BREWERS-1.05%
Anheuser-Busch Cos., Inc. 50,800 2,380,996
=========================================================================
BUILDING PRODUCTS-0.79%
Masco Corp. 56,700 1,785,483
=========================================================================
COMPUTER HARDWARE-2.46%
Hewlett-Packard Co. 132,200 2,706,134
-------------------------------------------------------------------------
International Business Machines Corp. 37,400 2,856,612
=========================================================================
5,562,746
=========================================================================
CONSTRUCTION & ENGINEERING-0.69%
Fluor Corp. 30,400 1,567,424
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.93%
Automatic Data Processing, Inc. 47,300 2,054,712
-------------------------------------------------------------------------
First Data Corp. 60,400 2,297,012
=========================================================================
4,351,724
=========================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DISTRIBUTORS-1.07%
Genuine Parts Co. 56,600 $ 2,428,140
=========================================================================
DIVERSIFIED BANKS-2.67%
Bank of America Corp. 42,200 1,900,688
-------------------------------------------------------------------------
U.S. Bancorp 101,400 2,829,060
-------------------------------------------------------------------------
Wachovia Corp. 25,500 1,305,090
=========================================================================
6,034,838
=========================================================================
DIVERSIFIED CHEMICALS-1.36%
Dow Chemical Co. (The) 21,700 996,681
-------------------------------------------------------------------------
PPG Industries, Inc. 30,600 2,067,030
=========================================================================
3,063,711
=========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.45%
H&R Block, Inc. 41,500 2,067,115
-------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 66,100 1,217,562
=========================================================================
3,284,677
=========================================================================
ELECTRIC UTILITIES-1.56%
Entergy Corp. 20,500 1,502,650
-------------------------------------------------------------------------
Exelon Corp. 40,900 2,024,550
=========================================================================
3,527,200
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.21%
Cooper Industries, Ltd.-Class A (Bermuda) 21,900 1,394,154
-------------------------------------------------------------------------
Emerson Electric Co. 57,500 3,603,525
=========================================================================
4,997,679
=========================================================================
FOOTWEAR-0.50%
NIKE, Inc.-Class B 14,700 1,129,107
=========================================================================
HEALTH CARE EQUIPMENT-3.55%
Baxter International Inc. 90,700 3,364,970
-------------------------------------------------------------------------
Becton, Dickinson & Co. 14,500 848,540
-------------------------------------------------------------------------
Medtronic, Inc. 72,200 3,804,940
=========================================================================
8,018,450
=========================================================================
HOME IMPROVEMENT RETAIL-1.45%
Home Depot, Inc. (The) 92,400 3,268,188
=========================================================================
HOUSEHOLD APPLIANCES-1.38%
Snap-on Inc. 94,100 3,121,297
=========================================================================
HOUSEHOLD PRODUCTS-2.02%
Colgate-Palmolive Co. 51,100 2,544,269
-------------------------------------------------------------------------
|
FS-307
MARKET
SHARES VALUE
-------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-(CONTINUED)
Kimberly-Clark Corp. 32,400 $ 2,023,380
=========================================================================
4,567,649
=========================================================================
INDUSTRIAL MACHINERY-1.96%
Ingersoll-Rand Co. Ltd.-Class A (Bermuda) 23,400 1,798,758
-------------------------------------------------------------------------
Pentair, Inc. 66,300 2,637,414
=========================================================================
4,436,172
=========================================================================
INSURANCE BROKERS-0.63%
Marsh & McLennan Cos., Inc. 51,200 1,435,136
=========================================================================
INTEGRATED OIL & GAS-4.73%
ConocoPhillips 21,400 2,243,790
-------------------------------------------------------------------------
Eni S.p.A. (Italy)(a) 54,800 1,377,971
-------------------------------------------------------------------------
Exxon Mobil Corp. 31,600 1,802,148
-------------------------------------------------------------------------
Occidental Petroleum Corp. 46,700 3,222,300
-------------------------------------------------------------------------
TOTAL S.A. (France)(a) 9,150 2,034,682
=========================================================================
10,680,891
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.33%
BellSouth Corp. 100,700 2,667,543
-------------------------------------------------------------------------
SBC Communications Inc. 109,000 2,594,200
=========================================================================
5,261,743
=========================================================================
INVESTMENT BANKING & BROKERAGE-1.38%
Morgan Stanley 59,300 3,120,366
=========================================================================
LIFE & HEALTH INSURANCE-0.35%
Prudential Financial, Inc. 13,700 782,955
=========================================================================
MULTI-LINE INSURANCE-1.17%
Hartford Financial Services Group, Inc. (The) 36,400 2,634,268
=========================================================================
MULTI-UTILITIES & UNREGULATED POWER-3.12%
Dominion Resources, Inc. 45,600 3,438,240
-------------------------------------------------------------------------
Public Service Enterprise Group Inc. 42,200 2,451,820
-------------------------------------------------------------------------
Wisconsin Energy Corp. 33,100 1,167,106
=========================================================================
7,057,166
=========================================================================
OFFICE SERVICES & SUPPLIES-1.36%
Pitney Bowes Inc. 68,500 3,063,320
=========================================================================
OIL & GAS DRILLING-1.28%
GlobalSantaFe Corp. (Cayman Islands) 86,100 2,892,960
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.72%
Citigroup Inc. 82,800 3,888,288
=========================================================================
PACKAGED FOODS & MEATS-2.24%
General Mills, Inc. 72,800 3,596,320
-------------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
Sara Lee Corp. 69,000 $ 1,475,910
=========================================================================
5,072,230
=========================================================================
PAPER PACKAGING-1.70%
Bemis Co., Inc. 95,300 2,626,468
-------------------------------------------------------------------------
Sonoco Products Co. 44,800 1,213,632
=========================================================================
3,840,100
=========================================================================
PHARMACEUTICALS-9.76%
Abbott Laboratories 86,300 4,242,508
-------------------------------------------------------------------------
Bristol-Myers Squibb Co. 70,700 1,838,200
-------------------------------------------------------------------------
Johnson & Johnson 55,300 3,795,239
-------------------------------------------------------------------------
Lilly (Eli) & Co. 64,800 3,788,856
-------------------------------------------------------------------------
Merck & Co. Inc. 54,600 1,850,940
-------------------------------------------------------------------------
Pfizer Inc. 109,900 2,985,983
-------------------------------------------------------------------------
Wyeth 79,200 3,559,248
=========================================================================
22,060,974
=========================================================================
PROPERTY & CASUALTY INSURANCE-3.23%
Chubb Corp. (The) 14,200 1,161,276
-------------------------------------------------------------------------
MBIA Inc. 44,300 2,320,434
-------------------------------------------------------------------------
SAFECO Corp. 29,100 1,532,697
-------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 63,700 2,280,460
=========================================================================
7,294,867
=========================================================================
PUBLISHING-1.65%
Gannett Co., Inc. 48,300 3,719,100
=========================================================================
REGIONAL BANKS-4.16%
Cullen/Frost Bankers, Inc. 50,400 2,183,328
-------------------------------------------------------------------------
Fifth Third Bancorp 79,800 3,471,300
-------------------------------------------------------------------------
KeyCorp 27,700 918,532
-------------------------------------------------------------------------
North Fork Bancorp., Inc. 100,300 2,823,445
=========================================================================
9,396,605
=========================================================================
RESTAURANTS-1.16%
Outback Steakhouse, Inc. 64,700 2,613,880
=========================================================================
SEMICONDUCTORS-1.85%
Linear Technology Corp. 76,100 2,719,814
-------------------------------------------------------------------------
Texas Instruments Inc. 58,800 1,467,648
=========================================================================
4,187,462
=========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 34,200 1,902,888
=========================================================================
SPECIALTY CHEMICALS-0.89%
Ecolab Inc. 61,200 2,001,852
=========================================================================
SYSTEMS SOFTWARE-1.73%
Microsoft Corp. 154,300 3,903,790
=========================================================================
|
FS-308
MARKET
SHARES VALUE
-------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-1.28%
Fannie Mae 53,700 $ 2,897,115
=========================================================================
TOBACCO-1.64%
Altria Group, Inc. 56,900 3,697,931
=========================================================================
Total Common Stocks & Other Equity
Interests (Cost $188,882,699) 201,308,132
=========================================================================
PRINCIPAL
AMOUNT
NOTES-0.15%
AEROSPACE & DEFENSE-0.04%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06(b) $ 75,000 80,255
=========================================================================
ELECTRIC UTILITIES-0.07%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05(b) 160,000 163,231
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.04%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%,
01/30/06(b) 100,000 99,507
=========================================================================
Total Notes (Cost $345,297) 342,993
=========================================================================
|
-------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY SECURITIES-2.64%
U.S. TREASURY BONDS-1.32%
U.S. Treasury Bonds 3.38%, 02/28/07(b) $ 3,000,000 $ 2,986,890
=========================================================================
U.S. TREASURY NOTES-1.32%
U.S. Treasury Notes 3.38%, 02/15/08(b) 3,000,000 2,973,750
=========================================================================
Total U.S. Treasury Securities (Cost
$5,946,516) 5,960,640
=========================================================================
SHARES
MONEY MARKET FUNDS-9.40%
Liquid Assets Portfolio-Institutional
Class(c) 10,617,292 10,617,292
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 10,617,292 10,617,292
=========================================================================
Total Money Market Funds (Cost
$21,234,584) 21,234,584
=========================================================================
TOTAL INVESTMENTS-101.27% (Cost $216,409,096) 228,846,349
=========================================================================
OTHER ASSETS LESS LIABILITIES-(1.27%) (2,867,332)
=========================================================================
NET ASSETS-100.00% $225,979,017
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Sr. - Senior Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market
prices. The aggregate market value of these securities at April 30, 2005
was $3,412,653, which represented 1.49% of the Fund's Total Investments.
See Note 1A.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an
independent pricing service. The aggregate market value of these
securities at April 30, 2005 was $6,303,633, which represented 2.75% 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-309
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$195,174,512) $207,611,765
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $21,234,584) 21,234,584
===========================================================
Total Investments (Cost $216,409,096) 228,846,349
===========================================================
Receivables for:
Fund shares sold 1,210,353
-----------------------------------------------------------
Dividends and interest 345,364
-----------------------------------------------------------
Amount due from advisor 11,600
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 9,468
-----------------------------------------------------------
Other assets 43,738
===========================================================
Total assets 230,466,872
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 3,723,382
-----------------------------------------------------------
Fund shares reacquired 539,581
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 11,342
-----------------------------------------------------------
Accrued distribution fees 113,661
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,348
-----------------------------------------------------------
Accrued transfer agent fees 62,910
-----------------------------------------------------------
Accrued operating expenses 35,631
===========================================================
Total liabilities 4,487,855
===========================================================
Net assets applicable to shares outstanding $225,979,017
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $211,394,141
-----------------------------------------------------------
Undistributed net investment income (11,634)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
futures contracts and option contracts 2,159,257
-----------------------------------------------------------
Unrealized appreciation of investment
securities 12,437,253
===========================================================
$225,979,017
___________________________________________________________
===========================================================
NET ASSETS:
Class A $122,983,450
___________________________________________________________
===========================================================
Class B $ 72,925,778
___________________________________________________________
===========================================================
Class C $ 30,069,789
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,367,511
___________________________________________________________
===========================================================
Class B 6,201,486
___________________________________________________________
===========================================================
Class C 2,560,358
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.86
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.86 divided by
94.50%) $ 12.55
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.76
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.74
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-310
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,260) $2,069,949
------------------------------------------------------------------------
Dividends from affiliated money market funds 173,605
------------------------------------------------------------------------
Interest 37,547
========================================================================
Total investment income 2,281,101
========================================================================
EXPENSES:
Advisory fees 642,106
------------------------------------------------------------------------
Administrative services fees 24,795
------------------------------------------------------------------------
Custodian fees 15,176
------------------------------------------------------------------------
Distribution fees:
Class A 156,752
------------------------------------------------------------------------
Class B 294,641
------------------------------------------------------------------------
Class C 113,637
------------------------------------------------------------------------
Transfer agent fees 153,444
------------------------------------------------------------------------
Trustees' and officer's fees and benefits 9,588
------------------------------------------------------------------------
Other 92,468
========================================================================
Total expenses 1,502,607
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (379,181)
========================================================================
Net expenses 1,123,426
========================================================================
Net investment income 1,157,675
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain from:
Investment securities 2,180,972
------------------------------------------------------------------------
Foreign currencies 3,267
------------------------------------------------------------------------
Futures contracts 75,143
------------------------------------------------------------------------
Option contracts written 78,340
========================================================================
2,337,722
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 3,187,353
------------------------------------------------------------------------
Futures contracts (9,390)
========================================================================
3,177,963
========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 5,515,685
========================================================================
Net increase in net assets resulting from operations $6,673,360
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-311
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,157,675 $ 742,750
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures contracts and option contracts 2,337,722 3,210,309
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and futures contracts 3,177,963 4,353,104
==========================================================================================
Net increase in net assets resulting from operations 6,673,360 8,306,163
==========================================================================================
Distributions to shareholders from net investment income:
Class A (744,578) (500,393)
------------------------------------------------------------------------------------------
Class B (301,612) (204,810)
------------------------------------------------------------------------------------------
Class C (114,216) (63,792)
==========================================================================================
Total distributions from net investment income (1,160,406) (768,995)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A (1,261,432) --
------------------------------------------------------------------------------------------
Class B (887,849) --
------------------------------------------------------------------------------------------
Class C (318,378) --
==========================================================================================
Total distributions from net realized gains (2,467,659) --
==========================================================================================
Decrease in net assets resulting from distributions (3,628,065) (768,995)
==========================================================================================
Share transactions-net:
Class A 57,986,046 37,536,817
------------------------------------------------------------------------------------------
Class B 26,003,571 21,106,883
------------------------------------------------------------------------------------------
Class C 14,414,920 8,543,492
==========================================================================================
Net increase in net assets resulting from share
transactions 98,404,537 67,187,192
==========================================================================================
Net increase in net assets 101,449,832 74,724,360
==========================================================================================
NET ASSETS:
Beginning of period 124,529,185 49,804,825
==========================================================================================
End of period (including undistributed net investment
income of $(11,634) and $(8,903), respectively) $225,979,017 $124,529,185
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-312
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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 investment 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-313
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
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 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. 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
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 received or made depending upon whether unrealized gains or losses are incurred. When the contracts
FS-314
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $1 billion 0.75% -------------------------------------------------------------------- Next $1 billion 0.70% -------------------------------------------------------------------- Over $2 billion 0.625% ____________________________________________________________________ ==================================================================== |
Effective January 1, 2005 through June 30, 2006, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $250 million 0.695% -------------------------------------------------------------------- Next $250 million 0.67% -------------------------------------------------------------------- Next $500 million 0.645% -------------------------------------------------------------------- Next $1.5 billion 0.62% -------------------------------------------------------------------- Next $2.5 billion 0.595% -------------------------------------------------------------------- Next $2.5 billion 0.57% -------------------------------------------------------------------- Next $2.5 billion 0.545% -------------------------------------------------------------------- Over $10 billion 0.52% ____________________________________________________________________ ==================================================================== |
AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.00%, 1.65% and 1.65% of average daily net assets, respectively. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.50%, 2.15% and 2.15% of average daily net assets, respectively, through October 31, 2005. 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 limits 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), or items designated as such 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, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the only expense offset arrangements from which the Fund may benefit 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. To the extent that the annualized expense ratio does not exceed the expense limitation, 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. AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $375,928.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP agreed to reimburse $1,433 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $24,795.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $153,444.
FS-315
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B and Class C shares paid $156,752, $294,641 and $113,637 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 the six months ended April 30, 2005, ADI advised the Fund that it retained $77,637 in front-end sales commissions from the sale of Class A shares and $3,249, $20,253 and $1,339 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 ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from 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. The table below shows the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 8,365,886 $22,196,490 $(19,945,084) $ -- $10,617,292 $ 86,034 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 8,365,886 22,196,490 (19,945,084) -- 10,617,292 87,571 --
==================================================================================================================================
Total $16,731,772 $44,392,980 $(39,890,168) $ -- $21,234,584 $173,605 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $393,147 and sales of $0, which resulted in net realized gain (loss) of $0.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $1,820.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
FS-316
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,089 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------------------
Beginning of period -- $ --
-----------------------------------------------------------------------------------
Written 1,319 116,594
-----------------------------------------------------------------------------------
Closed (1,083) (93,157)
-----------------------------------------------------------------------------------
Exercised (236) (23,437)
===================================================================================
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of October 31, 2004.
FS-317
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, 2005 was $99,739,755 and $10,367,635, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $16,304,992 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (4,018,218) =============================================================================== Net unrealized appreciation of investment securities $12,286,774 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $216,559,575. |
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 certain 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, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,604,962 $ 67,184,534 4,322,865 $ 48,449,001
----------------------------------------------------------------------------------------------------------------------
Class B 2,909,016 34,579,161 2,496,183 27,796,432
----------------------------------------------------------------------------------------------------------------------
Class C 1,395,359 16,564,227 891,143 9,870,802
======================================================================================================================
Issued as reinvestment of dividends:
Class A 156,144 1,861,646 41,472 465,571
----------------------------------------------------------------------------------------------------------------------
Class B 91,265 1,078,872 16,701 185,244
----------------------------------------------------------------------------------------------------------------------
Class C 34,015 401,510 5,270 58,491
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 196,320 2,348,312 186,137 2,093,587
----------------------------------------------------------------------------------------------------------------------
Class B (197,993) (2,348,312) (187,728) (2,093,587)
======================================================================================================================
Reacquired:
Class A (1,121,645) (13,408,446) (1,198,931) (13,471,342)
----------------------------------------------------------------------------------------------------------------------
Class B (615,674) (7,306,150) (432,094) (4,781,206)
----------------------------------------------------------------------------------------------------------------------
Class C (216,169) (2,550,817) (125,008) (1,385,801)
======================================================================================================================
8,235,600 $ 98,404,537 6,016,010 $ 67,187,192
______________________________________________________________________________________________________________________
======================================================================================================================
|
NOTE 12--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Core Stock Fund ("Selling Fund"), a series of AIM Combination Stock & Bond Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
FS-318
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.48 $ 10.26 $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10(a) 0.14 0.06(b) (0.03)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.23 1.54 (1.27)
=========================================================================================================================
Total from investment operations 0.69 1.37 1.60 (1.30)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.15) (0.04) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.31) (0.15) (0.04) --
=========================================================================================================================
Net asset value, end of period $ 11.86 $ 11.48 $ 10.26 $ 8.70
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.98% 13.36% 18.39% (13.00)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,983 $63,513 $22,375 $ 7,834
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(d) 1.00% 1.51% 1.75%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.45%(d) 1.70% 2.12% 4.26%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.66%(a)(d) 1.27% 0.65% (0.34)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.09 and 1.38%, respectively.
(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
$90,314,821.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-319
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.38 $ 10.17 $ 8.65 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.21 1.53 (1.27)
=========================================================================================================================
Total from investment operations 0.65 1.28 1.53 (1.35)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
=========================================================================================================================
Net asset value, end of period $ 11.76 $ 11.38 $ 10.17 $ 8.65
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.67% 12.63% 17.67% (13.50)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,926 $45,700 $21,582 $ 7,100
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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
$59,416,500.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-320
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.37 $ 10.16 $ 8.65 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.58 1.21 1.52 (1.27)
========================================================================================================================
Total from investment operations 0.64 1.28 1.52 (1.35)
========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
========================================================================================================================
Net asset value, end of period $ 11.74 $ 11.37 $10.16 $ 8.65
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 5.59% 12.64% 17.55% (13.50)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,070 $15,316 $5,848 $ 1,116
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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
$22,915,866.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-321
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-322
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.87%
ADVERTISING-4.96%
Interpublic Group of Cos., Inc. (The)(a) 562,200 $ 7,229,892
-----------------------------------------------------------------------
Omnicom Group Inc. 137,600 11,407,040
=======================================================================
18,636,932
=======================================================================
AEROSPACE & DEFENSE-1.53%
Honeywell International Inc. 160,300 5,732,328
=======================================================================
ALUMINUM-1.33%
Alcoa Inc. 171,500 4,976,930
=======================================================================
APPAREL RETAIL-1.68%
Gap, Inc. (The) 295,700 6,313,195
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.95%
Bank of New York Co., Inc. (The) 262,600 7,337,044
=======================================================================
BUILDING PRODUCTS-1.97%
Masco Corp. 235,200 7,406,448
=======================================================================
COMMUNICATIONS EQUIPMENT-0.87%
Motorola, Inc. 213,200 3,270,488
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.81%
Deere & Co. 48,800 3,051,952
=======================================================================
CONSUMER ELECTRONICS-3.07%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 191,970 4,758,936
-----------------------------------------------------------------------
Sony Corp.-ADR (Japan) 184,700 6,780,337
=======================================================================
11,539,273
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.04%
Ceridian Corp.(a) 291,700 4,920,979
-----------------------------------------------------------------------
First Data Corp. 269,700 10,256,691
=======================================================================
15,177,670
=======================================================================
DIVERSIFIED CHEMICALS-0.67%
Dow Chemical Co. (The) 54,600 2,507,778
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.31%
Cendant Corp. 435,600 8,672,796
=======================================================================
ENVIRONMENTAL SERVICES-2.86%
Waste Management, Inc. 376,550 10,727,910
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
FOOD RETAIL-3.07%
Kroger Co. (The)(a) 404,600 $ 6,380,542
-----------------------------------------------------------------------
Safeway Inc.(a) 240,800 5,126,632
=======================================================================
11,507,174
=======================================================================
GENERAL MERCHANDISE STORES-2.07%
Target Corp. 167,600 7,776,640
=======================================================================
HEALTH CARE DISTRIBUTORS-6.18%
Cardinal Health, Inc. 264,600 14,703,822
-----------------------------------------------------------------------
McKesson Corp. 230,100 8,513,700
=======================================================================
23,217,522
=======================================================================
HEALTH CARE EQUIPMENT-1.64%
Baxter International Inc. 165,800 6,151,180
=======================================================================
HEALTH CARE FACILITIES-2.51%
HCA Inc. 168,400 9,403,456
=======================================================================
INDUSTRIAL CONGLOMERATES-5.89%
General Electric Co. 225,500 8,163,100
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 445,800 13,957,998
=======================================================================
22,121,098
=======================================================================
INDUSTRIAL MACHINERY-2.07%
Illinois Tool Works Inc. 92,515 7,754,607
=======================================================================
INVESTMENT BANKING & BROKERAGE-3.98%
Merrill Lynch & Co., Inc. 123,800 6,676,534
-----------------------------------------------------------------------
Morgan Stanley 157,000 8,261,340
=======================================================================
14,937,874
=======================================================================
MANAGED HEALTH CARE-3.23%
WellPoint, Inc.(a) 95,000 12,136,250
=======================================================================
MOVIES & ENTERTAINMENT-2.50%
Walt Disney Co. (The) 356,100 9,401,040
=======================================================================
MULTI-LINE INSURANCE-2.19%
Hartford Financial Services Group, Inc. (The) 113,600 8,221,232
=======================================================================
OIL & GAS DRILLING-2.54%
Transocean Inc. (Cayman Islands)(a) 205,377 9,523,332
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.84%
Halliburton Co. 257,100 10,692,789
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 109,100 7,463,531
=======================================================================
18,156,320
=======================================================================
|
FS-323
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-6.41%
Citigroup Inc. 275,619 $ 12,943,068
-----------------------------------------------------------------------
JPMorgan Chase & Co. 313,356 11,121,004
=======================================================================
24,064,072
=======================================================================
PACKAGED FOODS & MEATS-3.02%
Kraft Foods Inc.-Class A 170,300 5,519,423
-----------------------------------------------------------------------
Unilever N.V. (Netherlands)(b) 90,300 5,811,540
=======================================================================
11,330,963
=======================================================================
PHARMACEUTICALS-8.14%
Pfizer Inc. 320,700 8,713,419
-----------------------------------------------------------------------
Sanofi-Aventis (France)(b) 159,452 14,119,923
-----------------------------------------------------------------------
Wyeth 172,300 7,743,162
=======================================================================
30,576,504
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.31%
ACE Ltd. (Cayman Islands) 201,800 8,669,328
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
SYSTEMS SOFTWARE-2.93%
Computer Associates International, Inc. 408,499 $ 10,988,623
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.30%
Fannie Mae 168,300 9,079,785
-----------------------------------------------------------------------
Freddie Mac 54,000 3,322,080
=======================================================================
12,401,865
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $302,771,714) 363,689,824
=======================================================================
MONEY MARKET FUNDS-3.06%
Liquid Assets Portfolio-Institutional
Class(c) 5,736,779 5,736,779
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 5,736,779 5,736,779
=======================================================================
Total Money Market Funds (Cost
$11,473,558) 11,473,558
=======================================================================
TOTAL INVESTMENTS-99.93% (Cost $314,245,272) 375,163,382
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.07% 275,719
=======================================================================
NET ASSETS-100.00% $375,439,101
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at April 30, 2005 was
$19,931,463, which represented 5.31% 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-324
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$302,771,714) $363,689,824
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $11,473,558) 11,473,558
===========================================================
Total Investments (Cost $314,245,272) 375,163,382
===========================================================
Receivables for:
Fund shares sold 745,253
-----------------------------------------------------------
Dividends 500,618
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 51,360
-----------------------------------------------------------
Other assets 89,417
===========================================================
Total assets 376,550,030
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 704,724
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 68,018
-----------------------------------------------------------
Accrued distribution fees 150,246
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,524
-----------------------------------------------------------
Accrued transfer agent fees 147,023
-----------------------------------------------------------
Accrued operating expenses 39,394
===========================================================
Total liabilities 1,110,929
===========================================================
Net assets applicable to shares outstanding $375,439,101
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $333,357,486
-----------------------------------------------------------
Undistributed net investment income (loss) (89,162)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (18,747,333)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 60,918,110
===========================================================
$375,439,101
___________________________________________________________
===========================================================
NET ASSETS:
Class A $140,880,232
___________________________________________________________
===========================================================
Class B $ 77,068,743
___________________________________________________________
===========================================================
Class C $ 30,095,298
___________________________________________________________
===========================================================
Class R $ 1,194,675
___________________________________________________________
===========================================================
Investor Class $ 65,423,626
___________________________________________________________
===========================================================
Institutional Class $ 60,776,527
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,773,984
___________________________________________________________
===========================================================
Class B 6,079,460
___________________________________________________________
===========================================================
Class C 2,374,129
___________________________________________________________
===========================================================
Class R 91,810
___________________________________________________________
===========================================================
Investor Class 4,995,913
___________________________________________________________
===========================================================
Institutional Class 4,622,747
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 13.08
-----------------------------------------------------------
Offering price per share:
(Net asset value of $13.08 divided by
94.50%) $ 13.84
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.68
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.68
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 13.01
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 13.10
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 13.15
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-325
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $26,330) $ 2,699,471
-------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $8,916 after rebates of
$35,363) 128,259
=========================================================================
Total investment income 2,827,730
=========================================================================
EXPENSES:
Advisory fees 1,138,942
-------------------------------------------------------------------------
Administrative services fees 68,454
-------------------------------------------------------------------------
Custodian fees 18,994
-------------------------------------------------------------------------
Distribution fees:
Class A 261,313
-------------------------------------------------------------------------
Class B 419,614
-------------------------------------------------------------------------
Class C 156,005
-------------------------------------------------------------------------
Class R 2,922
-------------------------------------------------------------------------
Investor Class 87,870
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor 524,634
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,667
-------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,448
-------------------------------------------------------------------------
Other 174,643
=========================================================================
Total expenses 2,868,506
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (8,667)
=========================================================================
Net expenses 2,859,839
=========================================================================
Net investment income (loss) (32,109)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 1,821,318
-------------------------------------------------------------------------
Foreign currencies (19,436)
=========================================================================
1,801,882
=========================================================================
Change in net unrealized appreciation of Investment
securities 19,319,428
=========================================================================
Net gain from investment securities and foreign currencies 21,121,310
=========================================================================
Net increase in net assets resulting from operations $21,089,201
_________________________________________________________________________
=========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-326
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (32,109) $ (318,275)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 1,801,882 12,500,527
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 19,319,428 13,417,119
==========================================================================================
Net increase in net assets resulting from operations 21,089,201 25,599,371
==========================================================================================
Share transactions-net:
Class A (18,270,630) 18,535,871
------------------------------------------------------------------------------------------
Class B (12,647,890) (1,304,921)
------------------------------------------------------------------------------------------
Class C (2,437,776) 2,160,392
------------------------------------------------------------------------------------------
Class R 147,432 365,393
------------------------------------------------------------------------------------------
Investor Class (9,401,985) 62,887,146
------------------------------------------------------------------------------------------
Institutional Class 40,755,289 18,632,135
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,855,560) 101,276,016
==========================================================================================
Net increase in net assets 19,233,641 126,875,387
==========================================================================================
NET ASSETS:
Beginning of period 356,205,460 229,330,073
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(89,162) and $(57,053), respectively) $375,439,101 $356,205,460
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-327
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
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Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $1 billion 0.60% ---------------------------------------------------------------------- Next $1 billion 0.575% ---------------------------------------------------------------------- Over $2 billion 0.55% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate
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comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $1,251.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $2,910 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $68,454.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $524,634 for Class A, Class B, Class C, Class R and Investor Class share classes and $1,667 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $261,313, $419,614, $156,005, $2,922, $87,870, 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, 2005, ADI advised the Fund that it retained $28,704 in front-end sales commissions from the sale of Class A shares and $30, $16,357, $2,041 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 ADI.
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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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
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Liquid Assets
Portfolio-
Institutional
Class $ 3,790,466 $21,764,963 $(19,818,650) $ -- $ 5,736,779 $ 59,148 $ --
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 3,790,466 21,764,963 (19,818,650) -- 5,736,779 60,195 --
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SUBTOTAL $ 7,580,932 $43,529,926 $(39,637,300) $ -- $11,473,558 $119,343 $ --
__________________________________________________________________________________________________________________________
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INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 7,196,450 $31,235,303 $(38,431,753) $ -- $ -- $ 8,916 $ --
==========================================================================================================================
TOTAL $14,777,382 $74,765,229 $(78,069,053) $ -- $11,473,558 $128,259 $ --
__________________________________________________________________________________________________________________________
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* Net of rebates
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $4,506.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,501 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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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.
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During the six months ended April 30, 2005, 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 SSB, 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 at 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, 2005, there were no securities on loan to brokers. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $8,916 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2010 $ 9,120,472
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October 31, 2011 9,531,242
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Total capital loss carryforward $18,651,714
_____________________________________________________________________________
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* Capital loss carryforward as of the date listed above 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, 2005 was $16,952,459 and $24,305,793, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 72,261,886 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (13,199,749) ============================================================================== Net unrealized appreciation of investment securities $ 59,062,137 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $316,101,245. |
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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 certain 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 (A)(B)
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SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,329,019 $ 17,541,983 4,797,896 $ 59,721,792
----------------------------------------------------------------------------------------------------------------------
Class B 445,547 5,713,018 1,918,978 23,316,127
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Class C 278,358 3,587,900 753,705 9,128,932
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Class R 27,239 358,135 54,757 677,970
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Investor Class 392,698 5,210,814 1,838,069 22,849,380
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Institutional Class(c) 3,283,721 43,083,544 1,526,455 18,788,116
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Issued in connection with acquisitions(d)
Class A -- -- 23,582 268,604
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Class B -- -- 31,404 350,200
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Class C -- -- 100,704 1,122,781
----------------------------------------------------------------------------------------------------------------------
Investor Class -- -- 7,662,600 87,273,020
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Automatic conversion of Class B shares to Class A shares:
Class A 221,997 2,936,727 467,293 5,834,860
----------------------------------------------------------------------------------------------------------------------
Class B (228,630) (2,936,727) (478,951) (5,834,860)
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Reacquired:
Class A (2,932,777) (38,749,340) (3,841,386) (47,289,385)
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Class B (1,201,954) (15,424,181) (1,581,802) (19,136,388)
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Class C (470,284) (6,025,676) (671,051) (8,091,321)
----------------------------------------------------------------------------------------------------------------------
Class R (15,964) (210,703) (25,935) (312,577)
----------------------------------------------------------------------------------------------------------------------
Investor Class (1,100,927) (14,612,799) (3,812,184) (47,235,254)
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Institutional Class(c) (174,789) (2,328,255) (12,640) (155,981)
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(146,746) $ (1,855,560) 8,751,494 $101,276,016
______________________________________________________________________________________________________________________
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(a) 13% of the outstanding shares of the Fund are owned by affiliated mutual
funds. Affiliated mutual funds are mutual funds that are also advised by
AIM.
(b) There are two entities that are record owners of more than 5% of the
outstanding shares of the fund and they own 15% of the outstanding
shares of the Fund. AIM Distributors has an agreement with these
entities to sell Fund shares. The Fund AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund. AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) 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 on 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.
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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, ---------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.36 $ 11.39 $ 9.20 $ 10.94 $ 12.05 $ 9.40
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.01(a) (0.00)(a) 0.01(a) 0.02(a) 0.07(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.71 0.96 2.19 (1.75) (1.07) 2.88
=================================================================================================================================
Total from investment operations 0.72 0.97 2.19 (1.74) (1.05) 2.95
=================================================================================================================================
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 $ 13.08 $ 12.36 $ 11.39 $ 9.20 $ 10.94 $12.05
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.83% 8.52% 23.80% (15.90)% (8.74)% 32.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $140,880 $150,190 $121,980 $94,387 $68,676 $5,888
_________________________________________________________________________________________________________________________________
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Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.41%(c) 1.33% 1.42% 1.38% 1.27% 1.25%
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Without fee waivers and/or expense
reimbursements 1.41%(c) 1.35% 1.42% 1.38% 1.36% 8.21%
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Ratio of net investment income (loss)
to average net assets 0.09%(c) 0.11% (0.01)% 0.11% 0.17% 0.62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 5% 32% 41% 37% 18% 57%
_________________________________________________________________________________________________________________________________
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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 annualized and based on average daily net assets of
$150,588,976.
(d) Not annualized for periods less than one year.
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NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
--------------------------------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.02 $ 11.15 $ 9.07 $ 10.86 $ 12.02 $10.85
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Income from investment
operations:
Net investment income
(loss) (0.04)(a) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.70 0.94 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment
operations 0.66 0.87 2.08 (1.79) (1.11) 1.17
=================================================================================================================================
Less distributions:
Dividends from net
investment income -- -- -- -- (0.03) --
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Distributions from net
realized gains -- -- -- -- (0.02) --
=================================================================================================================================
Total distributions -- -- -- -- (0.05) --
=================================================================================================================================
Net asset value, end of
period $ 12.68 $ 12.02 $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.49% 7.80% 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $77,069 $84,896 $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.06%(c) 1.98% 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.06%(c) 2.00% 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.56)%(c) (0.54)% (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 5% 32% 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
$84,618,368.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-335
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
--------------------------------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.02 $ 11.15 $ 9.07 $ 10.85 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.04)(a) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.70 0.94 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment
operations 0.66 0.87 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 $ 12.68 $ 12.02 $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.49% 7.80% 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $30,095 $30,835 $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.06%(c) 1.98% 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.06%(c) 2.00% 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.56)%(c) (0.54)% (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 5% 32% 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
$31,459,631.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-336
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
-----------------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------- OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.31 $11.36 $ 9.20 $ 11.60
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.01)(a) (0.02)(a) (0.00)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.70 0.96 2.18 (2.40)
===============================================================================================================================
Total from investment operations 0.70 0.95 2.16 (2.40)
===============================================================================================================================
Net asset value, end of period $13.01 $12.31 $11.36 $ 9.20
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 5.69% 8.36% 23.48% (20.69)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,195 $ 991 $ 588 $ 8
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.56%(c) 1.48%(d) 1.57% 1.54%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.04)% (0.16)% (0.05)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 5% 32% 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
$1,178,440.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.50% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-337
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
-------------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.37 $ 11.39 $10.98
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.03(a) (0.00)(a)
---------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.72 0.95 0.41
=====================================================================================================================
Total from investment operations 0.73 0.98 0.41
=====================================================================================================================
Net asset value, end of period $ 13.10 $ 12.37 $11.39
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 5.90% 8.60% 3.73%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $65,424 $70,548 $ 178
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 1.31%(c) 1.24%(d) 1.25%(e)
=====================================================================================================================
Ratio of net investment income (loss) to average net assets 0.19%(c) 0.20% 0.16%(e)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate(f) 5% 32% 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
$70,878,492.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.25% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.38 $ 12.62
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05(a) 0.04(a)
-----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.72 (0.28)
===============================================================================================
Total from investment operations 0.77 (0.24)
===============================================================================================
Net asset value, end of period $ 13.15 $ 12.38
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 6.22% (1.90)%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,777 $18,745
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets 0.75%(c) 0.80%(d)(e)
===============================================================================================
Ratio of net investment income to average net assets 0.75%(c) 0.64%(e)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 5% 32%
_______________________________________________________________________________________________
===============================================================================================
|
(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
$44,099,689.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.81% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-338
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA,
FS-339
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-340
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.35%
AEROSPACE & DEFENSE-4.72%
Boeing Co. (The) 142,000 $ 8,451,840
------------------------------------------------------------------------
General Dynamics Corp. 55,000 5,777,750
------------------------------------------------------------------------
Precision Castparts Corp. 105,000 7,734,300
------------------------------------------------------------------------
Rockwell Collins, Inc. 170,000 7,799,600
------------------------------------------------------------------------
United Technologies Corp. 56,200 5,716,664
========================================================================
35,480,154
========================================================================
AIR FREIGHT & LOGISTICS-0.62%
FedEx Corp. 55,000 4,672,250
========================================================================
APPAREL RETAIL-1.94%
Abercrombie & Fitch Co.-Class A 170,000 9,171,500
------------------------------------------------------------------------
Chico's FAS, Inc.(a)(b) 210,000 5,382,300
========================================================================
14,553,800
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.70%
Coach, Inc.(a) 196,000 5,252,800
========================================================================
APPLICATION SOFTWARE-1.12%
Autodesk, Inc. 264,000 8,403,120
========================================================================
COMMUNICATIONS EQUIPMENT-1.67%
Cisco Systems, Inc.(a) 493,440 8,526,643
------------------------------------------------------------------------
Motorola, Inc. 260,000 3,988,400
========================================================================
12,515,043
========================================================================
COMPUTER HARDWARE-5.86%
Apple Computer, Inc.(a) 208,000 7,500,480
------------------------------------------------------------------------
Dell Inc.(a) 896,600 31,228,578
------------------------------------------------------------------------
NCR Corp.(a) 162,000 5,346,000
========================================================================
44,075,058
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.73%
Seagate Technology (Cayman Islands)(a) 310,000 5,449,800
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.72%
PACCAR Inc. 80,000 5,432,000
========================================================================
CONSUMER FINANCE-2.54%
SLM Corp. 401,000 19,103,640
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
DEPARTMENT STORES-2.29%
J.C. Penney Co., Inc. 124,000 $ 5,878,840
------------------------------------------------------------------------
Nordstrom, Inc. 223,000 11,335,090
========================================================================
17,213,930
========================================================================
DIVERSIFIED METALS & MINING-0.65%
Southern Peru Copper Corp.(b) 95,000 4,858,300
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.17%
Rockwell Automation, Inc. 191,000 8,829,930
========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.59%
Monsanto Co. 204,000 11,958,480
========================================================================
FOOTWEAR-2.03%
NIKE, Inc.-Class B 199,000 15,285,190
========================================================================
HEALTH CARE EQUIPMENT-3.18%
Bard (C.R.), Inc.(b) 100,000 7,117,000
------------------------------------------------------------------------
Becton, Dickinson & Co. 287,000 16,795,240
========================================================================
23,912,240
========================================================================
HEALTH CARE FACILITIES-2.08%
HCA Inc.(b) 280,000 15,635,200
========================================================================
HEALTH CARE SERVICES-2.19%
Medco Health Solutions, Inc.(a) 125,000 6,371,250
------------------------------------------------------------------------
Quest Diagnostics Inc. 95,000 10,051,000
========================================================================
16,422,250
========================================================================
HEALTH CARE SUPPLIES-2.76%
Alcon, Inc. (Switzerland)(a) 213,700 20,728,900
========================================================================
HOME IMPROVEMENT RETAIL-1.06%
Home Depot, Inc. (The) 225,000 7,958,250
========================================================================
HOMEBUILDING-1.83%
D.R. Horton, Inc.(b) 240,000 7,320,000
------------------------------------------------------------------------
NVR, Inc.(a)(b) 9,000 6,465,150
========================================================================
13,785,150
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.68%
Marriott International, Inc.-Class A 81,000 5,082,750
========================================================================
HOUSEHOLD PRODUCTS-2.62%
Clorox Co. (The)(b) 130,000 8,229,000
------------------------------------------------------------------------
|
FS-341
MARKET
SHARES VALUE
------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-(CONTINUED)
Procter & Gamble Co. (The) 212,000 $ 11,479,800
========================================================================
19,708,800
========================================================================
HOUSEWARES & SPECIALTIES-1.16%
Fortune Brands, Inc. 103,000 8,711,740
========================================================================
HYPERMARKETS & SUPER CENTERS-0.76%
Costco Wholesale Corp.(b) 140,000 5,681,200
========================================================================
INDUSTRIAL CONGLOMERATES-0.86%
Tyco International Ltd. (Bermuda) 207,000 6,481,170
========================================================================
INTEGRATED OIL & GAS-4.77%
BP PLC-ADR (United Kingdom) 143,000 8,708,700
------------------------------------------------------------------------
Chevron Corp. 221,000 11,492,000
------------------------------------------------------------------------
ConocoPhillips 149,000 15,622,650
========================================================================
35,823,350
========================================================================
INTERNET SOFTWARE & SERVICES-0.70%
VeriSign, Inc.(a) 200,000 5,292,000
========================================================================
INVESTMENT BANKING & BROKERAGE-3.99%
Bear Stearns Cos. Inc. (The) 71,000 6,720,860
------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 106,000 11,319,740
------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 130,000 11,923,600
========================================================================
29,964,200
========================================================================
IT CONSULTING & OTHER SERVICES-1.18%
Accenture Ltd.-Class A (Bermuda)(a) 409,000 8,875,300
========================================================================
MANAGED HEALTH CARE-7.05%
Aetna Inc. 248,000 18,195,760
------------------------------------------------------------------------
UnitedHealth Group Inc. 267,000 25,234,170
------------------------------------------------------------------------
WellPoint, Inc.(a) 75,000 9,581,250
========================================================================
53,011,180
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.80%
Apache Corp. 100,000 5,629,000
------------------------------------------------------------------------
Devon Energy Corp. 175,000 7,904,750
========================================================================
13,533,750
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-2.09%
Valero Energy Corp. 229,000 15,693,370
========================================================================
PACKAGED FOODS & MEATS-1.11%
Hershey Co. (The) 130,000 8,307,000
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
PERSONAL PRODUCTS-3.48%
Gillette Co. (The) 506,000 $ 26,129,840
========================================================================
PHARMACEUTICALS-6.95%
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom)(b) 203,000 6,309,240
------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom) 128,000 6,470,400
------------------------------------------------------------------------
Johnson & Johnson 491,000 33,697,330
------------------------------------------------------------------------
Sanofi-Aventis-ADR (France) 130,000 5,768,100
========================================================================
52,245,070
========================================================================
PROPERTY & CASUALTY INSURANCE-0.94%
Allstate Corp. (The) 126,000 7,076,160
========================================================================
RAILROADS-0.71%
Norfolk Southern Corp. 170,000 5,338,000
========================================================================
RESTAURANTS-4.14%
Darden Restaurants, Inc. 265,000 7,950,000
------------------------------------------------------------------------
McDonald's Corp. 250,000 7,327,500
------------------------------------------------------------------------
Yum! Brands, Inc. 337,000 15,825,520
========================================================================
31,103,020
========================================================================
SEMICONDUCTORS-1.18%
Intel Corp. 149,000 3,504,480
------------------------------------------------------------------------
National Semiconductor Corp. 283,000 5,399,640
========================================================================
8,904,120
========================================================================
SOFT DRINKS-1.08%
PepsiCo, Inc. 146,000 8,123,440
========================================================================
SPECIALTY STORES-2.02%
Staples, Inc. 796,000 15,179,720
========================================================================
STEEL-1.83%
Nucor Corp.(b) 184,000 9,402,400
------------------------------------------------------------------------
United States Steel Corp. 102,000 4,361,520
========================================================================
13,763,920
========================================================================
SYSTEMS SOFTWARE-3.93%
Adobe Systems Inc. 239,000 14,213,330
------------------------------------------------------------------------
Microsoft Corp. 429,280 10,860,784
------------------------------------------------------------------------
Oracle Corp.(a) 389,000 4,496,840
========================================================================
29,570,954
========================================================================
THRIFTS & MORTGAGE FINANCE-1.87%
Countrywide Financial Corp. 389,000 14,077,910
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $669,535,613) 739,203,449
========================================================================
|
FS-342
MARKET
SHARES VALUE
------------------------------------------------------------------------
MONEY MARKET FUNDS-2.38%
Liquid Assets Portfolio-Institutional
Class(c) 8,940,682 $ 8,940,682
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 8,940,682 8,940,682
========================================================================
Total Money Market Funds (Cost
$17,881,364) 17,881,364
========================================================================
TOTAL INVESTMENTS-100.73% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $687,416,977) 757,084,813
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-4.43%
STIC Prime Portfolio-Institutional
Class(c)(d) 33,327,138 $ 33,327,138
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $33,327,138) 33,327,138
========================================================================
TOTAL INVESTMENTS-105.16% (Cost $720,744,115) 790,411,951
========================================================================
OTHER ASSETS LESS LIABILITIES-(5.16%) (38,818,675)
========================================================================
NET ASSETS-100.00% $751,593,276
________________________________________________________________________
========================================================================
|
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, 2005.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-343
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$669,535,613)* $ 739,203,449
------------------------------------------------------------
Investments in affiliated money market
funds (cost $51,208,502) 51,208,502
============================================================
Total investments (cost $720,744,115) 790,411,951
============================================================
Receivables for:
Fund shares sold 1,098,975
------------------------------------------------------------
Dividends 708,237
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 157,296
------------------------------------------------------------
Other assets 103,576
============================================================
Total assets 792,480,035
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,587,618
------------------------------------------------------------
Fund shares reacquired 999,519
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 201,036
------------------------------------------------------------
Collateral upon return of securities
loaned 33,327,138
------------------------------------------------------------
Accrued distribution fees 247,691
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,315
------------------------------------------------------------
Accrued transfer agent fees 486,221
------------------------------------------------------------
Accrued operating expenses 35,221
============================================================
Total liabilities 40,886,759
============================================================
Net assets applicable to shares outstanding $ 751,593,276
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,297,925,258
------------------------------------------------------------
Undistributed net investment income (88,320)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,615,911,498)
------------------------------------------------------------
Unrealized appreciation of investment
securities 69,667,836
============================================================
$ 751,593,276
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 186,431,217
____________________________________________________________
============================================================
Class B $ 105,857,250
____________________________________________________________
============================================================
Class C $ 47,817,195
____________________________________________________________
============================================================
Class R $ 2,131,582
____________________________________________________________
============================================================
Investor Class $ 350,468,858
____________________________________________________________
============================================================
Institutional Class $ 58,887,174
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 20,166,877
____________________________________________________________
============================================================
Class B 11,921,117
____________________________________________________________
============================================================
Class C 5,382,267
____________________________________________________________
============================================================
Class R 231,509
____________________________________________________________
============================================================
Investor Class 37,721,028
____________________________________________________________
============================================================
Institutional Class 6,332,814
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.24
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.24 divided by
94.50%) $ 9.78
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.88
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.88
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.21
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 9.29
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.30
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $32,769,431 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-344
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,646) $ 5,990,107
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $14,847 after rebates of
$161,510) 140,372
==========================================================================
Total investment income 6,130,479
==========================================================================
EXPENSES:
Advisory fees 2,914,287
--------------------------------------------------------------------------
Administrative services fees 114,166
--------------------------------------------------------------------------
Custodian fees 38,813
--------------------------------------------------------------------------
Distribution fees:
Class A 331,943
--------------------------------------------------------------------------
Class B 571,187
--------------------------------------------------------------------------
Class C 253,087
--------------------------------------------------------------------------
Class R 7,121
--------------------------------------------------------------------------
Investor Class 365,984
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 1,408,294
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 6,130
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 20,696
--------------------------------------------------------------------------
Other 300,139
==========================================================================
Total expenses 6,331,847
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (244,157)
==========================================================================
Net expenses 6,087,690
==========================================================================
Net investment income 42,789
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities (includes gains
from securities sold to affiliates of $2,126,225) 25,807,818
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (19,161,150)
==========================================================================
Net gain from investment securities 6,646,668
==========================================================================
Net increase in net assets resulting from operations $ 6,689,457
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-345
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 42,789 $ (6,606,212)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 25,807,818 98,213,764
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (19,161,150) (67,692,338)
==========================================================================================
Net increase in net assets resulting from operations 6,689,457 23,915,214
==========================================================================================
Share transactions-net:
Class A 7,685,475 18,678,547
------------------------------------------------------------------------------------------
Class B (8,148,920) (12,082,083)
------------------------------------------------------------------------------------------
Class C (907,138) 3,097,603
------------------------------------------------------------------------------------------
Class R (679,048) 574,491
------------------------------------------------------------------------------------------
Investor Class (31,720,180) 361,821,129
------------------------------------------------------------------------------------------
Institutional Class 37,968,651 22,063,157
==========================================================================================
Net increase in net assets resulting from share
transactions 4,198,840 394,152,844
==========================================================================================
Net increase in net assets 10,888,297 418,068,058
==========================================================================================
NET ASSETS:
Beginning of period 740,704,979 322,636,921
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(88,320) and $(131,109), respectively) $751,593,276 $740,704,979
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-346
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-347
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
FS-348
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 paid an advisory fee based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $1 billion 0.75% ---------------------------------------------------------------------- Next $1 billion 0.70% ---------------------------------------------------------------------- Over $2 billion 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $250 million 0.695% ---------------------------------------------------------------------- Next $250 million 0.67% ---------------------------------------------------------------------- Next $500 million 0.645% ---------------------------------------------------------------------- Next $1.5 billion 0.62% ---------------------------------------------------------------------- Next $2.5 billion 0.595% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $209,967.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $20,806 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $114,166.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $1,408,294 for Class A, Class B, Class C, Class R and Investor Class share classes and $6,130 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. The Fund, pursuant to the Investor Class Plan, pays ADI 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. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $331,943, $571,187, $253,087, $7,121 and $365,984, 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, 2005, ADI advised the Fund that it retained $38,261 in front-end sales commissions from the sale of Class A shares and $1,506, $16,492, $3,258 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 ADI.
FS-349
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $14,259,968 $ 43,067,825 $ (48,387,111) $ -- $ 8,940,682 $ 62,236 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 14,259,968 43,067,825 (48,387,111) -- 8,940,682 63,289 --
==================================================================================================================================
Subtotal $28,519,936 $ 86,135,650 $ (96,774,222) $ -- $17,881,364 $125,525 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 4,905,700 $ 77,755,697 $ (82,661,397) $ -- $ -- $ 5,223 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 130,131,667 (96,804,529) -- 33,327,138 9,624 --
==================================================================================================================================
Subtotal $ 4,905,700 $207,887,364 $(179,465,926) $ -- $33,327,138 $ 14,847 $ --
==================================================================================================================================
Total $33,425,636 $294,023,014 $(276,240,148) $ -- $51,208,502 $140,372 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $0 and sales of $7,735,000, which resulted in net realized gains of $2,126,225.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $13,384.
FS-350
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $3,189 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $32,769,431 were on loan to brokers. The loans were secured by cash collateral of $33,327,138 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $14,847 for securities lending transactions, which are net of rebates.
FS-351
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these Limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,546,948,307 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $1,067,080,173
------------------------------------------------------------------------------
October 31, 2010 532,535,321
------------------------------------------------------------------------------
October 31, 2011 35,095,604
==============================================================================
Total capital loss carryforward $1,634,711,098
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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, 2005 was $387,343,053 and $365,180,262, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 80,318,882 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (17,164,639) ============================================================================== Net unrealized appreciation of investment securities $ 63,154,243 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $727,257,708. |
FS-352
NOTE 11--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 certain 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(A)
------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,456,295 $ 33,478,961 6,225,450 $ 57,170,463
------------------------------------------------------------------------------------------------------------------------
Class B 1,158,312 10,764,191 2,516,228 22,341,073
------------------------------------------------------------------------------------------------------------------------
Class C 1,034,121 9,651,420 2,041,593 18,173,950
------------------------------------------------------------------------------------------------------------------------
Class R 41,704 402,574 111,709 1,022,930
------------------------------------------------------------------------------------------------------------------------
Investor Class 1,494,394 14,520,052 4,268,368 39,323,955
------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 3,989,941 38,701,639 2,436,212 22,232,973
========================================================================================================================
Issued in connection with acquisitions:(c)
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 203,261 1,964,867 472,810 4,373,299
------------------------------------------------------------------------------------------------------------------------
Class B (211,295) (1,964,867) (489,052) (4,373,299)
========================================================================================================================
Reacquired:
Class A (2,877,653) (27,758,353) (5,108,536) (46,826,136)
------------------------------------------------------------------------------------------------------------------------
Class B (1,823,491) (16,948,244) (3,420,244) (30,260,712)
------------------------------------------------------------------------------------------------------------------------
Class C (1,136,316) (10,558,558) (2,120,502) (18,744,901)
------------------------------------------------------------------------------------------------------------------------
Class R (112,698) (1,081,622) (48,964) (448,439)
------------------------------------------------------------------------------------------------------------------------
Investor Class (4,759,426) (46,240,232) (13,848,145) (126,645,903)
------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) (74,710) (732,988) (18,629) (169,816)
========================================================================================================================
382,439 $ 4,198,840 44,460,987 $ 394,152,844
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 10% of the outstanding shares
of the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but
not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. 7% of the outstanding
shares of the fund are owned by affiliated mutual funds. Affiliated
mutual funds are mutual funds that are advised by AIM. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
(c) As of the opening of business on November 3, 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 on 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-353
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, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74 $ 11.29
------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.00(a)(b) (0.08)(a) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.08 0.36 1.59 (1.36) (8.84) 6.60
========================================================================================================================
Total from investment
operations 0.08 0.28 1.51 (1.45) (8.92) 6.45
========================================================================================================================
Net asset value, end of period $ 9.24 $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 0.87% 3.15% 20.49% (16.44)% (50.28)% 57.13%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $186,431 $177,498 $154,052 $105,320 $138,269 $225,255
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 1.55%(d) 1.54% 1.82% 1.70% 1.57% 1.58%
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.61%(d) 1.55% 1.82% 1.70% 1.57% 1.58%
========================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.03%(b)(d) (0.92)% (1.01)% (1.01)% (0.72)% (0.82)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income (loss) per share and the ratio of net investment income (loss) to
average net assets excluding the special dividend are $(0.01) and
$(0.30)%, respectively.
(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 the 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
$191,253,560.
(e) Not annualized for periods less than one year.
CLASS B
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54 $ 11.25
-------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.03)(a)(b) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.09 0.35 1.53 (1.33) (8.71) 6.56
=========================================================================================================================
Total from investment
operations 0.06 0.21 1.41 (1.47) (8.87) 6.29
=========================================================================================================================
Net asset value, end of period $ 8.88 $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 0.68% 2.44% 19.58% (16.96)% (50.57)% 55.91%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $105,857 $112,931 $122,011 $104,040 $144,747 $210,224
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.20%(d) 2.19% 2.47% 2.35% 2.23% 2.24%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.26%(d) 2.20% 2.47% 2.35% 2.23% 2.24%
=========================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.62)%(b)(d) (1.57)% (1.66)% (1.66)% (1.39)% (1.48)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and $(0.95)%, respectively.
(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 the 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
$115,184,129.
(e) Not annualized for periods less than one year.
FS-354
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55 $ 11.25
------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.03)(a)(b) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.08 0.35 1.53 (1.32) (8.72) 6.57
==================================================================================================================
Total from investment
operations 0.05 0.21 1.41 (1.46) (8.88) 6.30
==================================================================================================================
Net asset value, end of period $ 8.88 $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 0.57% 2.44% 19.56% (16.84)% (50.60)% 56.00%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $47,817 $48,420 $44,272 $36,575 $57,865 $79,392
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.20%(d) 2.19% 2.47% 2.35% 2.23% 2.24%
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.26%(d) 2.20% 2.47% 2.35% 2.23% 2.24%
==================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.62)%(b)(d) (1.57)% (1.66)% (1.66)% (1.39)% (1.48)%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and $(0.95)%, respectively.
(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 the 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
$51,036,875.
(e) Not annualized for periods less than one year.
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.13 $ 8.87 $ 7.37 $ 8.40
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a)(b) (0.10)(a) (0.09)(a) (0.04)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.09 0.36 1.59 (0.99)
======================================================================================================================
Total from investment operations 0.08 0.26 1.50 (1.03)
======================================================================================================================
Net asset value, end of period $ 9.21 $ 9.13 $ 8.87 $ 7.37
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(c) 0.88% 2.93% 20.35% (12.26)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,132 $2,761 $2,127 $ 9
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.70%(d) 1.69% 1.97% 1.85%(e)
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.76%(d) 1.70% 1.97% 1.85%(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.12)%(b)(d) (1.07)% (1.16)% (1.16)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f) 48% 111% 123% 111%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.02) and $(0.45)%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$2,871,902.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-355
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
---------------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.20 $ 8.88 $ 8.24
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a)(b) (0.05)(a)(c) (0.01)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 0.37 0.65
=======================================================================================================================
Total from investment operations 0.09 0.32 0.64
=======================================================================================================================
Net asset value, end of period $ 9.29 $ 9.20 $ 8.88
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(d) 0.98% 3.60%(c) 7.77%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $350,469 $376,905 $ 174
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.39%(e) 1.19% 1.56%(f)
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.45%(e) 1.42% 1.56%(f)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets 0.19%(b)(e) (0.57)% (0.75)%(f)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(g) 48% 111% 123%
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income (loss) to
average net assets excluding the special dividend are $0.00 and
$(0.14)%, respectively.
(c) The advisor reimbursed Investor Class expenses related to an overpayment
of Rule 12b-1 fees of the INVESCO Growth fund paid to INVESCO
Distributors, Inc., the prior distributor of INVESCO Growth Fund. Had
the advisor not reimbursed these expenses the net investment income per
share, the ratio of expenses to average net assets, the ratio of net
investment income to average net assets and the total return would have
been (0.07), 1.41%, (0.79) and 3.27%, respectively.
(d) 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(e) Ratios are annualized and based on average daily net assets of
$381,925,018.
(f) Annualized.
(g) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.18 $ 9.13
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)(b) (0.01)(a)
---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 0.06
=============================================================================================
Total from investment operations 0.12 0.05
=============================================================================================
Net asset value, end of period $ 9.30 $ 9.18
_____________________________________________________________________________________________
=============================================================================================
Total return(c) 1.31% 0.55%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,887 $22,190
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.84%(d) 0.92%(e)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.90%(d) 0.93%(e)
=============================================================================================
Ratio of net investment income to average net assets 0.74%(b)(d) (0.30)%(e)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(f) 48% 111%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.03 and $0.41%,
respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$41,312,037.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-356
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA,
FS-357
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-358
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.94%
ADVERTISING-0.86%
Omnicom Group Inc. 18,000 $ 1,492,200
=======================================================================
AEROSPACE & DEFENSE-1.08%
L-3 Communications Holdings, Inc. 26,500 1,880,705
=======================================================================
AIR FREIGHT & LOGISTICS-0.80%
Robinson (C.H.) Worldwide, Inc. 27,000 1,393,200
=======================================================================
APPAREL RETAIL-2.31%
Abercrombie & Fitch Co.-Class A 22,000 1,186,900
-----------------------------------------------------------------------
Chico's FAS, Inc.(a) 53,000 1,358,390
-----------------------------------------------------------------------
Urban Outfitters, Inc.(a) 33,000 1,461,900
=======================================================================
4,007,190
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.19%
Coach, Inc.(a) 83,000 2,224,400
-----------------------------------------------------------------------
Polo Ralph Lauren Corp. 45,000 1,579,500
=======================================================================
3,803,900
=======================================================================
APPLICATION SOFTWARE-3.35%
Amdocs Ltd. (United Kingdom)(a) 60,000 1,602,600
-----------------------------------------------------------------------
Autodesk, Inc.(a) 35,100 1,117,233
-----------------------------------------------------------------------
Mercury Interactive Corp.(a) 36,000 1,487,880
-----------------------------------------------------------------------
MicroStrategy Inc.-Class A(a) 18,000 783,540
-----------------------------------------------------------------------
NAVTEQ Corp.(a) 22,700 826,734
=======================================================================
5,817,987
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.07%
Investors Financial Services Corp.(b) 50,000 2,097,500
-----------------------------------------------------------------------
Legg Mason, Inc. 21,000 1,488,060
=======================================================================
3,585,560
=======================================================================
AUTO PARTS & EQUIPMENT-0.87%
Autoliv, Inc. 34,000 1,504,500
=======================================================================
BIOTECHNOLOGY-3.85%
Charles River Laboratories International,
Inc.(a) 40,400 1,913,748
-----------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 30,000 689,700
-----------------------------------------------------------------------
Gilead Sciences, Inc.(a) 45,000 1,669,500
-----------------------------------------------------------------------
Invitrogen Corp.(a) 14,000 1,025,780
-----------------------------------------------------------------------
Martek Biosciences Corp.(a)(b) 36,000 1,377,720
=======================================================================
6,676,448
=======================================================================
CASINOS & GAMING-0.93%
Station Casinos, Inc. 25,000 1,613,250
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMODITY CHEMICALS-1.03%
Celanese Corp.-Series A(a) 122,400 $ 1,780,920
=======================================================================
COMMUNICATIONS EQUIPMENT-4.23%
Avaya Inc.(a) 140,000 1,215,200
-----------------------------------------------------------------------
Comverse Technology, Inc.(a) 58,000 1,321,820
-----------------------------------------------------------------------
Corning Inc.(a) 100,000 1,375,000
-----------------------------------------------------------------------
Juniper Networks, Inc.(a) 88,200 1,992,438
-----------------------------------------------------------------------
Scientific-Atlanta, Inc. 47,000 1,437,260
=======================================================================
7,341,718
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.27%
QLogic Corp.(a) 40,000 1,329,600
-----------------------------------------------------------------------
Storage Technology Corp.(a) 31,700 881,260
=======================================================================
2,210,860
=======================================================================
CONSUMER FINANCE-0.67%
First Marblehead Corp. (The)(a)(b) 30,000 1,155,900
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.02%
Alliance Data Systems Corp.(a) 58,000 2,343,200
-----------------------------------------------------------------------
Iron Mountain Inc.(a) 39,000 1,158,300
=======================================================================
3,501,500
=======================================================================
DEPARTMENT STORES-2.27%
Kohl's Corp.(a) 40,000 1,904,000
-----------------------------------------------------------------------
Nordstrom, Inc. 40,000 2,033,200
=======================================================================
3,937,200
=======================================================================
DIVERSIFIED BANKS-0.98%
Centennial Bank Holdings, Inc. (Acquired
12/27/04; Cost $1,653,750)(a)(c) 157,500 1,701,000
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.71%
Career Education Corp.(a) 33,800 1,062,672
-----------------------------------------------------------------------
ChoicePoint Inc.(a) 36,400 1,436,708
-----------------------------------------------------------------------
Corporate Executive Board Co. (The) 34,000 2,234,820
-----------------------------------------------------------------------
Corrections Corp. of America(a) 45,000 1,703,250
=======================================================================
6,437,450
=======================================================================
DRUG RETAIL-1.08%
Shoppers Drug Mart Corp. (Canada)(a) 60,000 1,871,498
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.98%
Cooper Industries, Ltd.-Class A (Bermuda) 26,700 1,699,722
=======================================================================
|
FS-359
MARKET
SHARES VALUE
-----------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-0.61%
Amphenol Corp.-Class A 27,000 $ 1,064,880
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.78%
Benchmark Electronics, Inc.(a) 50,000 1,352,000
=======================================================================
GENERAL MERCHANDISE STORES-1.49%
Dollar General Corp. 80,700 1,642,245
-----------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 38,300 937,967
=======================================================================
2,580,212
=======================================================================
HEALTH CARE DISTRIBUTORS-0.86%
Schein (Henry), Inc.(a) 40,000 1,500,400
=======================================================================
HEALTH CARE EQUIPMENT-6.66%
Biomet, Inc. 42,000 1,624,980
-----------------------------------------------------------------------
Fisher Scientific International Inc.(a) 24,000 1,425,120
-----------------------------------------------------------------------
INAMED Corp.(a) 15,000 912,600
-----------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 45,000 2,765,250
-----------------------------------------------------------------------
PerkinElmer, Inc. 99,000 1,831,500
-----------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 41,900 1,413,706
-----------------------------------------------------------------------
Waters Corp.(a) 40,000 1,585,200
=======================================================================
11,558,356
=======================================================================
HEALTH CARE FACILITIES-1.05%
Community Health Systems Inc.(a) 50,000 1,822,500
=======================================================================
HEALTH CARE SERVICES-3.52%
Caremark Rx, Inc.(a) 45,000 1,802,250
-----------------------------------------------------------------------
Cerner Corp.(a)(b) 20,000 1,161,200
-----------------------------------------------------------------------
Express Scripts, Inc.(a) 18,000 1,613,520
-----------------------------------------------------------------------
Renal Care Group, Inc.(a) 40,000 1,526,000
=======================================================================
6,102,970
=======================================================================
HEALTH CARE SUPPLIES-1.01%
Cooper Cos., Inc. (The) 25,900 1,749,545
=======================================================================
HOME FURNISHINGS-0.53%
Tempur-Pedic International Inc.(a) 48,000 916,320
=======================================================================
HOMEBUILDING-1.03%
Pulte Homes, Inc. 25,000 1,786,250
=======================================================================
HOTELS, RESORTS & CRUISE LINES-2.26%
Hilton Hotels Corp. 105,000 2,292,150
-----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(d) 30,000 1,630,200
=======================================================================
3,922,350
=======================================================================
HOUSEWARES & SPECIALTIES-1.53%
Fortune Brands, Inc. 10,200 862,716
-----------------------------------------------------------------------
Jarden Corp.(a) 40,000 1,786,800
=======================================================================
2,649,516
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INDUSTRIAL MACHINERY-0.53%
Ingersoll-Rand Co. Ltd.-Class A (Bermuda) 12,000 $ 922,440
=======================================================================
INTEGRATED OIL & GAS-1.23%
Murphy Oil Corp. 24,000 2,138,160
=======================================================================
INTERNET SOFTWARE & SERVICES-1.88%
Digital River, Inc.(a) 45,500 1,210,300
-----------------------------------------------------------------------
VeriSign, Inc.(a) 77,300 2,045,358
=======================================================================
3,255,658
=======================================================================
IT CONSULTING & OTHER SERVICES-0.99%
Cognizant Technology Solutions Corp.-Class
A(a) 41,000 1,722,410
=======================================================================
LEISURE PRODUCTS-0.48%
Brunswick Corp. 20,000 840,000
=======================================================================
MANAGED HEALTH CARE-0.36%
AMERIGROUP Corp.(a) 18,000 632,160
=======================================================================
MULTI-LINE INSURANCE-0.19%
Quanta Capital Holdings Ltd. (Bermuda)(a) 41,177 329,416
=======================================================================
OFFICE ELECTRONICS-0.56%
Zebra Technologies Corp.-Class A(a) 20,400 974,304
=======================================================================
OIL & GAS DRILLING-2.02%
Nabors Industries, Ltd. (Bermuda)(a) 32,000 1,723,840
-----------------------------------------------------------------------
Noble Corp. (Cayman Islands) 35,000 1,781,500
=======================================================================
3,505,340
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.51%
National-Oilwell Varco Inc.(a) 37,000 1,470,380
-----------------------------------------------------------------------
Smith International, Inc. 30,000 1,745,400
-----------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 22,000 1,147,300
=======================================================================
4,363,080
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.45%
Ultra Petroleum Corp. (Canada)(a) 50,000 2,524,000
=======================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.03%
Williams Cos., Inc. (The) 105,000 1,787,100
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.06%
CapitalSource Inc.(a) 88,000 1,848,000
=======================================================================
PHARMACEUTICALS-2.23%
Medicis Pharmaceutical Corp.-Class A 32,000 899,200
-----------------------------------------------------------------------
MGI Pharma, Inc.(a) 64,000 1,411,200
-----------------------------------------------------------------------
Valeant Pharmaceuticals International 75,000 1,556,250
=======================================================================
3,866,650
=======================================================================
|
FS-360
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PUBLISHING-0.49%
Getty Images, Inc.(a) 12,000 $ 858,600
=======================================================================
RAILROADS-0.49%
CSX Corp. 21,000 842,730
=======================================================================
REAL ESTATE-1.84%
Aames Investment Corp. 152,400 1,287,780
-----------------------------------------------------------------------
People's Choice Financial Corp. (Acquired
12/21/04; Cost $1,897,000)(a)(c) 189,700 1,897,000
=======================================================================
3,184,780
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.16%
CB Richard Ellis Group, Inc.-Class A(a) 57,900 2,012,025
=======================================================================
REGIONAL BANKS-0.56%
Signature Bank(a) 39,600 975,348
=======================================================================
SEMICONDUCTOR EQUIPMENT-0.98%
Novellus Systems, Inc.(a) 36,000 843,480
-----------------------------------------------------------------------
Tessera Technologies Inc.(a) 32,400 860,544
=======================================================================
1,704,024
=======================================================================
SEMICONDUCTORS-5.45%
Altera Corp.(a) 100,000 2,073,000
-----------------------------------------------------------------------
ATI Technologies Inc. (Canada)(a) 114,700 1,697,560
-----------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 45,000 1,506,600
-----------------------------------------------------------------------
Microchip Technology Inc. 80,000 2,278,400
-----------------------------------------------------------------------
National Semiconductor Corp. 100,000 1,908,000
=======================================================================
9,463,560
=======================================================================
SPECIALIZED FINANCE-0.72%
Chicago Mercantile Exchange Holdings Inc. 6,400 1,251,328
=======================================================================
SPECIALTY STORES-5.01%
Advance Auto Parts, Inc.(a) 37,000 1,973,950
-----------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 40,000 1,488,400
-----------------------------------------------------------------------
Office Depot, Inc.(a) 76,000 1,488,080
-----------------------------------------------------------------------
Staples, Inc. 91,500 1,744,905
-----------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 59,500 1,992,655
=======================================================================
8,687,990
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS-1.40%
MSC Industrial Direct Co., Inc.-Class A 57,000 $ 1,531,590
-----------------------------------------------------------------------
W.W. Grainger, Inc. 16,300 901,227
=======================================================================
2,432,817
=======================================================================
TRUCKING-0.53%
Swift Transportation Co., Inc.(a) 43,000 917,190
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.91%
American Tower Corp.-Class A(a) 82,600 1,423,198
-----------------------------------------------------------------------
Nextel Partners, Inc.-Class A(a) 90,000 2,116,800
-----------------------------------------------------------------------
NII Holdings Inc.(a) 28,000 1,401,960
-----------------------------------------------------------------------
SpectraSite, Inc.(a) 33,000 1,852,290
=======================================================================
6,794,248
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $154,999,096) 168,251,365
=======================================================================
MONEY MARKET FUNDS-2.75%
Liquid Assets Portfolio-Institutional
Class(e) 2,385,692 2,385,692
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 2,385,692 2,385,692
=======================================================================
Total Money Market Funds (Cost
$4,771,384) 4,771,384
=======================================================================
TOTAL INVESTMENTS-99.69% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $159,770,480) 173,022,749
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-2.72%
STIC Prime Portfolio-Institutional
Class(e)(f) 4,723,100 4,723,100
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $4,723,100) 4,723,100
=======================================================================
TOTAL INVESTMENTS-102.41% (Cost $164,493,580) 177,745,849
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.41%) (4,190,098)
=======================================================================
NET ASSETS-100.00% $173,555,751
_______________________________________________________________________
=======================================================================
|
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, 2005.
(c) 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 April 30, 2005 was
$3,598,000, which represented 2.07% of the Fund's Net Assets. These
securities are considered to be illiquid; the portfolio is limited to
investing 15% of net assets in illiquid securities.
(d) Each unit represents one common share and one Class B share.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-361
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$154,999,096)* $ 168,251,365
------------------------------------------------------------
Investments in affiliated money market funds
(cost $9,494,484) 9,494,484
============================================================
Total investments (cost $164,493,580) 177,745,849
============================================================
Receivables for:
Investments sold 2,369,701
------------------------------------------------------------
Fund shares sold 79,121
------------------------------------------------------------
Dividends 61,133
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 24,529
------------------------------------------------------------
Other assets 27,946
============================================================
Total assets 180,308,279
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,300,277
------------------------------------------------------------
Fund shares reacquired 407,921
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 32,061
------------------------------------------------------------
Collateral upon return of securities loaned 4,723,100
------------------------------------------------------------
Accrued distribution fees 95,667
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,383
------------------------------------------------------------
Accrued transfer agent fees 140,290
------------------------------------------------------------
Accrued operating expenses 51,829
============================================================
Total liabilities 6,752,528
============================================================
Net assets applicable to shares outstanding $ 173,555,751
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 282,014,629
------------------------------------------------------------
Undistributed net investment income (loss) (1,592,487)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (120,118,527)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 13,252,136
============================================================
$ 173,555,751
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 88,060,287
____________________________________________________________
============================================================
Class B $ 62,328,884
____________________________________________________________
============================================================
Class C $ 22,078,567
____________________________________________________________
============================================================
Class R $ 1,077,949
____________________________________________________________
============================================================
Institutional Class $ 10,064
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 9,560,702
____________________________________________________________
============================================================
Class B 7,029,958
____________________________________________________________
============================================================
Class C 2,489,778
____________________________________________________________
============================================================
Class R 117,727
____________________________________________________________
============================================================
Institutional Class 1,085
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.21
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.21 divided by
94.50%) $ 9.75
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.87
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.87
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.16
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.28
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $3,721,463 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-362
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,182) $ 462,289
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $7,003 after rebates of
$57,773) 59,761
==========================================================================
Total investment income 522,050
==========================================================================
EXPENSES:
Advisory fees 807,397
--------------------------------------------------------------------------
Administrative services fees 24,795
--------------------------------------------------------------------------
Custodian fees 7,582
--------------------------------------------------------------------------
Distribution fees:
Class A 181,426
--------------------------------------------------------------------------
Class B 359,708
--------------------------------------------------------------------------
Class C 125,661
--------------------------------------------------------------------------
Class R 2,733
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 507,388
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 5
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 11,111
--------------------------------------------------------------------------
Other 106,055
==========================================================================
Total expenses 2,133,861
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (48,695)
==========================================================================
Net expenses 2,085,166
==========================================================================
Net investment income (loss) (1,563,116)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (includes gains (losses) from
securities sold to affiliates of $(318,507)) 19,028,063
--------------------------------------------------------------------------
Foreign currencies (1,671)
==========================================================================
19,026,392
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (13,408,650)
--------------------------------------------------------------------------
Foreign currencies 6,416
==========================================================================
(13,402,234)
==========================================================================
Net gain from investment securities and foreign currencies 5,624,158
==========================================================================
Net increase in net assets resulting from operations $ 4,061,042
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-363
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,563,116) $ (3,749,647)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 19,026,392 9,151,671
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (13,402,234) (2,982,396)
==========================================================================================
Net increase in net assets resulting from operations 4,061,042 2,419,628
==========================================================================================
Share transactions-net:
Class A (13,470,372) (10,422,993)
------------------------------------------------------------------------------------------
Class B (9,440,141) (11,811,705)
------------------------------------------------------------------------------------------
Class C (2,871,385) (4,684,464)
------------------------------------------------------------------------------------------
Class R 204,721 676,095
------------------------------------------------------------------------------------------
Institutional Class -- 10,000
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (25,577,177) (26,233,067)
==========================================================================================
Net increase (decrease) in net assets (21,516,135) (23,813,439)
==========================================================================================
NET ASSETS:
Beginning of period 195,071,886 218,885,325
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(1,592,487) and $(29,371),
respectively) $173,555,751 $195,071,886
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-364
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-365
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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-366
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $1 billion 0.80% -------------------------------------------------------------------- Over $1 billion 0.75% ____________________________________________________________________ ==================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $250 million 0.745% -------------------------------------------------------------------- Next $250 million 0.73% -------------------------------------------------------------------- Next $500 million 0.715% -------------------------------------------------------------------- Next $1.5 billion 0.70% -------------------------------------------------------------------- Next $2.5 billion 0.685% -------------------------------------------------------------------- Next $2.5 billion 0.67% -------------------------------------------------------------------- Next $2.5 billion 0.655% -------------------------------------------------------------------- Over $10 billion 0.64% ____________________________________________________________________ ==================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $36,886.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP agreed to reimburse $9,355 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $24,795.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $507,388 for Class A, Class B, Class C and Class R share classes and $5 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $181,426, $359,708, $125,661 and $2,733, 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, 2005, ADI advised the Fund that it retained $18,491 in front-end sales commissions from the sale of Class A shares and $25, $18,942, $1,745 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 ADI.
FS-367
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,818,420 $29,453,914 $(28,886,642) $ -- $2,385,692 $26,132 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,818,420 29,453,914 (28,886,642) -- 2,385,692 26,626 --
==================================================================================================================================
Subtotal $ 3,636,840 $58,907,828 $(57,773,284) $ -- $4,771,384 $52,758 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 6,790,375 $27,408,013 $(29,475,288) $ -- $4,723,100 $ 7,003 $ --
==================================================================================================================================
Total $10,427,215 $86,315,841 $(87,248,572) $ -- $9,494,484 $59,761 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $1,609,832 and sales of $2,346,010, which resulted in net realized gain (loss) of $(318,507).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $2,454.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,200 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.
FS-368
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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. During the six months ended April 30, 2005, the average interfund borrowings for the one day the borrowings were outstanding was $5,340,100 with a weighted average interest rate of 2.94% and interest expense of $430.
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. The Fund did not borrow under the facility during the six months ended April 30, 2005.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $3,721,463 were on loan to brokers. The loans were secured by cash collateral of $4,723,100 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,003 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
October 31, 2008 $ 407,338
---------------------------------------------------------------------------
October 31, 2009 86,724,292
---------------------------------------------------------------------------
October 31, 2010 50,812,218
===========================================================================
Total capital loss carryforward $137,943,848
___________________________________________________________________________
===========================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-369
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, 2005 was $124,041,823 and $152,710,015, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $20,666,997 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,002,162) =============================================================================== Net unrealized appreciation of investment securities $12,664,835 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $165,081,014. |
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 certain 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, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,606,859 $ 15,552,162 3,366,280 $ 31,467,821
----------------------------------------------------------------------------------------------------------------------
Class B 662,305 6,186,393 1,689,471 15,326,444
----------------------------------------------------------------------------------------------------------------------
Class C 320,993 3,010,529 1,055,967 9,613,286
----------------------------------------------------------------------------------------------------------------------
Class R 46,364 447,790 79,652 742,690
----------------------------------------------------------------------------------------------------------------------
Institutional Class(a) -- -- 1,085 10,000
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 103,592 1,007,200 287,382 2,711,609
----------------------------------------------------------------------------------------------------------------------
Class B (107,470) (1,007,200) (296,604) (2,711,609)
======================================================================================================================
Reacquired:
Class A (3,084,661) (30,029,734) (4,869,016) (44,602,423)
----------------------------------------------------------------------------------------------------------------------
Class B (1,558,332) (14,619,334) (2,730,826) (24,426,540)
----------------------------------------------------------------------------------------------------------------------
Class C (625,745) (5,881,914) (1,595,627) (14,297,750)
----------------------------------------------------------------------------------------------------------------------
Class R (25,701) (243,069) (7,765) (66,595)
======================================================================================================================
(2,661,796) $(25,577,177) (3,020,001) $(26,233,067)
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Institutional Class shares commenced sales on April 30, 2004.
FS-370
NOTE 12--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,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.13)(a) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.29 2.49 (1.91) (5.69) 4.50
=================================================================================================================================
Total from investment operations 0.13 0.16 2.38 (2.04) (5.80) 4.38
=================================================================================================================================
Net asset value, end of period $ 9.21 $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.43% 1.79% 36.39% (23.78)% (40.33)% 43.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $88,060 $99,262 $108,436 $63,463 $94,457 $114,913
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.76%(c) 1.74% 1.90% 1.83% 1.65% 1.63%(d)
=================================================================================================================================
Without fee waivers and/or expense
reimbursements 1.80%(c) 1.76% 1.90% 1.83% 1.65% 1.63%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.24)%(c) (1.36)% (1.42)% (1.49)% (1.06)% (0.76)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$104,530,799.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-371
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-----------------------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.27 2.43 (1.87) (5.62) 4.47
=================================================================================================================================
Total from investment operations 0.10 0.09 2.28 (2.05) (5.80) 4.25
=================================================================================================================================
Net asset value, end of period $ 8.87 $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.14% 1.04% 35.63% (24.26)% (40.70)% 42.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $62,329 $70,421 $81,298 $58,654 $81,905 $103,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.41%(c) 2.39% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Without fee waivers and/or expense
reimbursements 2.45%(c) 2.41% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.89)%(c) (2.01)% (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$72,537,839.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-372
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-----------------------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.27 2.43 (1.87) (5.63) 4.48
=================================================================================================================================
Total from investment operations 0.10 0.09 2.28 (2.05) (5.81) 4.26
=================================================================================================================================
Net asset value, end of period $ 8.87 $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.14% 1.04% 35.63% (24.26)% (40.74)% 42.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $22,079 $24,503 $28,928 $16,404 $23,971 $29,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.41%(c) 2.39% 2.55% 2.48% 2.32% 2.32%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.45%(c) 2.41% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.89)%(c) (2.01)% (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$25,340,541.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.03 $8.89 $6.54 $ 8.73
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.14)(a) (0.13)(a) (0.05)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 0.28 2.48 (2.14)
======================================================================================================================
Total from investment operations 0.13 0.14 2.35 (2.19)
======================================================================================================================
Net asset value, end of period $ 9.16 $9.03 $8.89 $ 6.54
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 1.44% 1.57% 35.93% (25.09)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,078 $ 877 $ 224 $ 7
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.91%(c) 1.89% 2.05% 1.98%(d)
======================================================================================================================
Without fee waivers and/or expense reimbursements 1.95%(c) 1.91% 2.05% 1.98%(d)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.39)%(c) (1.51)% (1.57)% (1.64)%(d)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(e) 63% 167% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,102,309.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-373
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.11 $ 9.22
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.04)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 (0.07)
=============================================================================================
Total from investment operations 0.17 (0.11)
=============================================================================================
Net asset value, end of period $ 9.28 $ 9.11
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 1.87% (1.19)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 10
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(c) 1.20%(d)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.05%(c) 1.28%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.49)%(c) (0.82)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 63% 167%
_____________________________________________________________________________________________
=============================================================================================
|
(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 $10,612.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these
FS-374
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-375
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS--99.35%
ADVERTISING--5.51%
Interpublic Group of Cos., Inc. (The) (a) 2,500 $ 32,150
------------------------------------------------------------------------------------------------------------------
Omnicom Group Inc. 500 41,450
==================================================================================================================
73,600
==================================================================================================================
AEROSPACE & DEFENSE--1.34%
Honeywell International Inc. 500 17,880
==================================================================================================================
APPAREL RETAIL--2.56%
Gap, Inc. (The) 1,600 34,160
==================================================================================================================
BREWERS--0.81%
Molson Coors Brewing Co.-Class B 175 10,806
==================================================================================================================
BUILDING PRODUCTS--2.51%
American Standard Cos. Inc. 750 33,532
==================================================================================================================
DATA PROCESSING & OUTSOURCED SERVICES--5.16%
Ceridian Corp. (a) 1,600 26,992
------------------------------------------------------------------------------------------------------------------
First Data Corp. 1,100 41,833
==================================================================================================================
68,825
==================================================================================================================
DIVERSIFIED COMMERCIAL SERVICES--5.60%
Cendant Corp. 2,000 39,820
------------------------------------------------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 1,900 34,998
==================================================================================================================
74,818
==================================================================================================================
ENVIRONMENTAL SERVICES--2.99%
Waste Management, Inc. 1,400 39,886
==================================================================================================================
FOOD RETAIL--3.22%
Kroger Co. (The) (a) 1,650 26,020
------------------------------------------------------------------------------------------------------------------
Safeway Inc. (a) 800 17,032
==================================================================================================================
43,052
==================================================================================================================
GENERAL MERCHANDISE STORES--2.09%
Target Corp. 600 27,840
==================================================================================================================
|
FS-376
MARKET
SHARES VALUE
------------------------------------------------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS--8.32%
Cardinal Health, Inc. 1,400 $ 77,798
------------------------------------------------------------------------------------------------------------------
McKesson Corp. 900 33,300
==================================================================================================================
111,098
==================================================================================================================
HEALTH CARE EQUIPMENT--2.55%
Waters Corp. (a) 860 34,082
==================================================================================================================
HEALTH CARE SERVICES--0.54%
IMS Health Inc. 300 7,194
==================================================================================================================
HOTELS, RESORTS & CRUISE LINES--1.71%
Starwood Hotels & Resorts Worldwide, Inc. (b) 420 22,823
==================================================================================================================
INDUSTRIAL CONGLOMERATES--4.46%
Tyco International Ltd. (Bermuda) 1,900 59,489
==================================================================================================================
INVESTMENT BANKING & BROKERAGE--3.23%
Merrill Lynch & Co., Inc. 800 43,144
==================================================================================================================
LEISURE PRODUCTS--2.20%
Brunswick Corp. 700 29,400
==================================================================================================================
MANAGED HEALTH CARE--4.50%
WellPoint, Inc. (a) 470 60,042
==================================================================================================================
OIL & GAS DRILLING--5.90%
Pride International, Inc. (a) 1,450 32,335
------------------------------------------------------------------------------------------------------------------
Transocean Inc. (Cayman Islands) (a) 1,000 46,370
==================================================================================================================
78,705
==================================================================================================================
OIL & GAS EQUIPMENT & SERVICES--1.76%
Weatherford International Ltd. (Bermuda) (a) 450 23,468
==================================================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES--7.79%
Citigroup Inc. 1,100 51,656
------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co. 1,475 52,348
==================================================================================================================
104,004
==================================================================================================================
PHARMACEUTICALS--9.29%
Pfizer Inc. 1,300 35,321
------------------------------------------------------------------------------------------------------------------
Sanofi-Aventis (France) (c) 687 60,836
------------------------------------------------------------------------------------------------------------------
Wyeth 620 27,863
==================================================================================================================
124,020
==================================================================================================================
|
FS-377
MARKET
SHARES VALUE
------------------------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE--2.74%
ACE Ltd. (Cayman Islands) 850 $ 36,516
==================================================================================================================
SEMICONDUCTOR EQUIPMENT--1.40%
Novellus Systems, Inc. (a) 800 18,744
==================================================================================================================
SYSTEMS SOFTWARE--4.13%
Computer Associates International, Inc. 2,050 55,145
==================================================================================================================
THRIFTS & MORTGAGE FINANCE--7.04%
Fannie Mae 1,000 53,950
------------------------------------------------------------------------------------------------------------------
Freddie Mac 650 39,988
==================================================================================================================
93,938
==================================================================================================================
Total Common Stocks & Other Equity Interests (Cost $1,061,843) 1,326,211
==================================================================================================================
TOTAL INVESTMENTS--99.35% (Cost $1,061,843) 1,326,211
==================================================================================================================
OTHER ASSETS LESS LIABILITIES--0.65% 8,641
==================================================================================================================
NET ASSETS--100.00% $1,334,852
__________________________________________________________________________________________________________________
==================================================================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Each unit represents one common share and one Class B share.
(c) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The market value of this security at April 30, 2005 represented 4.59% of the Fund's Total Investments. See Note 1A.
See accompanying notes which are an integral part of the financial statements.
FS-378
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost $1,061,843) $ 1,326,211
-------------------------------------------------------------------------------------------------------
Cash 12,331
-------------------------------------------------------------------------------------------------------
Receivables for:
Dividends 1,441
-------------------------------------------------------------------------------------------------------
Amount due from advisor 14,841
-------------------------------------------------------------------------------------------------------
Other assets 138
=======================================================================================================
Total assets 1,354,962
_______________________________________________________________________________________________________
=======================================================================================================
LIABILITIES:
Accrued trustees' fees 10,727
-------------------------------------------------------------------------------------------------------
Accrued transfer agent fees 10
-------------------------------------------------------------------------------------------------------
Accrued operating expenses 9,373
=======================================================================================================
Total liabilities 20,110
=======================================================================================================
Net assets applicable to shares outstanding $ 1,334,852
=======================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 1,044,533
-------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (4,191)
-------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and foreign currencies 30,142
-------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 264,368
=======================================================================================================
$ 1,334,852
_______________________________________________________________________________________________________
=======================================================================================================
NET ASSETS:
Class A $ 533,937
_______________________________________________________________________________________________________
=======================================================================================================
Class B $ 400,457
_______________________________________________________________________________________________________
=======================================================================================================
Class C $ 400,458
_______________________________________________________________________________________________________
=======================================================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 42,364
_______________________________________________________________________________________________________
=======================================================================================================
Class B 31,774
_______________________________________________________________________________________________________
=======================================================================================================
Class C 31,774
_______________________________________________________________________________________________________
=======================================================================================================
Class A:
Net asset value per share $ 12.60
-------------------------------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $12.60 / 94.50%) $ 13.33
_______________________________________________________________________________________________________
=======================================================================================================
Class B:
Net asset value and offering price per share $ 12.60
_______________________________________________________________________________________________________
=======================================================================================================
Class C:
Net asset value and offering price per share $ 12.60
_______________________________________________________________________________________________________
=======================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-379
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends $ 7,714
=======================================================================================================
EXPENSES:
Advisory fees 5,107
-------------------------------------------------------------------------------------------------------
Administrative services fees 24,795
-------------------------------------------------------------------------------------------------------
Custodian fees 823
-------------------------------------------------------------------------------------------------------
Distribution fees:
Class A 953
-------------------------------------------------------------------------------------------------------
Class B 2,043
-------------------------------------------------------------------------------------------------------
Class C 2,043
-------------------------------------------------------------------------------------------------------
Transfer agent fees 47
-------------------------------------------------------------------------------------------------------
Trustees' and officers fees and benefits 8,259
-------------------------------------------------------------------------------------------------------
Professional services fees 16,003
-------------------------------------------------------------------------------------------------------
Other 1,576
=======================================================================================================
Total expenses 61,649
=======================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangements (49,744)
=======================================================================================================
Net expenses 11,905
=======================================================================================================
Net investment income (loss) (4,191)
=======================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain from:
Investment securities 30,140
-------------------------------------------------------------------------------------------------------
Foreign currencies 14
=======================================================================================================
30,154
=======================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 32,374
-------------------------------------------------------------------------------------------------------
Foreign currencies (7)
=======================================================================================================
32,367
=======================================================================================================
Net gain from investment securities
and foreign currencies 62,521
=======================================================================================================
Net increase in net assets resulting from operations $ 58,330
_______________________________________________________________________________________________________
=======================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-380
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,191) $ (8,938)
------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investment securities
and foreign currencies 30,154 89,846
------------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities
and foreign currencies 32,367 16,789
==============================================================================================================================
Net increase in net assets resulting from operations 58,330 97,697
==============================================================================================================================
Distributions to shareholders from net realized gains:
Class A (24,703) --
------------------------------------------------------------------------------------------------------------------------------
Class B (18,527) --
------------------------------------------------------------------------------------------------------------------------------
Class C (18,527) --
==============================================================================================================================
Decrease in net assets resulting from distributions (61,757) --
==============================================================================================================================
Share reinvested:
Class A 24,703 --
------------------------------------------------------------------------------------------------------------------------------
Class B 18,527 --
------------------------------------------------------------------------------------------------------------------------------
Class C 18,527 --
==============================================================================================================================
Net increase (decrease) in net assets resulting from share transactions 61,757 --
==============================================================================================================================
Net increase in net assets 58,330 97,697
==============================================================================================================================
NET ASSETS:
Beginning of period 1,276,522 1,178,825
==============================================================================================================================
End of period (including undistributed net investment $ 1,334,852 $ 1,276,522
income (loss) of $(4,191) and $0, respectively)
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-381
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(Unaudited)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
AIM Select 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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
FS-382
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) and income
FS-383
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 (net of estimated foreign tax withholding) 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.
G. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------------------- First $1 billion 0.75% Next $1 billion 0.70% Over $2 billion 0.65% --------------------------------------------------------------------------------- |
Effective January 1, 2005 through June 30, 2006, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------------------- First $250 million 0.695% Next $250 million 0.67% Next $500 million 0.645% Next $1.5 billion 0.62% Next $2.5 billion 0.595% Next $2.5 billion 0.57% Next $2.5 billion 0.545% Over $10 billion 0.52% --------------------------------------------------------------------------------- |
AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.75% of average daily net assets. 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 limits 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), or items designated as such 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, in addition to the expense reimbursement arrangement with AMVESCAP PLC
FS-384
("AMVESCAP") described more fully below, the only expense offset arrangements from which the Fund may benefit 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 upon consultation with the Board of Trustees without further notice to investors. To the extent that the annualized expense ratio does not exceed the expense limitation, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year.
For the six months ended April 30, 2005, AIM waived fees of $5,107 and reimbursed expenses of $38,602.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP agreed to reimburse $804 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $24,795.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $47.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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. ADI 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. ADI waived all plan fees of $953, $2,043, and $2,043 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 ADI.
NOTE 3 -- EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $192.
NOTE 4 -- TRUSTEES' FEES
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
FS-385
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $1,847 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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at 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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had no capital loss carryforward as of October 31, 2004.
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, 2005 was $119,224 and $115,835, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 314,880
-----------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (50,512)
=========================================================================================
Net unrealized appreciation of investment securities $ 264,368
_________________________________________________________________________________________
=========================================================================================
Investments have the same cost for tax and financial statement purposes.
|
FS-386
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 certain 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 (a)
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2005 2004
-------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ----------
Issued as reinvestment of dividends:
Class A 1,887 24,703 -- --
----------------------------------------------------------------------------------------------------
Class B 1,417 18,527 -- --
----------------------------------------------------------------------------------------------------
Class C 1,417 18,527 -- --
====================================================================================================
4,721 $ 61,757 -- $ --
____________________________________________________________________________________________________
====================================================================================================
|
(a) Currently, the Fund is not open to investors. All shares are owned by AIM.
FS-387
NOTE 9 -- FINANCIAL HIGHLIGHTS
CLASS A
------------------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS YEAR ENDED OCTOBER 31, (DATE OPERATIONS
ENDED -------------------------- COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004 2003 2002
---------- ---------- ---------- ---------------
Net asset value, beginning of period $ 12.61 $ 11.65 $ 9.13 $ 10.00
------------------------------------------------------------ ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.04) (0.09) (0.07) (0.01)
------------------------------------------------------------ ---------- ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.05 2.70 (0.86)
============================================================ ========== ========== ========== ==========
Total from investment operations 0.60 0.96 2.63 (0.87)
============================================================ ========== ========== ========== ==========
Less distributions:
Dividends from net investment income -- -- (0.11) --
============================================================ ========== ========== ========== ==========
Distributions from net realized gains (0.61) -- -- --
============================================================ ========== ========== ========== ==========
Total distributions (0.61) -- (0.11) --
============================================================ ========== ========== ========== ==========
Net asset value, end of period $ 12.60 $ 12.61 $ 11.65 $ 9.13
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Total return (a) 4.58% 8.24% 29.12% (8.70)%
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 534 $ 511 $ 472 $ 365
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.78%(b) 1.77% 1.83% 1.75%(c)
------------------------------------------------------------ ---------- ---------- ---------- ----------
Without fee waivers and/or expense reimbursements 8.66%(b) 9.96% 10.27% 23.74%(c)
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratio of net investment income (loss) to average net assets (0.62)%(b) (0.70)% (0.75)% (0.49)%(c)
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Portfolio turnover rate (d) 9% 19% 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 $549,282.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-388
NOTE 9 -- FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS YEAR ENDED OCTOBER 31, (DATE OPERATIONS
ENDED -------------------------- COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004 2003 2002
---------- ---------- ---------- ---------------
Net asset value, beginning of period $ 12.62 $ 11.65 $ 9.13 $ 10.00
------------------------------------------------------------ ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.04) (0.09) (0.07) (0.01)
------------------------------------------------------------ ---------- ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 0.63 1.06 2.70 (0.86)
============================================================ ========== ========== ========== ==========
Total from investment operations 0.59 0.97 2.63 (0.87)
============================================================ ========== ========== ========== ==========
Less distributions:
Dividends from net investment income -- -- (0.11) --
============================================================ ========== ========== ========== ==========
Distributions from net realized gains (0.61) -- -- --
============================================================ ========== ========== ========== ==========
Total distributions (0.61) -- (0.11) --
============================================================ ========== ========== ========== ==========
Net asset value, end of period $ 12.60 $ 12.62 $ 11.65 $ 9.13
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Total return (a) 4.50% 8.33% 29.12% (8.70)%
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 400 $ 383 $ 354 $ 274
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.78%(b) 1.77% 1.83% 1.75%(c)
------------------------------------------------------------ ---------- ---------- ---------- ----------
Without fee waivers and/or expense reimbursements 9.31%(b) 10.61% 10.92% 24.39%(c)
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Ratio of net investment income (loss) to average net assets (0.62)%(b) (0.70)% (0.75)% (0.49)%(c)
____________________________________________________________ __________ __________ __________ __________
============================================================ ========== ========== ========== ==========
Portfolio turnover rate (d) 9% 19% 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 $411,967.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-389
NOTE 9 -- FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------
AUGUST 30, 2002
SIX MONTHS YEAR ENDED OCTOBER 31, (DATE OPERATIONS
ENDED -------------------------- COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004 2003 2002
---------- ---------- ---------- ----------------
Net asset value, beginning of period $ 12.62 $ 11.65 $ 9.13 $ 10.00
----------------------------------------------------------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.04) (0.09) (0.07) (0.01)
----------------------------------------------------------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 0.63 1.06 2.70 (0.86)
=========================================================== ========== ========== ========== ==========
Total from investment operations 0.59 0.97 2.63 (0.87)
=========================================================== ========== ========== ========== ==========
Less distributions:
Dividends from net investment income -- -- (0.11) --
=========================================================== ========== ========== ========== ==========
Distributions from net realized gains (0.61) -- -- --
=========================================================== ========== ========== ========== ==========
Total distributions (0.61) -- (0.11) --
=========================================================== ========== ========== ========== ==========
Net asset value, end of period $ 12.60 $ 12.62 $ 11.65 $ 9.13
___________________________________________________________ __________ __________ __________ __________
=========================================================== ========== ========== ========== ==========
Total return (a) 4.50% 8.33% 29.12% (8.70)%
___________________________________________________________ __________ __________ __________ __________
=========================================================== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 400 $ 383 $ 354 $ 274
___________________________________________________________ __________ __________ __________ __________
=========================================================== ========== ========== ========== ==========
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.78%(b) 1.77% 1.83% 1.75%(c)
----------------------------------------------------------- ---------- ---------- ---------- ----------
Without fee waivers and/or expense reimbursements 9.31%(b) 10.61% 10.92% 24.39%(c)
___________________________________________________________ __________ __________ __________ __________
=========================================================== ========== ========== ========== ==========
Ratio of net investment income (loss) to average net assets (0.62)%(b) (0.70)% (0.75)% (0.49)%(c)
___________________________________________________________ __________ __________ __________ __________
=========================================================== ========== ========== ========== ==========
Portfolio turnover rate (d) 9% 19% 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 $411,967.
(c) Annualized.
(d) Not annualized for periods less than one year.
FS-390
NOTE 10 -- LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous
unrelated mutual fund complexes and financial institutions. None of the AIM
Funds has been named as a defendant in these proceedings. The WVAG complaint,
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking, among other things, injunctive relief,
civil monetary penalties and a writ of quo warranto against the defendants. If
AIM is unsuccessful in its defense of the WVAG proceedings, it could be barred
from serving as an investment
FS-391
NOTE 10 -- LEGAL PROCEEDINGS (CONTINUED)
advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
o that the defendants permitted improper market timing and related issues in the AIM Funds;
o that certain AIM Funds inadequately employed fair value pricing;
o that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
o 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;
o that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
o that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
********************************************************************************
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-392
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.15%
AEROSPACE & DEFENSE-0.80%
Boeing Co. (The) 275,000 $ 16,368,000
==========================================================================
AIR FREIGHT & LOGISTICS-1.14%
FedEx Corp. 275,000 23,361,250
==========================================================================
APPAREL RETAIL-1.00%
Chico's FAS, Inc.(a) 800,000 20,504,000
==========================================================================
APPLICATION SOFTWARE-1.88%
Amdocs Ltd. (United Kingdom)(a) 1,450,000 38,729,500
==========================================================================
BIOTECHNOLOGY-1.62%
Gilead Sciences, Inc.(a) 900,000 33,390,000
==========================================================================
CASINOS & GAMING-1.00%
Las Vegas Sands Corp.(a)(b) 550,000 20,597,500
==========================================================================
COMMUNICATIONS EQUIPMENT-4.91%
Cisco Systems, Inc.(a) 2,100,000 36,288,000
--------------------------------------------------------------------------
QUALCOMM Inc. 1,300,000 45,357,000
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a)(b) 300,000 19,323,000
==========================================================================
100,968,000
==========================================================================
COMPUTER HARDWARE-5.15%
Apple Computer, Inc.(a) 1,200,000 43,272,000
--------------------------------------------------------------------------
Dell Inc.(a) 1,800,000 62,694,000
==========================================================================
105,966,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-2.71%
EMC Corp.(a) 2,650,000 34,768,000
--------------------------------------------------------------------------
Lexmark International, Inc.-Class A(a) 300,000 20,835,000
==========================================================================
55,603,000
==========================================================================
CONSUMER FINANCE-2.90%
American Express Co. 500,000 26,350,000
--------------------------------------------------------------------------
SLM Corp. 700,000 33,348,000
==========================================================================
59,698,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.97%
Alliance Data Systems Corp.(a) 600,000 24,240,000
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 375,000 16,290,000
==========================================================================
40,530,000
==========================================================================
DEPARTMENT STORES-3.60%
J.C. Penney Co., Inc. 700,000 33,187,000
--------------------------------------------------------------------------
Kohl's Corp.(a) 111,400 5,302,640
--------------------------------------------------------------------------
Nordstrom, Inc. 700,000 35,581,000
==========================================================================
74,070,640
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DISTILLERS & VINTNERS-0.71%
Constellation Brands, Inc.-Class A(a) 275,000 14,495,250
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.04%
Cendant Corp. 1,075,000 $ 21,403,250
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.31%
Cooper Industries, Ltd.-Class A (Bermuda) 275,000 17,506,500
--------------------------------------------------------------------------
Rockwell Automation, Inc. 646,400 29,883,072
==========================================================================
47,389,572
==========================================================================
FOOTWEAR-1.31%
NIKE, Inc.-Class B 350,000 26,883,500
==========================================================================
GENERAL MERCHANDISE STORES-1.13%
Target Corp. 500,000 23,200,000
==========================================================================
HEALTH CARE EQUIPMENT-3.58%
Bard (C.R.), Inc. 300,000 21,351,000
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 300,000 18,435,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 475,000 16,026,500
--------------------------------------------------------------------------
Waters Corp.(a) 450,000 17,833,500
==========================================================================
73,646,000
==========================================================================
HEALTH CARE FACILITIES-1.56%
HCA Inc. 575,000 32,108,000
==========================================================================
HEALTH CARE SERVICES-1.07%
Caremark Rx, Inc.(a) 550,000 22,027,500
==========================================================================
HEALTH CARE SUPPLIES-1.53%
Alcon, Inc. (Switzerland)(a) 325,000 31,525,000
==========================================================================
HOME IMPROVEMENT RETAIL-0.95%
Home Depot, Inc. (The) 550,000 19,453,500
==========================================================================
HOMEBUILDING-0.82%
D.R. Horton, Inc. 550,000 16,775,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.22%
Hilton Hotels Corp. 1,150,000 25,104,500
==========================================================================
HOUSEHOLD PRODUCTS-1.00%
Clorox Co. (The) 325,000 20,572,500
==========================================================================
HOUSEWARES & SPECIALTIES-1.54%
Fortune Brands, Inc. 375,000 31,717,500
==========================================================================
INDUSTRIAL CONGLOMERATES-5.14%
Textron Inc. 300,000 22,605,000
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 2,650,000 82,971,500
==========================================================================
105,576,500
==========================================================================
INDUSTRIAL MACHINERY-0.86%
Danaher Corp. 350,000 17,720,500
==========================================================================
|
FS-393
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INTEGRATED OIL & GAS-1.02%
ConocoPhillips 200,000 $ 20,970,000
==========================================================================
INTERNET SOFTWARE & SERVICES-5.72%
Google Inc.-Class A(a)(b) 200,000 44,000,000
--------------------------------------------------------------------------
VeriSign, Inc.(a) 1,150,000 30,429,000
--------------------------------------------------------------------------
Yahoo! Inc.(a) 1,250,000 43,137,500
==========================================================================
117,566,500
==========================================================================
INVESTMENT BANKING & BROKERAGE-4.76%
Goldman Sachs Group, Inc. (The) 500,000 53,395,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 250,000 22,930,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 400,000 21,572,000
==========================================================================
97,897,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.95%
Accenture Ltd.-Class A (Bermuda)(a) 900,000 19,530,000
==========================================================================
MANAGED HEALTH CARE-5.60%
Aetna Inc. 750,000 55,027,500
--------------------------------------------------------------------------
UnitedHealth Group Inc. 400,000 37,804,000
--------------------------------------------------------------------------
WellPoint, Inc.(a) 175,000 22,356,250
==========================================================================
115,187,750
==========================================================================
MOVIES & ENTERTAINMENT-1.48%
Walt Disney Co. (The) 1,150,000 30,360,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.63%
BJ Services Co. 700,000 34,125,000
--------------------------------------------------------------------------
National-Oilwell Varco Inc.(a) 500,000 19,870,000
==========================================================================
53,995,000
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.50%
Valero Energy Corp. 450,000 30,838,500
==========================================================================
PERSONAL PRODUCTS-2.26%
Gillette Co. (The) 900,000 46,476,000
==========================================================================
PHARMACEUTICALS-5.06%
Johnson & Johnson 850,000 58,335,500
--------------------------------------------------------------------------
Sepracor Inc.(a)(b) 400,000 23,968,000
--------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 700,000 21,756,000
==========================================================================
104,059,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
RESTAURANTS-1.51%
McDonald's Corp. 500,000 $ 14,655,000
--------------------------------------------------------------------------
Yum! Brands, Inc. 350,000 16,436,000
==========================================================================
31,091,000
==========================================================================
SEMICONDUCTORS-4.77%
Analog Devices, Inc. 1,100,000 37,521,000
--------------------------------------------------------------------------
Microchip Technology Inc. 950,000 27,056,000
--------------------------------------------------------------------------
National Semiconductor Corp. 1,750,000 33,390,000
==========================================================================
97,967,000
==========================================================================
SPECIALIZED FINANCE-1.19%
Chicago Mercantile Exchange Holdings Inc. 125,000 24,440,000
==========================================================================
SPECIALTY CHEMICALS-1.03%
Ecolab Inc. 650,000 21,261,500
==========================================================================
SYSTEMS SOFTWARE-4.22%
McAfee Inc.(a) 248,600 5,198,226
--------------------------------------------------------------------------
Oracle Corp.(a) 3,500,000 40,460,000
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 2,000,000 41,180,000
==========================================================================
86,838,226
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,688,052,756) 2,017,861,938
==========================================================================
MONEY MARKET FUNDS-2.05%
Liquid Assets Portfolio-Institutional
Class(c) 21,046,502 21,046,502
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 21,046,502 21,046,502
==========================================================================
Total Money Market Funds (Cost
$42,093,004) 42,093,004
==========================================================================
TOTAL INVESTMENTS-100.20% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,730,145,760) 2,059,954,942
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-2.86%
STIC Prime Portfolio-Institutional
Class(c)(d) 58,849,525 58,849,525
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $58,849,525) 58,849,525
==========================================================================
TOTAL INVESTMENTS-103.06% (Cost
$1,788,995,285) 2,118,804,467
==========================================================================
OTHER ASSETS LESS LIABILITIES-(3.06%) (62,915,799)
==========================================================================
NET ASSETS-100.00% $2,055,888,668
__________________________________________________________________________
==========================================================================
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, 2005 .
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-394
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,688,052,756)* $ 2,017,861,938
------------------------------------------------------------
Investments in affiliated money market
funds (cost $100,942,529) 100,942,529
============================================================
Total investments (cost $1,788,995,285) 2,118,804,467
============================================================
Receivables for:
Investments sold 21,581,790
------------------------------------------------------------
Fund shares sold 584,850
------------------------------------------------------------
Dividends 968,339
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 211,894
------------------------------------------------------------
Other assets 128,376
============================================================
Total assets 2,142,279,716
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 18,939,872
------------------------------------------------------------
Fund shares reacquired 5,562,588
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 497,176
------------------------------------------------------------
Collateral upon return of securities
loaned 58,849,525
------------------------------------------------------------
Accrued distribution fees 740,478
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,782
------------------------------------------------------------
Accrued transfer agent fees 1,462,644
------------------------------------------------------------
Accrued operating expenses 333,983
============================================================
Total liabilities 86,391,048
============================================================
Net assets applicable to shares outstanding $ 2,055,888,668
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 4,883,168,381
------------------------------------------------------------
Undistributed net investment income (loss) (5,875,139)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option
contracts (3,151,213,756)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 329,809,182
============================================================
$ 2,055,888,668
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,618,532,928
____________________________________________________________
============================================================
Class B $ 366,723,117
____________________________________________________________
============================================================
Class C $ 67,313,497
____________________________________________________________
============================================================
Class R $ 1,612,837
____________________________________________________________
============================================================
Institutional Class $ 1,706,289
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 133,066,083
____________________________________________________________
============================================================
Class B 32,959,977
____________________________________________________________
============================================================
Class C 6,044,504
____________________________________________________________
============================================================
Class R 133,457
____________________________________________________________
============================================================
Institutional Class 132,105
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.16 divided by
94.50%) $ 12.87
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.14
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.09
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.92
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $57,096,353 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-395
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $357) $ 11,963,824
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $55,923 after rebates of
$415,906) 166,381
===========================================================================
Total investment income 12,130,205
===========================================================================
EXPENSES:
Advisory fees 7,408,645
---------------------------------------------------------------------------
Administrative services fees 243,033
---------------------------------------------------------------------------
Custodian fees 50,666
---------------------------------------------------------------------------
Distribution fees:
Class A 2,688,134
---------------------------------------------------------------------------
Class B 2,089,262
---------------------------------------------------------------------------
Class C 380,433
---------------------------------------------------------------------------
Class R 3,967
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 4,308,306
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 913
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 50,778
---------------------------------------------------------------------------
Other 462,940
===========================================================================
Total expenses 17,687,077
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (166,118)
===========================================================================
Net expenses 17,520,959
===========================================================================
Net investment income (loss) (5,390,754)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities (includes gain (loss) from
securities sold to affiliates of $(750,898)) 186,981,968
---------------------------------------------------------------------------
Option contracts written 1,212,461
===========================================================================
188,194,429
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (141,841,247)
---------------------------------------------------------------------------
Option contracts written (23,540)
===========================================================================
(141,864,787)
===========================================================================
Net gain from investment securities and option contracts 46,329,642
===========================================================================
Net increase in net assets resulting from operations $ 40,938,888
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-396
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (5,390,754) $ (21,767,576)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 188,194,429 236,255,314
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (141,864,787) (114,821,148)
==============================================================================================
Net increase in net assets resulting from operations 40,938,888 99,666,590
==============================================================================================
Share transactions-net:
Class A (259,345,924) (395,056,301)
----------------------------------------------------------------------------------------------
Class B (74,620,782) (138,803,397)
----------------------------------------------------------------------------------------------
Class C (12,197,097) (15,793,039)
----------------------------------------------------------------------------------------------
Class R 156,669 1,126,374
----------------------------------------------------------------------------------------------
Institutional Class (86,603) (547,138)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (346,093,737) (549,073,501)
==============================================================================================
Net increase (decrease) in net assets (305,154,849) (449,406,911)
==============================================================================================
NET ASSETS:
Beginning of period 2,361,043,517 2,810,450,428
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(5,875,139) and $(484,385),
respectively) $2,055,888,668 $2,361,043,517
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-397
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-398
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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 paid an advisory fee based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $30 million 1.00% ---------------------------------------------------------------------- Next $320 million 0.75% ---------------------------------------------------------------------- Over $350 million 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $250 million 0.695% ---------------------------------------------------------------------- Next $250 million 0.67% ---------------------------------------------------------------------- Next $500 million 0.645% ---------------------------------------------------------------------- Next $1.5 billion 0.62% ---------------------------------------------------------------------- Next $2.5 billion 0.595% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
FS-399
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $62,848.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $75,427 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $243,033.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,308,306 for Class A, Class B, Class C and Class R share classes and $913 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $2,688,134, $2,089,262, $380,433 and $3,967, 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, 2005, ADI advised the Fund that it retained $99,040 in front-end sales commissions from the sale of Class A shares and $1,177, $86,886, $3,471 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 ADI.
FS-400
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
-------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 6,546,085 $182,155,234 $(167,654,817) $ -- $21,046,502 $ 54,859 $ --
-------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 6,546,085 182,155,234 (167,654,817) -- 21,046,502 55,599 --
===============================================================================================================================
Subtotal $13,092,170 $364,310,468 $(335,309,634) $ -- $42,093,004 $110,458 $ --
===============================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
-------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $40,952,850 $234,408,345 $(216,511,670) $ -- $ 58,849,525 $ 55,923 $ --
===============================================================================================================================
Total $54,045,020 $598,718,813 $(551,821,304) $ -- $100,942,529 $166,381 $ --
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $33,084,071 and sales of $3,815,066, which resulted in net realized gain (loss) of $(750,898).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $27,843.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $5,996 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.
FS-401
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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.
During the six months ended April 30, 2005, the average interfund borrowings for the 17 days the borrowings were outstanding was $7,503,571 with a weighted average interest rate of 2.57% and interest expense of $8,980.
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. The Fund did not borrow under the facility during the six months ended April 30, 2005.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $57,096,353 were on loan to brokers. The loans were secured by cash collateral of $58,849,525 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $55,923 for securities lending transactions, which are net of rebates.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of period 3,000 $ 421,040
-------------------------------------------------------------------------------------
Written 1,477 1,110,403
-------------------------------------------------------------------------------------
Closed (477) (811,191)
-------------------------------------------------------------------------------------
Exercised (924) (132,776)
-------------------------------------------------------------------------------------
Expired (3,076) (587,476)
=====================================================================================
End of period -- $ --
_____________________________________________________________________________________
=====================================================================================
|
FS-402
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $2,358,363,619
------------------------------------------------------------------------------
October 31, 2010 763,027,747
------------------------------------------------------------------------------
October 31, 2011 196,611,268
==============================================================================
Total capital loss carryforward $3,318,002,634
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2005 was $1,085,963,124 and $1,431,732,259, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $363,179,923 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (43,484,014) ============================================================================== Net unrealized appreciation of investment securities $319,695,909 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,799,108,558. |
FS-403
NOTE 12--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 certain 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(a)
------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,118,284 $ 26,832,587 6,161,430 $ 74,474,713
------------------------------------------------------------------------------------------------------------------------------
Class B 1,054,165 12,243,873 2,836,554 31,535,843
------------------------------------------------------------------------------------------------------------------------------
Class C 349,994 4,055,643 1,109,204 12,390,482
------------------------------------------------------------------------------------------------------------------------------
Class R 25,422 321,355 139,257 1,669,192
------------------------------------------------------------------------------------------------------------------------------
Institutional Class 10,462 140,178 13,498 172,948
==============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,649,811 20,864,289 4,502,782 54,704,748
------------------------------------------------------------------------------------------------------------------------------
Class B (1,800,544) (20,864,289) (4,888,349) (54,704,748)
==============================================================================================================================
Reacquired:
Class A (24,188,075) (307,042,800) (43,655,916) (524,235,762)
------------------------------------------------------------------------------------------------------------------------------
Class B (5,680,482) (66,000,366) (10,449,964) (115,634,492)
------------------------------------------------------------------------------------------------------------------------------
Class C (1,398,272) (16,252,740) (2,535,106) (28,183,521)
------------------------------------------------------------------------------------------------------------------------------
Class R (13,100) (164,686) (45,049) (542,818)
------------------------------------------------------------------------------------------------------------------------------
Institutional Class (16,846) (226,781) (56,324) (720,086)
==============================================================================================================================
(27,889,181) $(346,093,737) (46,867,983) $(549,073,501)
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 15% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund share. The Fund, AIM, and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
NOTE 13--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Dent Demographic Trends Fund ("Selling Fund"), a series of AIM Equity Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
FS-404
NOTE 14--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, -------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.08)(b) (0.07) (0.07)(b) (0.10) (0.14)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.16 0.51 2.19 (3.11) (11.87) 3.18
=================================================================================================================================
Total from investment operations 0.14 0.43 2.12 (3.18) (11.97) 3.04
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 12.16 $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.17% 3.71% 22.39% (25.14)% (47.38)% 10.61%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,618,533 $1,844,930 $2,160,823 $2,104,660 $4,001,552 $8,948,781
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.38%(d) 1.39% 1.47% 1.33% 1.21% 1.03%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.39%(d) 1.40% 1.47% 1.33% 1.22% 1.07%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.32)%(a)(d) (0.67)% (0.68)% (0.64)% (0.56)% (0.45)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and (0.54)% respectively.
(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
$1,806,941,166.
(e) Not annualized for periods less than one year.
FS-405
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.15)(b) (0.14) (0.15)(b) (0.21) (0.36)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.16 0.47 2.03 (2.89) (11.21) 3.08
=================================================================================================================================
Total from investment
operations 0.10 0.32 1.89 (3.04) (11.42) 2.72
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 11.13 $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.91% 2.99% 21.43% (25.63)% (47.75)% 9.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $366,723 $434,572 $555,779 $533,224 $922,476 $1,927,514
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.08%(d) 2.09% 2.17% 2.04% 1.92% 1.78%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.09%(d) 2.10% 2.17% 2.04% 1.93% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (1.02)%(a)(d) (1.37)% (1.38)% (1.34)% (1.27)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (1.24)% respectively.
(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
$421,315,256.
(e) Not annualized for periods less than one year.
CLASS C
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.15)(b) (0.14) (0.15)(b) (0.21) (0.36)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.16 0.47 2.03 (2.89) (11.23) 3.10
=================================================================================================================================
Total from investment operations 0.10 0.32 1.89 (3.04) (11.44) 2.74
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 11.14 $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.91% 2.99% 21.40% (25.61)% (47.77)% 9.83%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $67,313 $78,330 $91,325 $86,455 $150,604 $301,590
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.08%(d) 2.09% 2.17% 2.04% 1.92% 1.78%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.09%(d) 2.10% 2.17% 2.04% 1.93% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.02)%(a)(d) (1.37)% (1.38)% (1.34)% (1.27)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (1.24)% respectively.
(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
$76,717,203.
(e) Not annualized for periods less than one year.
FS-406
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
----------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 3, 2002
ENDED OCTOBER 31, (DATE SALES
APRIL 30, ------------------- COMMENCED) TO
2005 2004 2003 OCTOBER 31, 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.95 $11.56 $ 9.47 $ 11.36
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.10)(b) (0.06) (0.03)(b)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.17 0.49 2.15 (1.86)
========================================================================================================================
Total from investment operations 0.14 0.39 2.09 (1.89)
========================================================================================================================
Net asset value, end of period $12.09 $11.95 $11.56 $ 9.47
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 1.17% 3.37% 22.07% (16.64)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,613 $1,448 $ 311 $ 76
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.58%(d) 1.59% 1.67% 1.53%(e)
========================================================================================================================
Without fee waivers and/or expense reimbursements 1.59%(d) 1.60% 1.67% 1.53%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.52)%(a)(d) (0.87)% (0.88)% (0.84)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 48% 74% 111% 217%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.05) and (0.74)% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,600,090.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-407
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.01)(b) 0.00 (0.01)(b) (0.01) (0.06)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.17 0.54 2.29 (3.24) (12.29) 3.29
=================================================================================================================================
Total from investment operations 0.19 0.53 2.29 (3.25) (12.30) 3.23
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $12.92 $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.49% 4.34% 23.11% (24.70)% (47.11)% 11.07%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,706 $1,763 $2,213 $ 1,883 $ 7,667 $18,634
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.81%(d) 0.84% 0.78% 0.82% 0.69% 0.64%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.82%(d) 0.85% 0.78% 0.82% 0.70% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.25%(a)(d) (0.12)% 0.01% (0.12)% (0.04)% (0.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.00 and 0.03% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,839,891.
(e) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-408
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-409
AIM AGGRESSIVE GROWTH FUND
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM DIVERSIFIED DIVIDEND FUND
AIM LARGE CAP BASIC VALUE FUND
AIM LARGE CAP GROWTH FUND
AIM MID CAP GROWTH FUND
AIM WEINGARTEN FUND
PROSPECTUS
OCTOBER 25, 2005
Institutional Classes
AIM Aggressive Growth Fund seeks to provide long-term growth of capital.
AIM Blue Chip Fund seeks to provide long-term growth of capital.
AIM Capital Development Fund seeks to provide long-term growth of capital.
AIM Charter Fund seeks to provide growth of capital.
AIM Constellation Fund seeks to provide growth of capital.
AIM Diversified Dividend Fund seeks to provide growth of capital and, secondarily, current income.
AIM Large Cap Basic Value Fund seeks to provide long-term growth of capital.
AIM Large Cap Growth Fund seeks to provide long-term growth of capital.
AIM Mid Cap Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information about the Institutional Class shares of the funds. Please read it before investing and keep it for future reference.
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
An investment in a fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ AIM Aggressive Growth Fund 1 AIM Blue Chip Fund 1 AIM Capital Development Fund 1 AIM Charter Fund 1 AIM Constellation Fund 2 AIM Diversified Dividend Fund 2 AIM Large Cap Basic Value Fund 2 AIM Large Cap Growth Fund 2 AIM Mid Cap Growth Fund 3 AIM Weingarten Fund 3 Aggressive Growth, Large Cap Growth and Mid Cap Growth 3 All Funds 3 PRINCIPAL RISKS OF INVESTING IN THE FUNDS 4 ------------------------------------------------------ PERFORMANCE INFORMATION 5 ------------------------------------------------------ Annual Total Returns 5 Performance Table 11 FEE TABLE AND EXPENSE EXAMPLE 14 ------------------------------------------------------ Fee Table 14 Expense Example 15 Hypothetical Investment and Expense Information 15 DISCLOSURE OF PORTFOLIO HOLDINGS 16 ------------------------------------------------------ FUND MANAGEMENT 18 ------------------------------------------------------ The Advisors 18 Advisor Compensation 19 Portfolio Managers 19 OTHER INFORMATION 22 ------------------------------------------------------ Dividends and Distributions 22 Suitability for Investors 22 Future Limited Fund Offering 22 FINANCIAL HIGHLIGHTS 23 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Purchasing Shares A-1 Excessive Short-Term Trading Activity Disclosures A-2 Redeeming Shares A-4 Exchanging Shares A-5 Pricing of Shares A-5 Taxes A-7 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, 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, 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a servicemark of A I M Management Group Inc. and AIM Funds Management Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
AIM AGGRESSIVE GROWTH FUND (AGGRESSIVE GROWTH)
The fund's investment objective is to achieve long-term growth of capital. The
investment objective of the fund may be changed by the Board of Trustees
without shareholder approval.
The fund seeks to meet its objective by investing primarily in common stocks of small and medium-sized growth companies. The portfolio manager focuses on companies he believes are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio manager considers whether to sell a particular security when any of these factors materially changes.
AIM BLUE CHIP FUND (BLUE CHIP)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of blue chip companies. In complying with this 80% investment requirement, the fund may invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers blue chip companies to be large and medium sized companies (i.e., companies with market capitalizations, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark--Index during the most recent 11-month period, based on month-end data, plus the most recent data during the current month) with leading market positions and which possess the following characteristics:
- MARKET CHARACTERISTICS--Companies that occupy (or in AIM's judgment have the potential to occupy) leading market positions that are expected to be maintained or enhanced over time. Strong market positions, particularly in growing industries, can give a company pricing flexibility as well as the potential for strong unit sales. These factors can, in turn, lead to higher earnings growth and greater share price appreciation. Market leaders can be identified within an industry as those companies that have (i) superior growth prospects compared with other companies in the same industry; (ii) possession of proprietary technology with the potential to bring about major changes within an industry; and/or (iii) leading sales within an industry, or the potential to become a market leader.
- FINANCIAL CHARACTERISTICS--Companies that possess at least one of the
following attributes (i) faster earnings growth than its competitors and the
market in general; (ii) higher profit margins relative to its competitors;
(iii) strong cash flow relative to its competitors; and/or (iv) a balance
sheet with relatively low debt and a high return on equity relative to its
competitors.
The portfolio managers consider whether to sell a particular security when they believe the issuer of the security no longer is a market leader, and/or it no longer has the characteristics described above. When the portfolio managers believe securities other than marketable equity securities offer the opportunity for long-term growth of capital and current income, the fund may invest in United States government securities and high-quality debt securities.
AIM CAPITAL DEVELOPMENT FUND (CAPITAL DEVELOPMENT)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing primarily in securities, including common stocks, convertible securities and bonds, of small- and medium-sized companies. Among factors which the portfolio manager 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 manager considers whether to sell a particular security when any one of these factors materially changes or when the securities are no longer considered medium-sized company securities.
AIM CHARTER FUND (CHARTER)
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing at least 65% of its total assets in securities of established companies that have long-term above-average growth in earnings and growth companies that the portfolio manager believes have the potential for above-average growth in earnings. In selecting investments, the portfolio manager seeks to identify those companies that are, in his view, undervalued relative to current or projected earnings, or the current market value of assets owned by the company. The primary emphasis of the portfolio manager's search for undervalued equity securities is in four categories: (1) out-of-favor cyclical growth companies; (2) established growth companies that are undervalued compared to historical relative valuation parameters; (3) companies where there is early but tangible evidence of improving prospects which are not yet reflected in the value of the companies' equity securities; and (4) companies whose equity securities are selling at prices that do not yet reflect the current market value of their assets. The portfolio manager considers whether to sell a particular security when any of these factors materially changes. For risk management or cash management purposes, the fund may hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase. A larger position in cash or cash
equivalents could detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
AIM CONSTELLATION FUND (CONSTELLATION)
The fund's investment objective is growth of capital. The investment objective
of the fund may be changed by the Board of Trustees without shareholder
approval.
The fund seeks to meet its objective by investing principally in common stocks of companies the portfolio managers believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when it no longer meets these criteria. The fund will invest without regard to market capitalization.
AIM DIVERSIFIED DIVIDEND FUND (DIVERSIFIED DIVIDEND)
The fund's primary investment objective is growth of capital with a secondary objective of current income. The investment objectives of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet these objectives by investing, normally, at least 80% of its assets in dividend-paying equity securities. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts.
The fund may invest up to 20% of assets in master limited partnerships or in investment-grade debt securities of U.S. issuers.
In selecting investments, the portfolio manager seeks stocks that have paid consistent or increasing dividends. The portfolio manager focuses on the financial health and profit sustainability of the company issuing the stock, and selects stocks that offer the most total return potential from price appreciation and dividend return. The portfolio manager considers whether to sell a particular security when any of these factors materially changes.
AIM LARGE CAP BASIC VALUE FUND (LARGE CAP BASIC VALUE)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies that offer potential for capital growth, and may offer potential for current income. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000 Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The fund may also invest in debt instruments that are consistent with its investment objectives of long-term growth of capital and current income.
The portfolio managers purchase securities of companies that they believe are undervalued in relation to long-term earning power or other factors. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
AIM LARGE CAP GROWTH FUND (LARGE CAP GROWTH)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000 Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
The fund's portfolio managers may focus on securities of companies with market capitalizations that are within the top 50% of stocks in the Russell 1000 Index at the time of purchase. The portfolio managers purchase securities of a limited number of large-cap companies that they believe have the potential for above-average growth in revenues and earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
AIM MID CAP GROWTH FUND (MID CAP GROWTH)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of mid-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell MidCap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell MidCap Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000 Index is a widely recognized, unmanaged index of common stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. These companies are considered representative of medium-sized companies. Under normal conditions, the top 10 holdings may comprise up to 40% of the fund's total assets.
The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have favorable prospects for future growth. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
AIM WEINGARTEN FUND (WEINGARTEN)
The fund's investment objective is to provide growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund will invest primarily in common stocks of seasoned and better-capitalized companies. The portfolio managers focus on companies that have experienced above-average growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
AGGRESSIVE GROWTH, LARGE CAP GROWTH AND MID CAP GROWTH
Each fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased transaction costs and brokerage commissions, both of which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
ALL FUNDS
Each of Aggressive Growth, Blue Chip, Capital Development, Diversified Dividend, Large Cap Basic Value, Large Cap Growth and Mid Cap Growth may invest up to 25% of its total assets in foreign securities. Each of Charter, Constellation and Weingarten may invest up to 20% of its total assets in foreign securities. For cash management purposes, the funds may also hold a portion of their assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of a fund are applied at the time of purchase.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt instruments. As a result, a fund may not achieve its investment objective.
ALL FUNDS
There is a risk that you could lose all or a portion of your investment in the funds. The value of your investment in a fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the funds is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
BLUE CHIP AND DIVERSIFIED DIVIDEND
The income you may receive from your investment in Blue Chip and Diversified Dividend may vary.
AGGRESSIVE GROWTH, CAPITAL DEVELOPMENT, CONSTELLATION AND MID CAP GROWTH
The fluctuation in the value of your investment is especially true with respect to equity securities of smaller companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
CHARTER
To the extent the fund holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
DIVERSIFIED DIVIDEND
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
LARGE CAP BASIC VALUE
Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. When interest rates rise, bond prices fall; the longer a bond's duration, the more sensitive it is to this risk.
LARGE CAP BASIC VALUE AND MID CAP GROWTH
Since a large percentage of each fund's assets will be invested in a limited number of securities, any change in value of those securities could significantly affect the value of your investment in the funds.
LARGE CAP BASIC VALUE, LARGE CAP GROWTH AND MID CAP GROWTH
The values of the convertible securities in which the funds may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the funds.
The bar charts and tables shown below provide an indication of the risks of investing in each of the funds. A fund's past performance (before and after taxes) is not necessarily an indication of its future performance. The returns in the bar charts shown below for Diversified Dividend, Large Cap Basic Value, Large Cap Growth and Mid Cap Growth are those of each fund's Class A shares, which are not offered in this prospectus. Institutional Class shares would have higher annual returns because, although the shares are invested in the same portfolio of securities, Institutional Class shares have lower expenses.
The following bar charts show changes in the performance of Diversified Dividend, Large Cap Basic Value's, Large Cap Growth's and Mid Cap Growth's Class A shares and Aggressive Growth's, Blue Chip's, Capital Development's, Charter's, Constellation's and Weingarten's Institutional Class shares from year to year. The bar charts do not reflect sales loads. If they did, the annual returns shown would be lower. Institutional Class shares are not subject to front-end or back-end sales loads.
AGGRESSIVE GROWTH--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2003................................................................... 27.89%
2004................................................................... 12.55%
|
BLUE CHIP--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2003................................................................... 26.14%
2004................................................................... 4.94%
|
CAPITAL DEVELOPMENT--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2003................................................................... 36.09%
2004................................................................... 16.08%
|
CHARTER--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1995................................................................... 36.13%
1996................................................................... 20.29%
1997................................................................... 25.18%
1998................................................................... 27.40%
1999................................................................... 34.37%
2000................................................................... -14.37%
2001................................................................... -22.67%
2002................................................................... -15.81%
2003................................................................... 24.64%
2004................................................................... 9.30%
|
CONSTELLATION--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1995................................................................... 36.16%
1996................................................................... 16.83%
1997................................................................... 13.45%
1998................................................................... 19.41%
1999................................................................... 45.07%
2000................................................................... -9.98%
2001................................................................... -23.22%
2002................................................................... -24.37%
2003................................................................... 29.98%
2004................................................................... 6.83%
|
DIVERSIFIED DIVIDEND--CLASS A
(PERFORMANCE GRAPH)
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2002................................................................... -12.90%
2003................................................................... 26.90%
2004................................................................... 13.84%
|
LARGE CAP BASIC VALUE--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2000................................................................... 21.74%
2001................................................................... 1.25%
2002................................................................... -23.20%
2003................................................................... 32.02%
2004................................................................... 9.05%
|
LARGE CAP GROWTH--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2000................................................................... 8.52%
2001................................................................... -36.13%
2002................................................................... -26.46%
2003................................................................... 29.32%
2004................................................................... 8.87%
|
MID CAP GROWTH--CLASS A
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2000................................................................... -10.12%
2001................................................................... -21.21%
2002................................................................... -31.86%
2003................................................................... 42.08%
2004................................................................... 6.48%
|
WEINGARTEN--INSTITUTIONAL CLASS
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1995................................................................... 35.43%
1996................................................................... 18.24%
1997................................................................... 26.48%
1998................................................................... 33.58%
1999................................................................... 35.23%
2000................................................................... -19.98%
2001................................................................... -33.70%
2002................................................................... -31.10%
2003................................................................... 31.61%
2004................................................................... 8.48%
|
The year-to-date total return for each fund as of September 30, 2005 was as follows:
FUND ------------------------------------------------ Aggressive [ ]% Growth--Institutional Class Blue Chip--Institutional Class [ ]% Capital [ ]% Development--Institutional Class Charter--Institutional Class [ ]% Constellation--Institutional [ ]% Class Diversified Dividend--Class A [ ]% Large Cap Basic Value--Class A [ ]% Large Cap Growth--Class A [ ]% Mid Cap Growth--Class A [ ]% Weingarten--Institutional [ ]% Class ------------------------------------------------ |
During the periods shown in the bar charts, the highest quarterly returns and the lowest quarterly returns were as follows:
HIGHEST QUARTERLY RETURN LOWEST QUARTERLY RETURN
FUND (QUARTER ENDED) (QUARTER ENDED)
-----------------------------------------------------------------------------------
Aggressive 13.03% (12/31/04) (6.02)% (9/30/04)
Growth--Institutional Class
Blue Chip--Institutional Class 12.98 (6/30/03) (3.93) (9/30/04)
Capital 17.32 (6/30/03) (3.28) (9/30/04)
Development--Institutional
Class
Charter--Institutional Class 26.29 (12/31/98) (21.63) (9/30/01)
Constellation-- 36.71 (12/31/99) (23.20) (9/30/01)
Institutional Class
Diversified Dividend-- 14.18 (6/30/03) (14.15) (9/30/02)
Class A
Large Cap Basic Value--Class A 20.48 (6/30/03) (20.22) (9/30/02)
Large Cap Growth--Class A 26.64 (3/31/00) (34.26) (3/31/01)
Mid Cap Growth--Class A 28.02 (3/31/00) (30.93) (9/30/01)
Weingarten--Institutional 28.14 (12/13/98) (27.56) (3/31/01)
Class
-----------------------------------------------------------------------------------
|
PERFORMANCE TABLE
The following performance table compares each fund's performance to that of a broad-based securities market index, a style specific index, and a peer group index. The indices may not reflect payment of fees, expenses or taxes. The funds are not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the funds may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS(1)
-----------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2004) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE
-----------------------------------------------------------------------------------------
Aggressive
Growth--Institutional Class 03/15/02
Return Before Taxes 12.55% -- -- 3.81%
Return After Taxes on
Distributions 12.55 -- -- 3.81
Return After Taxes on
Distributions and Sale of
Fund Shares 8.16 -- -- 3.25
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% -- -- 5.06%(23) 02/28/02(23)
Russell Midcap--Trademark--
Growth Index(4,5) 15.48 -- -- 10.02(23) 02/28/02(23)
Russell 2500--Registered
Trademark-- Growth Index(6) 14.59 -- -- 10.40(23) 02/28/02(23)
Lipper Mid-Cap Growth Fund
Index(7) 14.03 -- -- 6.91(23) 02/28/02(23)
-----------------------------------------------------------------------------------------
Blue Chip--Institutional Class 03/15/02
Return Before Taxes 4.94% -- -- (0.68)%
Return After Taxes on
Distributions 4.94 -- -- (0.68)
Return After Taxes on
Distributions and Sale of
Fund Shares 3.21 -- -- (0.58)
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% -- -- 5.06%(23) 02/28/02(23)
Russell 1000--Registered
Trademark-- Growth Index(8) 6.30 1.95(23) 02/28/02(23)
Russell 1000--Registered
Trademark-- Index(9) 11.40 -- -- 5.75(23) 02/28/02(23)
Lipper Large-Cap Growth
Index(8,10) 7.45 1.62(23) 02/28/02(23)
Lipper Large-Cap Core Fund
Index(11) 8.29 -- -- 3.42(23) 02/28/02(23)
-----------------------------------------------------------------------------------------
Capital
Development--Institutional
Class 03/15/02
Return Before Taxes 16.08% -- -- 6.55%
Return After Taxes on
Distributions 14.83 -- -- 6.00
Return After Taxes on
Distributions and Sale of
Fund Shares 12.08 -- -- 5.58
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% -- -- 5.06%(23) 02/28/02(23)
Russell Midcap--Trademark--
Growth Index(5,12) 15.48 -- -- 10.02(23) 02/28/02(23)
Russell Midcap--Trademark--
Index(13) 20.22 -- -- 13.59(23) 02/28/02(23)
Lipper Mid-Cap Growth Fund
Index(7) 14.03 -- -- 6.91(23) 02/28/02(23)
Lipper Mid-Cap Core Fund
Index(14) 15.44 -- -- 10.91(23) 02/28/02(23)
-----------------------------------------------------------------------------------------
Charter--Institutional Class
Return Before Taxes 9.30% (5.36)% 10.30% 07/30/91
Return After Taxes on
Distributions 9.07 (5.62) 8.60
Return After Taxes on
Distributions and Sale of
Fund Shares 6.34 (4.51) 8.16
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% (2.30)% 12.07%
Russell 1000--Registered
Trademark-- Index(9) 11.40 (1.76) 12.16
Lipper Large-Cap Core Fund
Index(11) 8.29 (2.98) 10.26
-----------------------------------------------------------------------------------------
|
AVERAGE ANNUAL TOTAL RETURNS(1)
-----------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2004) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE
-----------------------------------------------------------------------------------------
Constellation--Institutional
Class 04/08/92
Return Before Taxes 6.83% (6.21)% 8.54% --
Return After Taxes on
Distributions 6.83 (6.95) 7.49 --
Return After Taxes on
Distributions and Sale of
Fund Shares 4.44 (5.24) 7.28 --
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% (2.30)% 12.07% --
Russell 1000--Registered
Trademark-- Growth
Index(17,18) 6.30 (9.29) 9.59 --
Lipper Multi-Cap Growth Fund
Index(17,19) 11.26 (7.00) 9.43 --
-----------------------------------------------------------------------------------------
Diversified Dividend--Class
A(15) 12/31/01
Return Before Taxes 13.84% -- -- 7.96%
Return After Taxes on
Distributions 13.17 -- -- 7.70
Return After Taxes on
Distributions and Sale of
Fund Shares 9.53 -- -- 6.78
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% -- -- 3.58(23) 12/31/01(23)
Russell 1000--Registered
Trademark-- Index(9,17) 11.40 -- -- 4.27(23) 12/31/01(23)
Lipper Large-Cap Core Fund
Index(11,17) 8.29 -- -- 2.11(23) 12/31/01(23)
-----------------------------------------------------------------------------------------
Large Cap Basic
Value--Institutional
Class(16) 06/30/99(16)
Return Before Taxes 9.46% 6.47% -- 6.35%
Return After Taxes on
Distributions 9.46 6.42 -- 6.08
Return After Taxes on
Distributions and Sales
of Fund Shares 6.15 5.56 -- 5.31
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% (2.30)% -- (0.76)%(23) 06/30/99(23)
Russell 1000--Registered
Trademark-- Value
Index(20,21) 16.49 5.27 -- 3.38(23) 06/30/99(23)
Lipper Large-Cap Value Fund
Index(20,22) 12.00 1.42 -- 1.22(23) 06/30/99(23)
-----------------------------------------------------------------------------------------
Large Cap Growth
Fund--Institutional
Class(16) 03/01/99(16)
Return Before Taxes 9.31% (6.34)% -- 0.09%
Return After Taxes on
Distributions 9.31 (6.34) -- 0.09
Return After Taxes on
Distributions and Sale of
Fund Shares 6.05 (5.28) -- 0.07
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% (2.30)% -- 1.13%(23) 02/28/99(23)
Russell 1000--Registered
Trademark-- Growth
Index(17,18) 6.30 (9.29) -- (3.56)(23) 02/28/99(23)
Lipper Large-Cap Growth Fund
Index(10,17) 7.45 (9.72) -- (3.92)(23) 02/28/99(23)
-----------------------------------------------------------------------------------------
Mid Cap Growth
Fund--Institutional
Class(16) 11/01/99(16)
Return Before Taxes 7.01% (6.01)% -- 0.15%
Return After Taxes on
Distributions 7.01 (6.01) -- 0.15
Return After Taxes on
Distributions and Sale of
Fund Shares 4.55 (5.00) -- 0.13
-----------------------------------------------------------------------------------------
S&P 500 Index(3) 10.87% (2.30)% -- (0.75)%(23) 10/31/99(23)
Russell Midcap--Trademark--
Growth Index(4,5) 15.48 (3.36) -- 1.71(23) 10/31/99(23)
Lipper Mid-Cap Growth Fund
Index(4,7) 14.03 (6.07) -- (0.11)(23) 10/31/99(23)
-----------------------------------------------------------------------------------------
Weingarten--Institutional
Class 10/08/91
Return Before Taxes 8.48% (12.19)% 6.68% --
Return After Taxes on
Distributions 8.48 (12.70) 4.64 --
Return After Taxes on
Distributions and Sale of
Fund Shares 5.51 (9.87) 5.10 --
-----------------------------------------------------------------------------------------
|
AVERAGE ANNUAL TOTAL RETURNS(1) ----------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2004) 1 YEAR 5 YEARS 10 YEARS INCEPTION(2) DATE ----------------------------------------------------------------------------------------- S&P 500 Index(3) 10.87% (2.30)% 12.07% Russell 1000--Registered Trademark-- Growth Index(17,18) 6.30 (9.29) 9.59 Lipper Large-Cap Growth Fund Index(17,10) 7.45 (9.72) 8.64 ----------------------------------------------------------------------------------------- |
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
(1) A significant portion of Large Cap Basic Value's and Large Cap Growth's
returns during certain periods was attributable to its investments in
initial public offerings (IPOs). Although IPO investments have had a
positive impact on the fund's performance in the past, there can be no
assurance that the fund will have favorable IPO investment opportunities in
the future. For additional information regarding the fund's performance,
please see the "Financial Highlights" section of this prospectus.
(2) Since Inception performance is only provided for a class with less than ten
calendar years of performance.
(3) The Standard & Poor's 500 Index measures the performance of the 500 most
widely held common stock and is considered one of the best indicators of
U.S. stock market performance.
(4) The fund has also elected to use the Russell Midcap--Trademark-- Growth
Index as its style specific index rather than the Russell 2500--Registered
Trademark-- Growth Index because the fund believes the Russell
Midcap--Trademark-- Growth Index more closely reflects the performance of
the types of securities in which the fund invests. In addition, the fund
has included the Lipper Mid-Cap Growth Fund Index (which may or may not
include the fund) for comparison to a peer group.
(5) The Russell Midcap--Trademark-- Growth Index measures the performance of
Russell Midcap companies with a greater than average growth orientation.
Securities in this index tend to exhibit higher price-to-book and
price-to-earnings ratios, lower dividend yields and higher forecasted
growth rates than the overall Mid Cap universe. These stocks are a subset
of Russell Midcap companies which represent the 800 smallest companies in
the Russell 1000(R) Index, as ranked by total market capitalization.
(6) The Russell 2500--Trademark-- Growth Index measures the performance of
those Russell 2500 Index companies with higher price-to-book ratios and
higher forecasted growth values. The Russell 2500--Registered Trademark--
Index measures the 2,500 smallest companies, which represents approximately
16% of the market capitalization, of the Russell 3000--Registered
Trademark-- Index. The Russell 3000 --Registered Trademark-- Index includes
a representative sample of 3,000 of the largest U.S. companies in leading
industries and represents approximately 98% of the investable U.S. equity
market.
(7) The Lipper Mid-Cap Growth Fund Index is an equally weighted representation
of the 30 largest funds in the Lipper Mid-Cap Growth category. These funds
typically invest in stocks with market capitalizations between $1 and $5
billion at the time of purchase and have an above-average price-to-earnings
ratio, price-to-book ratio, and a three year sales-per-share growth value,
compared to the S&P MidCap 400 Index.
(8) The fund has also included the Russell 1000--Registered Trademark-- Growth
Index as its style specific index instead of the Russell 1000--Registered
Trademark-- Index because the fund believes the Russell 1000--Registered
Trademark-- Growth Index more closely reflects the performance of the types
of securities in which the fund invests. In addition, the fund has included
the Lipper Large-Cap Growth Fund Index (which may or may not include the
fund) for comparison to a peer group. The fund has elected to use the
Lipper Large-Cap Growth Fund Index as its peer group index rather than the
Lipper Large-Cap Core Fund Index because the Lipper Large-Cap Growth Fund
Index more closely reflects the investment style of this fund.
(9) The Russell 1000--Registered Trademark-- Index measures the performance of
the 1,000 largest companies domiciled in the United States.
(10) The Lipper Large Cap Growth Fund Index is an equally weighted
representation of the 30 largest funds in the Lipper Large Cap Growth
category. These funds typically invest in stocks with market capitalization
greater than $5 billion at the time of the purchase and have an
above-average price-to-earnings ratio, price to book ratio, and a three
year sales-per-share growth value, compared to the S&P 500 Index.
(11) The Lipper Large-Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Core Classification. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically 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 500 Index.
(12) The fund has also elected to use the Russell Midcap Growth Index as its
style specific index rather than the Russell Midcap Index because the fund
believes the Russell Midcap Growth Index more closely reflects the
performance of the types of securities in which the fund invests. In
addition, the fund has included the Lipper Mid-Cap Growth Fund Index (which
may or may not include the fund) for comparison to a peer group. The fund
has elected to use the Lipper Mid-Cap Growth Fund Index as its peer group
index rather than the Lipper Mid-Cap Core Fund Index because the Lipper
Mid-Cap Growth Fund Index more closely reflects the investment style of the
fund.
(13) 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% and 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.
(14) 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.
(15) 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 Rule 12b-1 fees applicable to Class A shares. Institutional Class shares would have different returns because, although the shares are invested in the same portfolio of securities, Institutional 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 Institutional Class shares is October 25, 2005.
(16) The returns shown for these periods are the blended returns of the historical performance of the fund's Institutional Class shares since their inception and the restated historical performance of the fund's Class A shares (for the periods prior to the inception of the Institutional Class shares) at net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. If the effect of the Institutional Class total expenses were reflected, the returns would be higher than those shown because the Institutional Class has lower total expenses. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Institutional Class shares is April 30, 2004.
(17) Each of Charter, Constellation, Diversified Dividend, Large Cap Growth and Weingarten has also included the Russell 1000--Registered Trademark-- Index, Russell 1000--Registered Trademark-- Growth Index, Russell 1000--Registered Trademark-- Index, Russell 1000--Registered Trademark-- Growth Index and Russell 1000--Registered Trademark-- Growth Index, respectively, which each fund believes more closely reflects the performance of the types of securities in which it invests. In addition, the funds have included the Lipper Large-Cap Core Fund Index, Lipper Multi Cap Growth Fund Index, Lipper Large-Cap Core Fund Index, Lipper Large Cap Growth Fund Index and Lipper Large Cap Growth Fund Index respectively, (which may or may not include the fund) for comparison to a peer group.
(18) The Russell 1000--Registered Trademark-- Growth Index measures the performance of those securities in the Russell 1000--Registered Trademark-- Index with a higher than average growth forecast.
(19) The Lipper Multi Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Multi Cap Growth category. These funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. The S&P SuperComposite 1500 Index is considered representative of the U.S. equity markets.
(20) The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the fund has included the Lipper Large Cap Value Fund Index (which may or may not include the fund) for comparison to a peer group.
(21) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with lower price-to-book ratios and lower forecasted growth values.
(22) The Lipper Large Cap Value Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large Cap Value category. These funds typically invest in stocks with market capitalizations greater than $5 billion at the time of purchase and have a below-average price-to-earnings ratio, price-to-book ratio and a three year sales-per-share growth value, compared to the S&P 500 Index.
(23) The average annual total return given is since the month end closest to the inception date of the fund.
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the funds.
SHAREHOLDER FEES ------------------------------------------------------------------------------------------------------------------ (fees paid directly from your AGGRESSIVE BLUE CAPITAL DIVERSIFIED LARGE CAP LARGE CAP investment) GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION DIVIDEND BASIC VALUE GROWTH ------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None None None None None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None None None None None None None None ------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEE SHAREHOLDER FEES --------------- -------------------- (fees paid directly from your MID CAP investment) GROWTH WEINGARTEN ------------------------------------------------ Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None None ---------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(1) ---------------------------------------------------------------------------------------------------------------------------- (expenses that are deducted from fund AGGRESSIVE BLUE CAPITAL DIVERSIFIED LARGE CAP LARGE CAP MID CAP assets) GROWTH CHIP DEVELOPMENT CHARTER CONSTELLATION DIVIDEND BASIC VALUE GROWTH GROWTH ---------------------------------------------------------------------------------------------------------------------------- Management Fees 0.64% 0.64% 0.67% 0.63% 0.63% 0.51 0.60% 0.75% 0.80% Distribution and/or Service (12b-1) Fees -- -- -- -- -- -- -- -- -- Other Expenses(2) 0.09 0.11 0.20 0.12 0.11 0.22 0.21 0.18 0.40 Total Annual Fund Operating Expenses 0.73 0.75 0.87 0.75 0.74 0.73 0.81 0.93 1.20 Fee Waivers(3,4) -- 0.01 -- 0.01 0.03 -- 0.01 0.08 0.05 Net Annual Fund Operating Expenses(5) 0.73 0.74 0.87 0.74 0.71 0.73 0.80 0.85 1.15 ---------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPE --------------- (expenses that are deducted from fund assets) WEINGARTEN ---------------------------------------------------------------------------------- Management Fees 0.64% Distribution and/or Service (12b-1) Fees -- Other Expenses(2) 0.21 Total Annual Fund Operating Expenses 0.85 Fee Waivers(3,4) -- Net Annual Fund Operating Expenses(5) 0.85 ------------------------------------------------------------------------------------------------------- |
(1) There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Other expenses for Diversified Dividend are based on estimated amounts for the current fiscal year.
(3) Effective January 1, 2005 through December 31, 2009, the advisor contractually agreed to waive a portion of its advisory fees for the following funds: Blue Chip, Charter, Constellation, Large Cap Growth, Mid Cap Growth and Weingarten. The Fee Waiver reflects this agreement. (See "Fund Management--Advisor Compensation" following.)
(4) The fund's advisor has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) for Diversified Dividend, Large Cap Basic Value and Large Cap Growth to 1.15%, 0.97% and 1.07% of average daily net assets, 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 limits: (i) interest; (ii) taxes; (iii) dividend expenses on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the fund's day-to-day operations), or items designated as such 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, in addition to the expense reimbursement arrangement with AMVESCAP (as defined herein) described more fully below, 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. This expense limitation agreement is in effect through October 31, 2005 for Diversified Dividend and through June 30, 2006 for Large Cap Basic Value and Large Cap Growth.
(5) At the request of the Board of Trustees, AMVESCAP (as defined herein) has agreed to reimburse the fund for expenses related to market timing matters. Net Annual Fund Operating Expenses restated for items in Note 3 and Note 4 and net of this arrangement were 0.72%, 0.73%, 0.86%, 0.73%, 0.70%, 0.79%, 0.84%, 1.13% and 0.84% for Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation, Large Cap Basic Value, Large Cap Growth, Mid Cap Growth and Weingarten, respectively for the year ended October 31, 2004.
If a financial institution is managing your account, you may also be charged a transaction or other fee by such financial institution.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that the fund's operating expenses remain the same and includes the effect of contractual fee waivers and/or expense reimbursement, if any. To the extent fees are waived and/or expenses are reimbursed voluntarily, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth $ 75 $233 $406 $ 906
Blue Chip 76 237 411 925
Capital Development 89 278 482 1,073
Charter 76 237 411 925
Constellation 73 227 395 903
Diversified Dividend 75 233 406 906
Large Cap Basic Value 82 258 449 1,001
Large Cap Growth 87 271 471 1,102
Mid Cap Growth 117 365 633 1,430
Weingarten 87 271 471 1,049
---------------------------------------------------------------------------------------------------------------------------------
|
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The following supplemental hypothetical investment information provides additional information in a different format from the preceding Fee Table and Expense Example about the effect of a fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. Because a fund's annual return when quoted is already reduced by the fund's fees and expenses for that year, this hypothetical expense information is intended to help you understand the annual and cumulative impact of a fund's fees and expenses on your investment. Assuming a hypothetical investment of $10,000 in the Institutional Class of shares of the fund and a 5% return before expenses each year, the chart shows the cumulative return before expenses, the cumulative return after expenses, the ending balance and the estimated annual expenses for each year one through ten. The chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for the Institutional Class, which is the same as stated in the Fee Table above, is reflected in the chart and is net of any contractual fee waiver or expense reimbursement. There is no assurance that the annual expense ratio will be the expense ratio for the fund class. To the extent that the advisor makes any waivers or reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account initial or contingent deferred sales charges, if any. You should understand that this is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios; your actual returns and expenses are likely to differ (higher or lower) from those shown below.
AGGRESSIVE GROWTH ANNUAL EXPENSE RATIO 0.73% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.27% 8.72% 13.36% 18.21% 23.25% End of Year Balance $10,427.00 $10,872.23 $11,336.48 $11,820.54 $12,325.28 Estimated Annual Expenses $ 74.56 $ 77.74 $ 81.06 $ 84.52 $ 88.13 ----------------------------------------------------------------------------------------------- AGGRESSIVE GROWTH ANNUAL EXPENSE RATIO 0.73% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.52% 34.00% 39.73% 45.69% 51.91% End of Year Balance $12,851.57 $13,400.33 $13,972.53 $14,569.15 $15,191.26 Estimated Annual Expenses $ 91.90 $ 95.82 $ 91.90 $ 104.18 $ 108.63 ----------------------------------------------------------------------------------------------- |
BLUE CHIP GROWTH ANNUAL EXPENSE RATIO 0.74% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.26% 8.70% 13.33% 18.16% 23.19% End of Year Balance $10,426.00 $10,870.15 $11,333.22 $11,816.01 $12,319.37 Estimated Annual Expenses $ 75.58 $ 78.80 $ 82.15 $ 85.65 $ 89.30 ----------------------------------------------------------------------------------------------- BLUE CHIP GROWTH ANNUAL EXPENSE RATIO 0.74% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.44% 33.91% 39.62% 45.57% 51.77% End of Year Balance $12,844.18 $13,391.34 $13,961.81 $14,556.58 $15,176.69 Estimated Annual Expenses $ 93.11 $ 97.07 $ 101.21 $ 105.52 $ 110.01 ----------------------------------------------------------------------------------------------- |
CAPITAL DEVELOPMENT ANNUAL EXPENSE RATIO 0.87% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.13% 8.43% 12.91% 17.57% 22.43% End of Year Balance $10,413.00 $10,843.06 $11,290.88 $11,757.19 $12,242.76 Estimated Annual Expenses $ 88.80 $ 92.46 $ 96.28 $ 100.26 $ 104.40 ----------------------------------------------------------------------------------------------- CAPITAL DEVELOPMENT ANNUAL EXPENSE RATIO 0.87% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 27.48% 32.75% 38.23% 43.94% 49.89% End of Year Balance $12,748.39 $13,274.89 $13,823.15 $14,394.04 $14,988.52 Estimated Annual Expenses $ 108.71 $ 113.20 $ 117.88 $ 122.74 $ 127.81 ----------------------------------------------------------------------------------------------- |
CHARTER ANNUAL EXPENSE RATIO 0.74% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.26% 8.70% 13.33% 18.16% 23.19% End of Year Balance $10,426.00 $10,870.15 $11,333.22 $11,816.01 $12,319.37 Estimated Annual Expenses $ 75.58 $ 78.80 $ 82.15 $ 85.65 $ 89.30 ----------------------------------------------------------------------------------------------- CHARTER ANNUAL EXPENSE RATIO 0.74% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.44% 33.91% 36.62% 45.57% 51.77% End of Year Balance $12,844.18 $13,391.34 $13,961.81 $14,556.58 $15,176.69 Estimated Annual Expenses $ 93.11 $ 97.07 $ 101.21 $ 105.52 $ 110.01 ----------------------------------------------------------------------------------------------- |
CONSTELLATION ANNUAL EXPENSE RATIO 0.71% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.29% 8.76% 13.43% 18.30% 23.37% End of Year Balance $10,429.00 $10,876.40 $11,343.00 $11,829.62 $12,337.11 Estimated Annual Expenses $ 72.52 $ 75.63 $ 78.88 $ 82.26 $ 85.79 ------------------------------------------------------------------------------------- CONSTELLATION ANNUAL EXPENSE RATIO 0.71% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 --------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.66% 34.18% 39.94% 45.94% 52.20% End of Year Balance $12,866.37 $13,418.34 $13,993.98 $14,594.32 $15,220.42 Estimated Annual Expenses $ 89.47 $ 93.31 $ 97.31 $ 101.49 $ 105.84 ------------------------------------------------------------------------------------- |
DIVERSIFIED DIVIDEND ANNUAL EXPENSE RATIO 0.73% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.27% 8.72% 13.36% 18.21% 23.25% End of Year Balance $10,427.00 $10,872.23 $11,336.48 $11,820.54 $12,325.28 Estimated Annual Expenses $ 74.56 $ 77.74 $ 81.06 $ 84.52 $ 88.13 ----------------------------------------------------------------------------------------------- DIVERSIFIED DIVIDEND ANNUAL EXPENSE RATIO 0.73% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.52% 34.00% 39.73% 45.69% 51.91% End of Year Balance $12,851.57 $13,400.33 $13,972.53 $14,569.15 $15,191.26 Estimated Annual Expenses $ 91.90 $ 95.82 $ 99.91 $ 104.18 $ 108.63 ----------------------------------------------------------------------------------------------- |
LARGE CAP BASIC VALUE ANNUAL EXPENSE RATIO 0.80% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.20% 8.58% 13.14% 17.89% 22.84% End of Year Balance $10,420.00 $10,857.64 $11,313.66 $11,788.83 $12,283.97 Estimated Annual Expenses $ 81.68 $ 85.11 $ 88.69 $ 92.41 $ 96.29 ----------------------------------------------------------------------------------------------- LARGE CAP BASIC VALUE ANNUAL EXPENSE RATIO 0.80% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.00% 33.37% 38.98% 44.81% 50.90% End of Year Balance $12,799.89 $13,337.49 $13,897.66 $14,481.36 $15,089.58 Estimated Annual Expenses $ 100.34 $ 104.55 $ 108.94 $ 113.52 $ 118.28 ----------------------------------------------------------------------------------------------- |
LARGE CAP GROWTH ANNUAL EXPENSE RATIO 0.85% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.15% 8.47% 12.97% 17.66% 22.55% End of Year Balance $10,415.00 $10,847.22 $11,297.38 $11,766.22 $12,254.52 Estimated Annual Expenses $ 86.76 $ 90.36 $ 94.11 $ 98.02 $ 102.09 ----------------------------------------------------------------------------------------------- LARGE CAP GROWTH ANNUAL EXPENSE RATIO 0.85% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 27.63% 32.93% 38.44% 44.19% 50.17% End of Year Balance $12,763.08 $13,292.75 $13,844.40 $14,418.94 $15,017.33 Estimated Annual Expenses $ 106.32 $ 110.74 $ 115.33 $ 120.12 $ 125.10 ----------------------------------------------------------------------------------------------- |
MID CAP GROWTH ANNUAL EXPENSE RATIO 1.15% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.85% 7.85% 12.00% 16.31% 20.79% End of Year Balance $10,385.00 $10,784.82 $11,200.04 $11,631.24 $12,079.04 Estimated Annual Expenses $ 117.21 $ 121.73 $ 126.41 $ 131.28 $ 136.33 ----------------------------------------------------------------------------------------------- MID CAP GROWTH ANNUAL EXPENSE RATIO 1.15% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 25.44% 30.27% 35.29% 40.49% 45.90% End of Year Balance $12,544.09 $13,027.03 $13,528.57 $14,049.42 $14,590.33 Estimated Annual Expenses $ 141.58 $ 147.03 $ 152.69 $ 158.57 $ 164.68 ----------------------------------------------------------------------------------------------- |
WEINGARTEN ANNUAL EXPENSE RATIO 0.85% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.15% 8.47% 12.97% 17.66% 22.55% End of Year Balance $10.415.00 $10,847.22 $11,297.38 $11,766.22 $12,254.52 Estimated Annual Expenses $ 86.76 $ 90.36 $ 94.11 $ 98.02 $ 102.09 ----------------------------------------------------------------------------------------------- WEINGARTEN ANNUAL EXPENSE RATIO 0.85% YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 27.63% 32.93% 38.44% 44.19% 50.17% End of Year Balance $12,763.08 $13,292.75 $13,844.40 $14,418.94 $15,017.33 Estimated Annual Expenses $ 106.32 $ 110.74 $ 115.33 $ 120.12 $ 125.10 ----------------------------------------------------------------------------------------------- |
DISCLOSURE OF PORTFOLIO HOLDINGS
Each funds' portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission (SEC) within 60 days a fund's first and third fiscal quarter-ends. In addition, portfolio holdings information for each fund is available at (http://www.aiminvestments.com). To reach this information, access a fund's overview page on the website. Links to the following fund information are located in the upper right side of this website page:
---------------------------------------------------------------------------------------------------------------------------------
APPROXIMATE DATE OF INFORMATION REMAINS
INFORMATION WEBSITE POSTING POSTED ON WEBSITE
---------------------------------------------------------------------------------------------------------------------------------
Top ten holdings as of month end 15 days after month end Until posting of the following month's top
ten holdings
---------------------------------------------------------------------------------------------------------------------------------
Complete portfolio holdings as of 30 days after calendar quarter end For one year
calendar quarter end
---------------------------------------------------------------------------------------------------------------------------------
|
A description of the fund's policies and procedures with respect to the disclosure of such fund's portfolio holdings is available in the fund's Statement of Additional Information, which is available at (http://www.aiminvestments.com).
THE ADVISORS
A I M Advisors, Inc. (the advisor or AIM) serves as each fund's investment
advisor. A I M Capital Management, Inc. (the subadvisor), a wholly owned
subsidiary of the advisor, is each of Charter's, Constellation's and
Weingarten's subadvisor and is responsible for its day-to-day management. Both
the advisor and the subadvisor are located at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. The advisors supervise all aspects of the funds'
operations and provide investment advisory services to the funds, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the funds.
The advisor has acted as an investment advisor since its organization in 1976, and the subadvisor has acted as an investment advisor since 1986. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the funds, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; (iii) that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; (iv) 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; (v) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and (vi) that the defendants breached their fiduciary duties by failing to ensure that the funds participated in class action settlements in which they were eligible to participate.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2004, the advisor received compensation from Aggressive Growth, Capital Development, Diversified Dividend and Large Cap Basic Value at the following rates:
ANNUAL RATE
(AS A PERCENTAGE
OF AVERAGE DAILY
FUND NET ASSETS)
---- ----------------
Aggressive Growth 0.64%
Capital Development 0.67%
Diversified Dividend 0.09%
Large Cap Basic Value 0.60%
|
During the fiscal year ended October 31, 2004, the advisor received compensation from Blue Chip, Charter, Constellation, Large Cap Growth, Mid Cap Growth and Weingarten at the following rates:
ANNUAL RATE
(AS A PERCENTAGE PERCENTAGE RANGE
OF AVERAGE DAILY (OF AVERAGE DAILY
FUND NET ASSETS) NET ASSETS
---- ---------------- -----------------
Blue Chip 0.64% 0.75% to 0.625%
Charter 0.63% 1.00% to 0.625%
Constellation 0.62% 1.00% to 0.625%
Large Cap Growth 0.75% 0.75% to 0.625%
Mid Cap Growth 0.80% 0.80% to 0.75%
Weingarten 0.64% 1.00% to 0.625%
|
The advisor contractually agreed to advisory fee waivers for the period January 1, 2005 to December 31, 2009 as part of its settlement with the Attorney General of New York ("NYAG"). The advisor will waive advisory fees to the extent necessary so that the advisory fee payable does not exceed the Advisory Fee Rates After January 1, 2005. Following are the advisory fee rates before and after January 1, 2005.
BLUE CHIP
ADVISORY FEE RATES BEFORE ADVISORY FEE RATES AFTER
JANUARY 1, 2005 WAIVER JANUARY 1, 2005 WAIVER
--------------------------------------------------------------------------------------------
0.75% of the first $350 million 0.695% of the first $250 million
0.625% of the next $4.65 billion 0.67% of the next $250 million
0.60% of the next $5 billion* 0.645% of the next $500 million
0.575% of amount over $10 billion* 0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of amount over $10 billion
|
* After fee waiver. This rate includes AIM's voluntary agreement to waive an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum of 0.175% on net assets over $35 billion.
CHARTER AND CONSTELLATION
ADVISORY FEE RATES BEFORE ADVISORY FEE RATES AFTER
JANUARY 1, 2005 WAIVER JANUARY 1, 2005 WAIVER
--------------------------------------------------------------------------------------------
1.00% of the first $30 million 0.75% of the first $150 million
0.75% of the next $120 million 0.615% of the next $4.85 billion
0.625% of the next $4.85 billion 0.57% of the next $2.5 billion
0.60% of the next $5 billion* 0.545% of the next $2.5 billion
0.575% of amount over $10 billion* 0.52% of amount over $10 billion
|
* After fee waiver. This rate includes AIM's voluntary agreement to waive an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum of 0.175% on net assets over $35 billion.
LARGE CAP GROWTH
ADVISORY FEE RATES BEFORE ADVISORY FEE RATES AFTER
JANUARY 1, 2005 WAIVER JANUARY 1, 2005 WAIVER
--------------------------------------------------------------------------------------------
0.75% of the first $1 billion 0.695% of the first $250 million
0.70% of the next $1 billion 0.67% of the next $250 million
0.625% of the next $3 billion 0.645% of the next $500 million
0.60% of the next $5 billion* 0.62% of the next $1.5 billion
0.575% of amount over $10 billion* 0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of amount over $10 billion
|
* After fee waiver. This rate includes AIM's voluntary agreement to waive an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum of 0.175% on net assets over $35 billion.
MID CAP GROWTH
ADVISORY FEE RATES BEFORE ADVISORY FEE RATES AFTER
JANUARY 1, 2005 WAIVER JANUARY 1, 2005 WAIVER
--------------------------------------------------------------------------------------------
0.80% of the first $1 billion 0.745% of the first $250 million
0.75% of the next $4 billion 0.73% of the next $250 million
0.725% of the next $5 billion* 0.715% of the next $500 million
0.70% of amount over $10 billion* 0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of amount over $10 billion
|
* After fee waiver. This rate includes AIM's voluntary agreement to waive an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum of 0.175% on net assets over $35 billion.
WEINGARTEN
ADVISORY FEE RATES BEFORE ADVISORY FEE RATES AFTER
JANUARY 1, 2005 WAIVER JANUARY 1, 2005 WAIVER
--------------------------------------------------------------------------------------------
1.00% of the first $30 million 0.695% of the first $250 million
0.75% of the next $320 million 0.67% of the next $250 million
0.625% of the next $4.65 billion* 0.645% of the next $500 million
0.60% of the next $5 billion* 0.62% of the next $1.5 billion
0.575% of amount over $10 billion* 0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of amount over $10 billion
|
* After fee waiver. This rate includes AIM's voluntary agreement to waive an amount equal to 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum of 0.175% on net assets over $35 billion.
PORTFOLIO MANAGERS
The following individuals are jointly and primarily responsible for the day-to-day management of each fund's portfolio:
AGGRESSIVE GROWTH
- Jay K. Rushin, (lead manager), Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998.
He is assisted by the advisor's Aggressive Growth Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management
responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
BLUE CHIP
- Kirk L. Anderson, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/ or its affiliates since 1994.
He is assisted by the advisor's Large Cap Growth Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
CAPITAL DEVELOPMENT
- Paul J. Rasplicka, (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994.
He is assisted by the advisor's Mid Cap Growth and GARP Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
CHARTER
- Ronald S. Sloan, Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1998.
He is assisted by the advisor's Mid/Large Cap Core Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
CONSTELLATION
- Kenneth A. Zschappel (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1996 and has been associated with the advisor and/or its affiliates since 1990.
- Christian A. Costanzo, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
- Robert J. Lloyd, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000. From 1997 to 2000, he was a trader with American Electric Power.
- Bryan A. Unterhalter, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
They are assisted by the advisor's Multi-Cap Growth Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio mangers and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
DIVERSIFIED DIVIDEND
- Meggan M. Walsh, Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1991.
She is assisted by the advisor's Diversified Dividend Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on this portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
LARGE CAP BASIC VALUE
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1998.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Matthew W. Seinsheimer, Senior Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001. From 1996 to 2001, he was equity analyst and portfolio manager for Luther King Capital Management.
They are assisted by the advisor's Basic Value Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of other members of the team, may found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
LARGE CAP GROWTH
- Geoffrey V. Keeling, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1995.
- Robert L. Shoss, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the advisor's Large Cap Growth Team ,which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund;s portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
MID CAP GROWTH
- Karl Farmer, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998.
- Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1994.
They are assisted by the advisor's Mid Cap Growth and GARP Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
WEINGARTEN
- Lanny H. Sachnowitz (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1987.
- James G. Birdsall, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the advisor's Large Cap Growth Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
The lead managers generally have final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead managers may perform these functions, and the nature of these functions, may change from time to time.
The funds' Statement of Additional Information provides additional information about the portfolio managers' investments in the funds, a description of their compensation structure, and information regarding other accounts they manage.
DIVIDENDS AND DISTRIBUTIONS
Each of the funds, except Diversified Dividend, expects that distributions, if any, will consist primarily of capital gains. Diversified Dividend expects that distributions, if any, will consist of both capital gains and ordinary income.
DIVIDENDS
The funds generally declare and pay dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The funds generally distribute long-term and short-term capital gains, if any, annually.
SUITABILITY FOR INVESTORS
The Institutional Classes of the funds are intended for use by institutional investors. Shares of the Institutional Classes of the funds are available for banks and trust companies acting in a fiduciary or similar capacity, bank and trust company common and collective trust funds, banks and trust companies investing for their own account, entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies), defined benefit plans, endowments, foundations and defined contribution plans offered pursuant to Sections 401, 457, 403(a), or 403(b) or (c) (defined contribution plans offered pursuant to Section 403(b) must be sponsored by a Section 501(c)(3) organization). For defined contribution plans for which the sponsor has combined defined contribution and defined benefit assets of at least $100 million there is no minimum initial investment requirement, otherwise the minimum initial investment requirement for defined contribution plans is $10 million. There is no minimum initial investment requirement for defined benefit plans; and the minimum initial investment requirement for all other investors for which the Institutional Classes of funds are available is $1 million.
The Institutional Classes of funds are designed to be convenient and economical vehicles in which institutions can invest in a portfolio of equity securities. An investment in the funds may relieve the institution of many of the investment and administrative burdens encountered when investing in equity securities directly. These include: selection and diversification of portfolio investments; surveying the market for the best price at which to buy and sell; valuation of portfolio securities; receipt, delivery and safekeeping of securities; and portfolio recordkeeping.
FUTURE LIMITED FUND OFFERING (AGGRESSIVE GROWTH)
Due to the sometimes limited availability of common stocks of smaller companies that meet the investment criteria for the fund, the fund may limit public sales of its shares to certain investors.
During closed periods, the fund may impose different standards for additional investments.
The financial highlights tables are intended to help you understand each fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in each fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal periods ended October 31, 2004, 2003 and 2002 has been audited by Ernst & Young LLP, whose report, along with each fund's financial statements, is included in each fund's annual report, which is available upon request. Information prior to fiscal period 2001 was audited by other public accountants. The Audit Committee of the Board of Trustees (the "Board") of the funds has appointed a new independent registered public accounting firm for the funds' current fiscal year (2005). Such appointment was ratified and approved by the independent trustees of the Board. For information regarding the change in the independent registered public accounting firm, see the Statement of Additional Information.
For a discussion of how investments in IPOs affected the Large Cap Basic Value's and Large Cap Growth's performance, see the "Performance Information" section of this prospectus.
Diversified Dividend's Institutional Class commenced operations on October 25, 2005 and therefore, financial information for such shares is not available.
AGGRESSIVE GROWTH --
INSTITUTIONAL CLASS
-----------------------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------- OCTOBER 31,
2005 2004 2003 2002
---------- ---------- ---------- --------------
Net asset value, beginning of period $ 9.76 $ 9.08 $ 7.32 $ 9.53
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.03)(a) (0.03)(a) (0.02)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.05 0.71 1.79 (2.19)
===============================================================================================================================
Total from investment operations 0.05 0.68 1.76 (2.21)
===============================================================================================================================
Net asset value, end of period $ 9.81 $ 9.76 $ 9.08 $ 7.32
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 0.51% 7.49% 24.04% (23.19)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 3,712 $ 128 $ 2,589 $ 138
===============================================================================================================================
Ratio of expenses to average net assets 0.81%(c) 0.72%(d) 0.71% 0.81%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.29)% (0.37)% (0.49)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 98% 115% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $2,408,044.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 0.73%.
(e) Annualized.
(f) Not annualized for periods less than one year.
BLUE CHIP -- INSTITUTIONAL CLASS
----------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
---------- ------- ------ --------------
Net asset value, beginning of period $ 11.14 $ 10.81 $ 9.26 $ 12.13
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08(a) 0.04 0.06 0.02(b)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01) 0.29 1.49 (2.89)
==================================================================================================================
Total from investment operations 0.07 0.33 1.55 (2.87)
==================================================================================================================
Net asset value, end of period $ 11.21 $ 11.14 $10.81 $ 9.26
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 0.63% 3.05% 16.74% (23.66)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $59,888 $49,044 $ 136 $ 160
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 0.70%(d)(e) 0.74%(e) 0.77% 0.77%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of net investment income to average net assets 1.52%(a)(d) 0.51% 0.53% 0.30%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(g) 24% 29% 28% 28%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a special cash dividend of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the special dividend are $0.04 and 0.79%, respectively.
(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 the returns for shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $55,837,682.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to average net assets prior to fee waivers and/or expense reimbursements was 0.71% (annualized) and 0.75% for the six months ended April 30, 2005 and the year ended October 31, 2004, respectively.
(f) Annualized.
(g) Not annualized for periods less than one year.
CAPITAL DEVELOPMENT --
INSTITUTIONAL CLASS
---------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
---------- ------ ------ --------------
Net asset value, beginning of period $18.13 $16.83 $12.84 $ 17.25
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00(a) 0.01(a) 0.01(a) 0.02(a)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.71 3.98 (4.43)
=================================================================================================================
Total from investment operations 0.64 1.72 3.99 (4.41)
=================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- --
=================================================================================================================
Net asset value, end of period $17.35 $18.13 $16.83 $ 12.84
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 3.11% 10.38% 31.08% (25.57)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,713 $ 67 $ 10 $ 7
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.83%(c) 0.86% 0.87% 0.84%(d)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.83%(c) 1.15% 1.25% 0.99%(d)
=================================================================================================================
Ratio of net investment income to average net assets 0.02%(c) 0.08% 0.10% 0.25%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 65% 74% 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 assets
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 $4,261,254.
(d) Annualized.
(e) Not annualized for periods less than one year.
CHARTER -- INSTITUTIONAL CLASS
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- ------ ------ ------ ------ ------
Net asset value, beginning of period $12.53 $11.45 $ 9.80 $10.67 $18.33 $17.33
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.13(b) 0.09(b) 0.06(c) 0.04 0.52
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.03 1.56 (0.93) (6.82) 1.83
=================================================================================================================================
Total from investment operations 0.43 1.16 1.65 (0.87) (6.78) 2.35
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.18) (0.08) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.18) (0.08) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $12.78 $12.53 $11.45 $ 9.80 $10.67 $18.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 3.42% 10.21% 16.84% (8.15)% (38.46)% 14.02%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,263 $3,285 $2,061 $1,457 $1,648 $3,234
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.78%(e) 0.74% 0.79% 0.79% 0.68% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.80%(e) 0.75% 0.79% 0.83% 0.69% 0.68%
=================================================================================================================================
Ratio of net investment income to average net assets 2.06%(e) 1.06% 0.90% 0.52%(c) 0.25% 0.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.10 and 1.35%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of $3,787,313.
(f) Not annualized for periods less than one year.
CONSTELLATION -- INSTITUTIONAL CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- -------- -------- -------- -------- --------
Net asset value, beginning of period $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) (0.01)(b) (0.03)(b) (0.06) 0.01 (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.06) 0.85 3.80 (2.54) (17.14) 12.91
=================================================================================================================================
Total from investment operations 0.03 0.84 3.77 (2.60) (17.13) 12.82
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 23.04 $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.13% 3.79% 20.49% (12.38)% (42.80)% 37.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $129,942 $164,664 $154,150 $122,746 $150,609 $288,097
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.75%(d) 0.72% 0.75% 0.80% 0.65% 0.65%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.77%(d) 0.74% 0.76% 0.81% 0.68% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.72%(a)(d) (0.04)% (0.13)% (0.28)% 0.03% (0.18)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net Investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $0.02 and
0.15% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $144,798,872.
(e) Not annualized for periods less than one year.
DIVERSIFIED DIVIDEND -- CLASS A
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
---------- ------- ------- -----------------
Net asset value, beginning of period $ 11.48 $ 10.26 $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10(a) 0.14 0.06(b) (0.03)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.23 1.54 (1.27)
=========================================================================================================================
Total from investment operations 0.69 1.37 1.60 (1.30)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.15) (0.04) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.31) (0.15) (0.04) --
=========================================================================================================================
Net asset value, end of period $ 11.86 $ 11.48 $ 10.26 $ 8.70
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.98% 13.36% 18.39% (13.00)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,983 $63,513 $22,375 $ 7,834
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(d) 1.00% 1.51% 1.75%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.45%(d) 1.70% 2.12% 4.26%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.66%(a)(d) 1.27% 0.65% (0.34)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.09 and 1.38%, respectively.
(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 $90,314,821.
(e) Annualized.
(f) Not annualized for periods less than one year.
LARGE CAP BASIC VALUE --
INSTITUTIONAL CLASS
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------- --------------
Net asset value, beginning of period $ 12.38 $ 12.62
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05(a) 0.04(a)
-----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.72 (0.28)
===============================================================================================
Total from investment operations 0.77 (0.24)
===============================================================================================
Net asset value, end of period $ 13.15 $ 12.38
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 6.22% (1.90)%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,777 $18,745
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets 0.75%(c) 0.80%(d)(e)
===============================================================================================
Ratio of net investment income to average net assets 0.75%(c) 0.64%(e)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 5% 32%
_______________________________________________________________________________________________
===============================================================================================
|
(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 $44,099,689.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 0.81% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
LARGE CAP GROWTH --
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------- --------------
Net asset value, beginning of period $ 9.18 $ 9.13
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)(b) (0.01)(a)
---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 0.06
=============================================================================================
Total from investment operations 0.12 0.05
=============================================================================================
Net asset value, end of period $ 9.30 $ 9.18
_____________________________________________________________________________________________
=============================================================================================
Total return(c) 1.31% 0.55%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,887 $22,190
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.84%(d) 0.92%(e)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.90%(d) 0.93%(e)
=============================================================================================
Ratio of net investment income to average net assets 0.74%(b)(d) (0.30)%(e)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(f) 48% 111%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.03 and $0.41%, respectively.
(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 the returns for shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $41,312,037.
(e) Annualized.
(f) Not annualized for periods less than one year.
MID CAP GROWTH--INSTITUTIONAL CLASS
---------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------- --------------
Net asset value, beginning of period $ 9.11 $ 9.22
-----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.04)(a)
-----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 (0.07)
=====================================================================================================
Total from investment operations 0.17 (0.11)
=====================================================================================================
Net asset value, end of period $ 9.28 $ 9.11
_____________________________________________________________________________________________________
=====================================================================================================
Total return(b) 1.87% (1.19)%
_____________________________________________________________________________________________________
=====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 10
_____________________________________________________________________________________________________
=====================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(c) 1.20%(d)
-----------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.05%(c) 1.28%(d)
=====================================================================================================
Ratio of net investment income (loss) to average net assets (0.49)%(c) (0.82)%(d)
_____________________________________________________________________________________________________
=====================================================================================================
Portfolio turnover rate(e) 63% 167%
_____________________________________________________________________________________________________
=====================================================================================================
|
(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 $10,612.
(d) Annualized.
(e) Not annualized for periods less than one year.
WEINGARTEN--INSTITUTIONAL CLASS
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- ------ ------ ------- ------- ----------
Net asset value, beginning of period $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.01)(b) 0.00 (0.01)(b) (0.01) (0.06)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.17 0.54 2.29 (3.24) (12.29) 3.29
=================================================================================================================================
Total from investment operations 0.19 0.53 2.29 (3.25) (12.30) 3.23
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $12.92 $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.49% 4.34% 23.11% (24.70)% (47.11)% 11.07%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,706 $1,763 $2,213 $ 1,883 $ 7,667 $18,634
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.81%(d) 0.84% 0.78% 0.82% 0.69% 0.64%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.82%(d) 0.85% 0.78% 0.82% 0.70% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.25%(a)(d) (0.12)% 0.01% (0.12)% (0.04)% (0.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.00 and 0.03% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $1,839,891.
(e) Not annualized for periods less than one year.
In addition to the fund, AIM serves as investment advisor to many other mutual funds (the funds). The following information is about the Institutional Classes of all funds, which are offered to certain eligible institutional investors. Consult the fund's Statement of Additional Information for the Institutional Class for details.
SHARES SOLD WITHOUT SALES CHARGES
You will not pay an initial or contingent deferred sales charge on purchases of any Institutional Class shares.
PURCHASING SHARES
MINIMUM INVESTMENTS PER ACCOUNT
The minimum investments for Institutional Class accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
----------------------------------------------------------------------------------------
Defined Benefit Plans or Platform Sponsors for Defined
Contribution Plans $ 0 no minimum
Banks acting in a fiduciary or similar capacity, Collective
and Common Trust Funds, Banks and Broker-Dealers acting for
their own account or Foundations and Endowments 1 million no minimum
Defined Contribution Plans (Corporate, Non-profit or
Governmental) 10 million no minimum
----------------------------------------------------------------------------------------
|
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed. Additionally, Federal law requires that the fund verify and record your identifying information.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
----------------------------------------------------------------------------------------------------------------------------
Through a Financial Advisor Contact your financial advisor. Same
The financial advisor should mail your
completed account application to the
transfer agent,
AIM Investment Services, Inc.,
P.O. Box 0843,
Houston, TX 77210-0843.
The financial advisor should call the
transfer agent at (800) 659-1005 to
receive a reference number.
Then, use the following wire instructions:
Beneficiary Bank
ABA/Routing #: 113000609
Beneficiary Account Number: 00100366732
Beneficiary Account Name: AIM Investment
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account as described above. Call the transfer agent at (800) 659-1005
and wire payment for your purchase order
in accordance with the wire instructions
noted above.
----------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or reinvested in the same fund at net asset value. Unless you specify otherwise, your dividends and distributions will automatically be reinvested in the same fund.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
A I M Distributors, Inc. (ADI) or one or more of its corporate affiliates (collectively, ADI Affiliates) may make additional cash payments to financial advisors in connection with the promotion and sale of shares of the funds. These additional cash payments may include cash revenue sharing payments and other payments for certain administrative services, transaction processing services and certain other marketing support services. ADI Affiliates make these payments
INSTCL--10/05
from their own resources and from ADI's retention of underwriting concessions. In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of the funds. The benefits ADI Affiliates receive when it makes these payments include, among other things, placing the funds on the financial advisor's funds sales system, placing the funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including the funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. The revenue sharing payments ADI Affiliates make may be calculated on the average daily net assets of the applicable funds attributable to that particular financial advisor (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.10% per annum of those assets during a defined period. Asset-Based Payments primarily create incentives to retain previously sold shares of the funds in investor accounts.
ADI Affiliates also may make other payments to certain financial advisors for processing certain transactions or account maintenance activities (such as processing purchases, redemptions or exchanges or producing customer account statements) or for providing certain other marketing support services (such as financial assistance for conferences, seminars or sales or training programs at which ADI Affiliates personnel may make presentations on the funds to the financial advisor's sales force). Financial advisors may earn profits on these payments for these services, since the amount of the payment may exceed the cost of providing the service. Certain of these payments are subject to limitations under applicable law.
ADI Affiliates are motivated to make the payments described above since they promote the sale of fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of the funds or retain shares of the funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional Information about these payments and the services provided by financial advisors. In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the funds, as well as about fees and/or commissions it charges.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. 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, thus interfering with the efficient management of such funds by causing them to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted. The Boards of Trustees have adopted policies and procedures designed to discourage excessive or short-term trading of fund shares for all funds except money market funds. However, there is the risk that these funds' policies and procedures will prove ineffective in whole or in part to detect or prevent excessive or short-term trading. These funds may alter their policies at any time without prior notice to shareholders if the advisor believes the change would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards of Trustees of the funds.
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 long-term shareholder interests.
The Boards of Trustees of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio (the money market funds) have not adopted any policies and procedures that would limit frequent purchases and redemptions of such funds' shares. The Boards do not believe that it is appropriate to adopt any such policies and procedures for the money market funds for the following reasons:
- The money market funds are offered to investors as cash management vehicles. Investors must perceive an investment in such funds
INSTCL--10/05
as an alternative to cash, and must be able to purchase and redeem shares regularly and frequently.
- One of the advantages of a money market fund as compared to other investment options is liquidity. Any policy that diminishes the liquidity of the money market funds will be detrimental to the continuing operations of such funds.
- The money market funds' portfolio securities are valued on the basis of amortized cost, and such funds seeks to maintain a constant net asset value. As a result, there are no price arbitrage opportunities.
- Because the money market funds seek to maintain a constant net asset value, investors expect to receive upon redemption the amount they originally invested in such funds. Imposition of redemption fees would run contrary to investor expectations.
The Boards considered the risks of not having a specific policy that limits frequent purchases and redemptions, and it determined that those risks are minimal, especially in light of the reasons for not having such a policy as described above. Nonetheless, to the extent that the fund must maintain additional cash and/or securities with short-term durations than may otherwise be required, the fund's yield could be negatively impacted.
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 will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the shareholder to take action to stop such activities or (ii) refusing to process future purchases or exchanges related to such activities in the shareholder's accounts other than exchanges into a money market fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the practical limitations described above.
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 or non-existent 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, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per calendar year, or a fund or an AIM Affiliate 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 AIM Affiliates reserve the discretion to accept exchanges in excess of these guidelines on a case-by-case basis if they believe that granting such exceptions would be consistent with the best interests of shareholders. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. The movement out of one fund (redemption) and into one or more other funds (purchase) on the same day shall be counted as one exchange. Exchanges effected as part of programs that have been determined by an AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio rebalancing, or other automatic non-discretionary programs that involve exchanges, generally will not be counted toward the trading guidelines limitation of four exchanges out of a fund per calendar year.
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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to implement these trading guidelines and may be further limited by systems limitations applicable to those types of accounts.
Some investments in the funds are made indirectly through vehicles such as qualified tuition plans, variable annuity and insurance contracts, and funds of funds which use the funds as underlying investments (each a conduit investment vehicle). If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to impose exchange limitations on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, shares of certain funds within 30 days of purchase. 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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to assess such fees and may be further limited by systems limitations applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares
of the fund held through omnibus accounts, retirement plan accounts, approved
fee-based program accounts and conduit investment vehicles, see "Redeeming
Shares -- Redemption Fee".
INSTCL--10/05
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more information.
REDEEMING SHARES
REDEMPTION FEE
You may be charged a 2% redemption fee (on redemption proceeds) if you redeem,
including redeeming by exchange, shares of the following funds 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 Core Equity Fund AIM European Small Company AIM International Growth Fund Fund AIM International Small Company Fund AIM Global Aggressive Growth AIM S&P 500 Index Fund Fund AIM Trimark Fund AIM Global Equity Fund AIM Global Growth Fund AIM Global Real Estate 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 generally 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 by funds of funds, qualified tuition plans maintained pursuant to Section 529 of the Code, and insurance company separate accounts which use the funds as underlying investments;
(5) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan established with the funds or a financial intermediary;
(6) 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;
(7) total or partial redemption of shares acquired through investment of dividends and other distributions; or
(8) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of shares of the above funds 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. 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 (1) through (8) above may impose a redemption fee that has different characteristics, which may be more or less restrictive, than those set forth above.
Some investments in the funds are made indirectly through conduit investment vehicles. If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to assess redemption fees on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle. In these cases, the applicability of redemption fees will be determined based on the aggregate holdings and redemptions of the conduit investment vehicle in a fund.
The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of losing its registered investment company qualification for tax purposes.
Your broker or financial advisor may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC) in addition to the redemption fee.
INSTCL--10/05
Through a Financial Advisor Contact your financial advisor.
Redemption proceeds will be sent in accordance with the wire
instructions specified in the account application provided
to the transfer agent. The transfer agent must receive your
financial intermediary's call before the close of the
customary trading session of the New York Stock Exchange
(NYSE) on days the NYSE is open for business in order to
effect the redemption at that day's closing price.
By Telephone A person who has been authorized in the account application
to effect transactions may make redemptions by telephone.
You must call the transfer agent before the close of the
customary trading session of the NYSE on days the NYSE is
open for business in order to effect the redemption at that
day's closing price.
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TIMING AND METHOD OF PAYMENT
We normally will send out redemption proceeds within one business day, and in any event no more than seven days, after we accept your request to redeem.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will transmit the amount of the redemption
proceeds electronically to your pre-authorized bank account. We use reasonable
procedures to confirm that instructions communicated by telephone are genuine
and are not liable for telephone instructions that are reasonably believed to be
genuine.
REDEMPTIONS IN KIND
Although the funds generally intend to pay redemption proceeds solely in cash,
the funds reserve the right determine in their sole discretion, whether to
satisfy redemption requests by making payment in securities or other property
(known as a redemption in kind).
REDEMPTIONS BY THE AIM FUNDS
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, or the fund is not able to
verify your identity as required by law, the fund may, at its discretion, redeem
the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under most circumstances, exchange Institutional Class shares in one fund for Institutional Class shares of another fund. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. Before requesting an exchange, review the prospectus of the fund you wish to acquire.
You may be charged a redemption fee on certain redemptions, including exchanges. See "Redeeming Shares -- Redemption Fee."
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- Shares of the 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 with the exception of dividends that are reinvested; 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, a 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 funds or the distributor may modify or terminate this privilege at any time. The 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 TELEPHONE
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each fund's shares is the fund's net asset value per share. The funds value portfolio securities for which market quotations are readily available at market value. The funds value all other securities and assets for which market quotations are unavailable or unreliable at their fair value in good faith using procedures approved by the Boards of Trustees of the funds. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
INSTCL--10/05
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where AIM determines that the closing price of the security is unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
AIM may use indications of fair value from pricing services approved by the Boards of Trustees. In other circumstances, the AIM valuation committee may fair value securities in good faith using procedures approved by the Boards of Trustees. As a means of evaluating its fair value process, AIM routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Boards of Trustees.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, normally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services 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, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service and independent quoted prices are unreliable, the AIM valuation committee will fair value the security using procedures approved by the Boards of Trustees.
Short-term Securities: The funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio value all 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.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Open-end Funds: To the extent a fund invests in other open-end funds, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
Each 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 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 on each day the NYSE is open for business, prior to the close of the customary trading session or any earlier NYSE closing time that day. The funds price purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. Any applicable sales charges are applied at the time an order is processed. A fund may postpone the right of redemption only under INSTCL--10/05
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. Every year, you will be sent information showing the amount of dividends and distributions you received from each fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of fund shares will be subject to federal income tax. Exchanges of shares for shares of another 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 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 fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401, 403, 408, 408A and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
INSTCL--10/05
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 funds 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 funds' investments. Each fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you have questions about the funds, 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 at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or
BY TELEPHONE: (800) 659-1005
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, SAIs, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
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You can also review and obtain copies of the fund's SAI, financial reports, the funds' Forms N-Q 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 Room, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIM Aggressive Growth Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Diversified Dividend Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM Weingarten Fund
SEC 1940 Act file number: 811-1424
The fund's most recent portfolio holdings, as filed on Form N-Q, are also available at www.aiminvestments.com.
AIMinvestments.com AEF-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 INSTITUTIONAL CLASS SHARES OF EACH PORTFOLIO (EACH A "FUND", COLLECTIVELY THE "FUNDS") OF AIM EQUITY FUNDS LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INSTITUTIONAL CLASS SHARES OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF THE PROSPECTUS FOR THE FUNDS LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
AIM INVESTMENT SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 659-1005
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED OCTOBER 25, 2005, RELATES TO THE FOLLOWING PROSPECTUS FOR THE PORTFOLIOS NAMED BELOW:
FUND DATED
---- -----
AIM AGGRESSIVE GROWTH FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM BLUE CHIP FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM CAPITAL DEVELOPMENT FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM CHARTER FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM CONSTELLATION FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM DIVERSIFIED DIVIDEND FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM LARGE CAP BASIC VALUE FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM LARGE CAP GROWTH FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM MID CAP GROWTH FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
AIM WEINGARTEN FUND - INSTITUTIONAL CLASS OCTOBER 25, 2005
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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..........................................................................11
Derivatives....................................................................................16
Additional Securities or Investment Techniques.................................................22
Fund Policies...........................................................................................23
Temporary Defensive Positions...........................................................................25
Portfolio Turnover......................................................................................25
Policies and Procedures for Disclosure of Fund Holdings.................................................26
MANAGEMENT OF THE TRUST..........................................................................................28
Board of Trustees.......................................................................................28
Management Information..................................................................................28
Trustee Ownership of Fund Shares...............................................................31
Approval of Investment Advisory Agreements and Summary of Independent Written Fee Evaluation...31
Approval of Sub-Advisory Agreement.............................................................48
Compensation............................................................................................65
Retirement Plan For Trustees...................................................................65
Deferred Compensation Agreements...............................................................66
Purchases of Class A Shares of the Funds at Net Asset Value....................................66
Codes of Ethics.........................................................................................66
Proxy Voting Policies...................................................................................67
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..............................................................67
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................67
Investment Advisor......................................................................................67
Investment Sub-Advisor.........................................................................70
Portfolio Managers.............................................................................70
Securities Lending Arrangements................................................................70
Service Agreements......................................................................................71
Administrative Services Agreement..............................................................71
Other Service Providers.................................................................................71
BROKERAGE ALLOCATION AND OTHER PRACTICES.........................................................................72
Brokerage Transactions..................................................................................72
Commissions.............................................................................................73
Broker Selection........................................................................................73
Directed Brokerage (Research Services)..................................................................76
Regular Brokers or Dealers..............................................................................76
Allocation of Portfolio Transactions....................................................................76
Allocation of Equity Initial Public Offering ("IPO") Transactions.......................................76
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PURCHASE, REDEMPTION AND PRICING OF SHARES.......................................................................77
Purchase and Redemption of Shares.......................................................................77
Offering Price..........................................................................................78
Redemptions In Kind.....................................................................................79
Backup Withholding......................................................................................80
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................80
Dividends and Distributions.............................................................................80
Tax Matters.............................................................................................81
DISTRIBUTION OF SECURITIES.......................................................................................88
Distributor.............................................................................................88
CALCULATION OF PERFORMANCE DATA..................................................................................90
PENDING LITIGATION...............................................................................................95
APPENDICES:
RATINGS OF DEBT SECURITIES......................................................................................A-1
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO
HOLDINGS ON AN ONGOING BASIS..................................................................................B-1
TRUSTEES AND OFFICERS...........................................................................................C-1
TRUSTEE COMPENSATION TABLE......................................................................................D-1
PROXY POLICIES AND PROCEDURES...................................................................................E-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................F-1
MANAGEMENT FEES.................................................................................................G-1
PORTFOLIO MANAGERS..............................................................................................H-1
ADMINISTRATIVE SERVICES FEES....................................................................................I-1
BROKERAGE COMMISSIONS...........................................................................................J-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF
REGULAR BROKERS OR DEALERS....................................................................................K-1
PERFORMANCE DATA................................................................................................L-1
PENDING LITIGATION..............................................................................................M-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 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of eleven separate portfolios: AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Diversified Dividend 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), 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 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 Diversified Dividend Fund, and AIM Select Basic Value 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. Prior to September 15, 2004, AIM Select Basic Value Fund was known as AIM Basic Value II Fund. As of March 15, 2005, AIM Core Strategies Fund and AIM U.S. Growth Fund were liquidated. On July 18, 2005, AIM Aggressive Growth Fund acquired all the assets of AIM Emerging Growth Fund and AIM Weingarten Fund acquired all the assets of AIM Dent Demographic Trends Fund. In addition, on July 18, 2005, AIM Aggressive Growth Fund acquired the assets of AIM Libra Fund, a portfolio of AIM Investments Funds.
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 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 (as defined herein) offers separate classes of shares as follows:
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
---- ------- ------- ------- ------- ------------- --------
AIM Aggressive Growth Fund X X X X X
AIM 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 Diversified Dividend Fund X X X X X X
AIM Large Cap Basic Value Fund X X X X X X
AIM Large Cap Growth Fund X X X X X X
AIM Mid Cap Growth Fund X X X X X
AIM Select Basic Value Fund X X X
AIM Weingarten Fund X X X X X
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This Statement of Additional Information relates solely to the Institutional Class of these ten Funds. The Institutional Class shares of the Funds are intended for use by certain eligible institutional investors, including 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;
o platform sponsors with which A I M Distributors, Inc. ("AIM Distributors") has entered into an agreement; and
o proprietary asset allocation funds.
Each class of shares represents an interest in the same portfolio of investments. Differing sales charges and expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class.
Each share of a Fund has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act,
omission or obligation of the Trust or any trustee or officer; however, a
trustee or officer is not protected against any liability to the Trust or to the
shareholders to which a trustee or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his or her office with the Trust
("Disabling Conduct"). The Trust's Bylaws generally provide 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.
Indemnification does not extend to judgements or amounts paid in settlement in
or actions by or in the right of the Trust. The Trust's Bylaws provide for the
advancement of payments to current and former trustees, officers and employees
or agents of the Trust, or anyone serving at their request, in connection with
the preparation and presentation of a defense to any claim, action, suit or
proceeding, expenses for which such person would be entitled to indemnification;
provided that any advancement of payments would be reimbursed unless it is
ultimately determined that such person is entitled to indemnification for such
expenses.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds is "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and investment techniques used by AIM in managing The AIM Family of Funds(R). 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
AGGRESSIVE BLUE CHIP CAPITAL CHARTER CONSTELLATION DIVERSIFIED LARGE CAP
GROWTH FUND FUND DEVELOPMENT FUND FUND DIVIDEND BASIC VALUE
SECURITY/ FUND FUND FUND
INVESTMENT
TECHNIQUE
---------- ------------ --------- ----------- ------- ------------- ----------- ------------
EQUITY INVESTMENTS
Common Stock X X X X X X X
Preferred Stock X X X X X X X
Convertible X X X X X X X
Securities
Alternative Entity X X X X X X X
Securities
FOREIGN INVESTMENTS
Foreign Securities X X X X X X X
Foreign X X X X X X X
Government
Obligations
Foreign Exchange X X X X X X X
Transactions
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. Government X X X X X X X
Obligations
Liquid Assets X X X X X X X
Investment Grade X X X X X X X
Corporate Debt
Obligations
Junk Bonds
OTHER INVESTMENTS
REITs X X X X X X X
Other Investment X X X X X X X
Companies
Defaulted Securities X
Municipal Forward
Contracts
AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM AIM
LARGE CAP MID CAP WEINGARTEN
GROWTH FUND GROWTH FUND FUND
SECURITY/
INVESTMENT
TECHNIQUE
---------- ----------- ----------- ----------
Common Stock X X X
Preferred Stock X X X
Convertible X X X
Securities
Alternative Entity X X X
Securities
Foreign Securities X X X
Foreign X X X
Government
Obligations
Foreign Exchange X X X
Transactions
U.S. Government X X X
Obligations
Liquid Assets X X X
Investment Grade X X X
Corporate Debt
Obligations
Junk Bonds
REITs X X X
Other Investment X X X
Companies
Defaulted Securities X
Municipal Forward
Contracts
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AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM AIM AIM AIM AIM AIM
AGGRESSIVE BLUE CHIP CAPITAL CHARTER CONSTELLATION DIVERSIFIED LARGE CAP
GROWTH FUND FUND DEVELOPMENT FUND FUND DIVIDEND BASIC VALUE
SECURITY/ FUND FUND FUND
INVESTMENT
TECHNIQUE
---------- ------------ --------- ----------- ------- ------------- ----------- -----------
Variable or
Floating Rate
Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind
Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery X X X X X X X
Transactions
When-Issued X X X X X X X
Securities
Short Sales X X X X X X X
Margin Transactions X X
Swap Agreements X X X X X X X
Interfund Loans X X X X X X X
Borrowing X X X X X X X
Lending Portfolio X X X X X X X
Securities
Repurchase X X X X X X X
Agreements
Reverse Repurchase X X
Agreements
Dollar Rolls X X X
Illiquid Securities X X X X X X X
Rule 144A X X X X X X X
Securities
Unseasoned X X X
Issuers
AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM AIM
LARGE CAP MID CAP WEINGARTEN
GROWTH FUND GROWTH FUND FUND
SECURITY/
INVESTMENT
TECHNIQUE
---------- ----------- ----------- ----------
Variable or
Floating Rate
Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind
Securities
Synthetic Municipal
Instruments
Delayed Delivery X X X
Transactions
When-Issued X X X
Securities
Short Sales X X X
Margin Transactions X X
Swap Agreements X X X
Interfund Loans X X X
Borrowing X X X
Lending Portfolio X X X
Securities
Repurchase X X X
Agreements
Reverse Repurchase X
Agreements
Dollar Rolls X X
Illiquid Securities X X X
Rule 144A X X X
Securities
Unseasoned X
Issuers
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AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM AIM AIM AIM AIM AIM
AGGRESSIVE BLUE CHIP CAPITAL CHARTER CONSTELLATION DIVERSIFIED LARGE CAP
GROWTH FUND FUND DEVELOPMENT FUND FUND DIVIDEND BASIC VALUE
SECURITY/ FUND FUND FUND
INVESTMENT
TECHNIQUE
---------- ------------ --------- ----------- ------- ------------- ----------- -----------
Sale of Money
Market Securities
Standby
Commitments
DERIVATIVES
Equity-Linked X X X X X X
Derivatives
Put Options X X X X X X
Call Options X X X X X X
Straddles X X X X X X
Warrants X X X X X X
Futures Contracts X X X X X X
and Options on
Futures Contracts
Forward Currency X X X X X X
Contracts
Cover X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Special Situations
Privatizations
Commercial Bank
Obligations
Master Limited X
Partnerships
Investments in X X X X X X X
Entities with
Relationships with
the Funds/Advisor
AIM EQUITY FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM AIM
LARGE CAP MID CAP WEINGARTEN
GROWTH FUND GROWTH FUND FUND
SECURITY/
INVESTMENT
TECHNIQUE
---------- ----------- ----------- ----------
Sale of Money
Market Securities
Standby
Commitments
Equity-Linked X X X
Derivatives
Put Options X X X
Call Options X X X
Straddles X X X
Warrants X X X
Futures Contracts X X X
and Options on
Futures Contracts
Forward Currency X X X
Contracts
Cover X X X
Special Situations
Privatizations
Commercial Bank
Obligations
Master Limited
Partnerships
Investments in X X X
Entities with
Relationships with
the Funds/Advisor
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Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund. AIM Blue Chip Fund does not intend to invest more than 10% of its total assets in convertible securities.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets in foreign securities, except that each of AIM Charter Fund, AIM Constellation Fund and AIM Weingarten Fund may invest up to 20% of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the
U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
Risks of Developing Countries. Each Fund may invest up to 5% of 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 a Fund's investments.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing
countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds."
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its total assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the Treasury; others, such as those of the Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so, in which case, if the issuer were to default, the Funds holding securities of such issuer might not be able to recover their investment from the U.S. Government.
LIQUID ASSETS. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, bankers' acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments, and municipal obligations).
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider (i) general economic and financial conditions; (ii) the specific issuer's (a)
business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate. AIM Blue Chip Fund will not invest in non-convertible corporate debt securities rated below investment grade by Standard and Poor's Ratings Services ("S&P") and Moody's Investors Service ("Moody's") or in unrated non-convertible corporate debt securities believed by the Funds' investment advisor to be below investment grade quality.
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company. The Funds have obtained an exemptive order from the SEC allowing them to invest in money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"), provided that investments in Affiliated Money Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a
specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest basis rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leverage technique except for AIM Constellation Fund.
Investment in securities on a delayed delivery basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must sell another security in order to honor a when-issued commitment. If a Fund purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to the when-issued commitment. If the market value of such segregated assets declines, additional liquid assets will be segregated on a daily basis so that the market value of the segregated assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. A Fund is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. A Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in a Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount a Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining the number of shares to be sold short against a Fund's position in a convertible security, the anticipated fluctuation in the conversion premium is considered. A Fund may also make short sales to generate additional income from the investment of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. To secure its obligation to deliver the securities sold short, a Fund will segregate with its custodian an equal amount to the securities sold short or securities convertible into or exchangeable for such securities. A Fund may pledge no more than 10% of its total assets as collateral for short sales against the box.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to the Fund than if it had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Most swap agreements entered into by a Fund would calculate the obligations on a "net basis." Consequently, a Fund's obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Obligations under a swap agreement will be accrued daily (offset against amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating liquid assets to avoid any potential leveraging of the Fund. A Fund will not enter into a swap agreement with any single party if the net amount owed to or to be received under existing contracts with that party would exceed 5% of the Fund's total assets. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters - Swap Agreements."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other Funds advised by AIM (the "AIM Funds") and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund 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, 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 the time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options, it may be required to set aside assets to reduce the risks associated with using those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the
premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options, it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. The Funds, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Funds' overall position. A possible combined position would involve writing a covered call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written covered call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" a Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair a Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
SPECIAL SITUATIONS. AIM Constellation Fund may invest in "special situations." A special situation arises when, in the opinion of the Fund's management, the securities of a particular company will, within a reasonably estimated period of time, be accorded market recognition at an appreciated value solely by reason of a development applicable to that company, and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others: liquidations, reorganizations, recapitalizations, mergers, material litigation, technical breakthroughs, and new management or management policies. Although large and well-known companies may be involved, special situations more often involve comparatively small or unseasoned companies. Investments in unseasoned companies and special situations often involve much greater risk than in ordinary investment securities.
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.
INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISOR. Each Fund may invest in securities issued, sponsored or guaranteed by the following types of entities or their affiliates: (i) entities that sell shares of the AIM Funds; (ii) entities that rate or rank the AIM Funds; (iii) exchanges on which the AIM Funds buy or sell securities; and (iv) entities that provide services to the AIM Funds (e.g., custodian banks). The Funds will decide whether to invest in or sell securities issued by these entities based on the merits of the specific investment opportunity.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares. Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) shall not be considered to be violated unless an excess over or a deficiency under the percentage occurs immediately after, and is caused by, an acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt obligations issued by governments or political subdivisions of governments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds has this flexibility, the Board has adopted non-fundamental restrictions for each of the Funds relating to certain of these restrictions which AIM and certain Funds' sub-advisors must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other AIM Funds, subject to the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33"% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM 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 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 Fund, on such terms and conditions as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
(7) The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Blue Chip Fund normally invests at least 80% of its assets in securities of blue chip companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) The amount AIM Constellation Fund may borrow will also be limited by the applicable margin limitations imposed by the Federal Reserve Board. If at any time the value of AIM Constellation Fund's assets should fail to meet the 300% asset coverage requirement, the Fund will, within three days, reduce its borrowings to the extent necessary. AIM Constellation Fund may be required to eliminate partially or totally its outstanding borrowings at times when it may not be desirable for it to do so. Any investment gains made by AIM Constellation Fund with the borrowed monies in excess of interest paid by the Fund will cause the net asset value of AIM Constellation Fund's shares to rise faster than would otherwise be the case. On the other hand, if the investment performance of the additional securities purchased with the proceeds of such borrowings fails to cover the interest paid on the money borrowed by AIM Constellation Fund, the net asset value of AIM Constellation Fund will decrease faster than would otherwise be the case. This speculative factor is known as "leveraging."
(3) AIM 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.
(4) 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.
(5) 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.
(6) AIM Large Cap Growth Fund normally invests at least 80% of its assets in securities of large-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt obligations. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
PORTFOLIO TURNOVER
The variations in the portfolio turnover rates for AIM Charter Fund and AIM Weingarten Fund for the fiscal year 2004 as compared to the prior two fiscal years were due to the repositioning of the Funds in 2002, resulting in decreased portfolio turnover and decreased commissions. The variations in the portfolio turnover rates for AIM Weingarten Fund for the fiscal year ended 2004 as compared to fiscal year 2002 was due to the repositioning of the Fund in 2002, resulting in decreased portfolio turnover.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). AIM and the Board may amend the Holdings Disclosure Policy at any time without prior notice. Details of the Holdings Disclosure Policy and a description of the basis on which employees of AIM and its affiliates may release information about portfolio securities in certain contexts are provided below.
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following portfolio holdings information on www.aiminvestments.com(1):
APPROXIMATE DATE OF WEBSITE INFORMATION REMAINS POSTED ON
INFORMATION POSTING WEBSITE
----------- --------------------------- ------------------------------
Top ten holdings as of month end 15 days after month end Until replaced with the
following month's top ten
holdings
Select holdings included in the 29 days after calendar quarter end Until replaced with the
Fund's Quarterly Performance following quarter's Quarterly
Update Performance Update
Complete portfolio holdings as 30 days after calendar quarter end For one year
of calendar quarter end
Complete portfolio holdings as 60-70 days after fiscal quarter For one year
of fiscal quarter end end
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These holdings are listed along with the percentage of the Fund's net assets they represent. Generally, employees of AIM and its affiliates may not disclose such portfolio holdings until one day after they have been posted on http://www.aiminvestments.com. You may also obtain the publicly available portfolio holdings information described above by contacting us at 1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE AGREEMENT. Employees of AIM and its affiliates may disclose non-public full portfolio holdings on a selective basis only if the Internal Compliance Controls Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management") approves the parties to whom disclosure of non-public full portfolio holdings will be made. The ICCC must determine that the proposed selective disclosure will be made for legitimate business purposes of the applicable Fund and address any perceived conflicts of interest between shareholders of such Fund and AIM or its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund portfolio holdings by (1) overseeing the implementation and enforcement of the Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief Compliance Officer (or her designee) of AIM and the AIM Funds and (2) considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended) that may arise in connection with the Holdings Disclosure Policy. Pursuant to the Holdings Disclosure Policy, the Board reviews the types of situations in which AIM provides selective disclosure and approves situations involving perceived conflicts of interest between shareholders of the applicable Fund and AIM or its affiliates brought to the Board's attention by AIM.
AIM discloses non-public full portfolio holdings information to the following persons in connection with the day-to-day operations and management of the AIM Funds:
o Attorneys and accountants;
(1) To locate the Fund's portfolio holdings information on www.aiminvestments.com, click on the Products and Performance tab, then click on the Mutual Funds link, then click on the Fund Overview link and select the Fund from the drop down menu. Links to the Fund's portfolio holdings are located in the upper right side of this website page.
o Securities lending agents;
o Lenders to the AIM Funds;
o Rating and rankings agencies;
o Persons assisting in the voting of proxies;
o AIM Funds' custodians;
o The AIM Funds' transfer agent(s) (in the event of a redemption in kind);
o Pricing services, market makers, or other persons who provide systems or software support in connection with AIM Funds' operations (to determine the price of securities held by an AIM Fund);
o Financial printers;
o Brokers identified by the AIM Funds' portfolio management team who provide execution and research services to the team; and
o Analysts hired to perform research and analysis to the AIM Funds' portfolio management team.
In many cases, AIM will disclose current portfolio holdings on a daily basis to these persons. In these situations, AIM has entered into non-disclosure agreements which provide that the recipient of the portfolio holdings will maintain the confidentiality of such portfolio holdings and will not trade on such information ("Non-disclosure Agreements"). Please refer to Appendix B for a list of examples of persons to whom AIM provides non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules or regulations, or by regulatory authorities having jurisdiction over AIM and its affiliates or the Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive or accept any compensation (including compensation in the form of the maintenance of assets in any Fund or other mutual fund or account managed by AIM or one of its affiliates) for the selective disclosure of portfolio holdings information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the Funds, and the Funds' subadvisors, if applicable, and each of their employees may receive or have access to portfolio holdings as part of the day to day operations of the Funds.
From time to time, employees of AIM and its affiliates may express their views orally or in writing on one or more of the Funds' portfolio securities or may state that a Fund has recently purchased or sold, or continues to own, one or more securities. The securities subject to these views and statements may be ones that were purchased or sold since a Fund's most recent quarter-end and therefore may not be reflected on the list of the Fund's most recent quarter-end portfolio holdings disclosed on the website. Such views and statements may be made to various persons, including members of the press, brokers and other financial intermediaries that sell shares of the Funds, shareholders in the applicable Fund, persons considering investing in the applicable Fund or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers, and other entities for which AIM or its affiliates provides or may provide investment advisory services. The nature and content of the views and statements provided to each of these persons may differ.
From time to time, employees of AIM and its affiliates also may provide oral or written information ("portfolio commentary") about a Fund, including, but not limited to, how the Fund's investments are divided among various sectors, industries, countries, investment styles and capitalization sizes, and among stocks, bonds, currencies and cash, security types, bond maturities, bond coupons and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to Fund performance. AIM may also provide oral or written information ("statistical information") about various financial characteristics of a Fund or its underlying portfolio securities including, but not limited to, alpha, beta, R-squared, coefficient of determination, duration,
maturity, information ratio, sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about a Fund may be based on the Fund's portfolio as of the most recent quarter-end or the end of some other interim period, such as month-end. The portfolio commentary and statistical information may be provided to various persons, including those described in the preceding paragraph. The nature and content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM and its affiliates may disclose one or more of the portfolio securities of a Fund when purchasing and selling securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities, or in connection with litigation involving the Funds' portfolio securities. AIM does not enter into formal Non-disclosure Agreements in connection with these situations; however, the Funds would not continue to conduct business with a person who AIM believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGER PRODUCTS. AIM and its affiliates manage products sponsored by companies other than AIM, including investment companies, offshore funds, and separate accounts. In many cases, these other products are managed in a similar fashion to certain AIM Funds (as defined herein) and thus have similar portfolio holdings. The sponsors of these other products managed by AIM and its affiliates may disclose the portfolio holdings of their products at different times than AIM discloses portfolio holdings for the AIM Funds.
AIM provides portfolio holdings information for portfolios of AIM Variable Insurance Funds (the "Insurance Funds") to insurance companies whose variable annuity and variable life insurance accounts invest in the Insurance Funds ("Insurance Companies"). AIM may disclose portfolio holdings information for the Insurance Funds to Insurance Companies with which AIM has entered into Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's disclosure of similar portfolio holdings information for other AIM Funds on http://www.aiminvestments.com. AIM provides portfolio holdings information for the Insurance Funds to such Insurance Companies to allow them to disclose this information on their websites at approximately the same time that AIM discloses portfolio holdings information for the other AIM Funds on its website. AIM manages the Insurance Funds in a similar fashion to certain other AIM Funds and thus the Insurance Funds and such other AIM Funds have similar portfolio holdings. AIM does not disclose the portfolio holdings information for the Insurance Funds on its website, and not all Insurance Companies disclose this information on their websites.
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. The Board 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. Certain trustees and officers of the Trust are affiliated with AIM and AIM Management, the parent corporation of AIM. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during the last five years and certain other information concerning them is set forth in Appendix C.
The standing committees of the Board 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's primary purposes are to: (i) assist the Board in oversight of the independent auditor's qualifications, independence and performance; (ii) appoint independent auditors for the Funds; (iii) to the extent required by Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible non-audit services that are provided to Funds by their independent auditors; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Funds' independent auditors to the Funds' investment adviser and certain other affiliated entities; (v) to oversee the financial reporting process for the Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to prepare an audit committee report for inclusion in any proxy statement issued by a Fund; (vii) assist the Board's oversight of the performance of the Funds' internal audit function to the extent an internal audit function exists; (viii) assist the Board's oversight of the integrity of the Funds' financial statements; and (ix) assist the Board's oversight of the Funds' compliance with legal and regulatory requirements. During the fiscal year ended October 31, 2004, the Audit Committee held eight meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance
Committee is responsible for: (i) recommending to the Board and the independent
trustees the appointment, compensation and removal of the Funds' Chief
Compliance Officer; (ii) recommending to the independent trustees the
appointment, compensation and removal of the Funds' Senior Officer appointed
pursuant to the terms of the Assurances of Discontinuance entered into by the
New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii)
recommending to the independent trustees the appointment and removal of AIM's
independent Compliance Consultant (the "Compliance Consultant") and reviewing
the report prepared by the Compliance Consultant upon its compliance review of
AIM (the "Report") and any objections made by AIM with respect to the Report;
(iv) reviewing any report prepared by a third party who is not an interested
person of AIM, upon the conclusion by such third party of a compliance review of
AIM; (v) reviewing all reports on compliance matters from the Funds' Chief
Compliance Officer, (vi) reviewing all recommendations made by the Senior
Officer regarding AIM's compliance procedures, (vii) reviewing all reports from
the Senior Officer of any violations of state and federal securities laws, the
Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund
shareholders and of AIM's Code of Ethics; (viii) overseeing all of the
compliance policies and procedures of the Funds and their service providers
adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to
the Board whether or not to approve such matters; (x) receiving and reviewing
quarterly reports on the activities of AIM's Internal Compliance Controls
Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer;
(xii) reviewing and recommending to the independent trustees whether to approve
procedures to investigate matters brought to the attention of AIM's ombudsman;
(xiii) risk management oversight with respect to the Funds and, in connection
therewith, receiving and overseeing risk management reports from AMVESCAP PLC
that are applicable to the Funds or their service providers; and (xiv)
overseeing potential conflicts of interest that are reported to the Compliance
Committee by the AIM, the Chief Compliance Officer, the Senior Officer and/or
the Compliance Consultant. During the fiscal year ended October 31, 2004, the
Compliance Committee held one meeting.
The members of the Governance Committee are Messrs. Bayley, Crockett,
Dowden (Chair), Jack M. Fields (Vice Chair) and Gerald J. Lewis. The Governance
Committee is responsible for: (i) nominating persons who will qualify as
independent trustees for (a) election as trustees in connection with meetings of
shareholders of the Funds that are called to vote on the election of trustees,
(b) appointment by the Board as trustees in connection with filling vacancies
that arise in between meetings of shareholders; (ii) reviewing the size of the
Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring
the composition of the Board and each committee of the Board, and monitoring the
qualifications of all trustees; (v) recommending persons to serve as members of
each committee of the
Board (other than the Compliance Committee), as well as persons who shall serve
as the chair and vice chair of each such committee; (vi) reviewing and
recommending the amount of compensation payable to the independent trustees;
(vii) overseeing the selection of independent legal counsel to the independent
trustees; (viii) reviewing and approving the compensation paid to independent
legal counsel and other advisers, if any, to the Audit Committee of the Board;
(ix) reviewing and approving the compensation paid to counsel and other
advisers, if any, to the Audit Committee of the Board; and (x) reviewing as they
deem appropriate administrative and/or logistical matters pertaining to the
operations of the Board.
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, 2004, the Governance Committee held seven meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of the 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 (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Lewis, Pennock, Soll, and Carl Frischling, and Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary purposes are to: (i) assist the Board in its oversight of the investment management services provided by AIM as well as any sub-advisers; and (ii) review all proposed and existing advisory, sub-advisory and distribution arrangements for the Funds, and to recommend what action the full Boards and the independent trustees take regarding the approval of all such proposed arrangements and the continuance of all such existing arrangements. During the fiscal year ended October 31, 2004, the Investments Committee held seven meetings.
The Investments Committee has established three Sub-Committees. The
Sub-Committees are responsible for: (i) reviewing the performance, fees and
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee
takes such action directly; (ii) reviewing with the applicable portfolio
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,
sub-advisory and distribution arrangements in effect or proposed for the
Designated Funds, unless the Investments Committee takes such action directly;
(iv) being familiar with the registration statements and periodic shareholder
reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the
Sub-Committee from time to time.
The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice Chair), Soll, and Mark Williamson (Chair) and Miss Quigley. The Valuation Committee is responsible for: (i) developing a sufficient knowledge of the valuation process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the "Pricing Procedures") in order to carry out their responsibilities; (ii) periodically reviewing information provided by AIM or other advisers regarding industry developments in connection with valuation and pricing, and making recommendations to the Board with respect to the Pricing Procedures based upon such review; (iii) reviewing the reports described in the Pricing Procedures and other information from AIM regarding fair value determinations made pursuant to the Pricing Procedures by AIM's internal valuation committee, and reporting to and making recommendations to the Board in connection with such reports; (iv) receiving the reports of AIM's internal valuation committee requesting approval of any changes to pricing vendors or pricing methodologies as required by the Pricing Procedures, receiving the annual report of AIM evaluating the pricing vendors, and approving changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures and recommending the
pricing vendors for approval by the Board annually; (v) upon request of AIM, assisting AIM's internal valuation committee and/or the Board in resolving particular fair valuation issues; (vi) receiving any reports of concerns by AIM's internal valuation committee regarding actual or potential conflicts of interest by investment personnel or others that could color their input or recommendations regarding pricing issues, and receiving information from AIM disclosing differences between valuation and pricing procedures used for the Funds and private funds, if any, advised by AIM for which AIM Fund Administration has exclusive accounting responsibility, and the reasons for such differences; and (vii) in each of the foregoing areas, making regular reports to the Board. During the fiscal year ended October 31, 2004, the Valuation Committee held one meeting.
The members of the Special Market Timing Litigation Committee are
Messrs. Crockett, Dowden (Vice Chair), Dunn and Lewis (Chair). The Special
Market Timing Litigation Committee is responsible: (i) for receiving reports
from time to time from management, counsel for management, counsel for the AIM
Funds and special counsel for the independent trustees, as applicable, related
to (a) the civil lawsuits, including purported class action and shareholder
derivative suits, that have been filed against the AIM Funds concerning alleged
excessive short term trading in shares of the AIM Funds ("market timing") and
(b) the civil enforcement actions and investigations related to market timing
activity in the AIM Funds that were settled with certain regulators, including
without limitation the SEC, the New York Attorney General and the Colorado
Attorney General, and for recommending to the independent trustees what actions,
if any, should be taken by the AIM Funds in light of all such reports; (ii) for
overseeing the investigation(s) on behalf of the independent trustees by special
counsel for the independent trustees and the independent trustees' financial
expert of market timing activity in the AIM Funds, and for recommending to the
independent trustees what actions, if any, should be taken by the AIM Funds in
light of the results of such investigation(s); (iii) for (a) reviewing the
methodology developed by AIM's Independent Distribution Consultant (the
"Distribution Consultant") for the monies ordered to be paid under the
settlement order with the SEC, and making recommendations to the independent
trustees as to the acceptability of such methodology and (b) recommending to the
independent trustees whether to consent to any firm with which the Distribution
Consultant is affiliated entering into any employment, consultant,
attorney-client, auditing or other professional relationship with AIM, or any of
its present or former affiliates, directors, officers, employees or agents
acting in their capacity as such for the period of the Distribution Consultant's
engagement and for a period of two years after the engagement; and (iv) for
taking reasonable steps to ensure that any AIM Fund which the Special Market
Timing Litigation Committee determines was harmed by improper market timing
activity receives what the Special Market Timing Litigation Committee deems to
be full restitution. During the fiscal year ended March 31, 2005, the Special
Market Timing Litigation Committee held eight meetings.
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.
Approval of Investment Advisory Agreements and Summary of Independent Written Fee Evaluation
The Board oversees the management of each Fund and, as required by law, determines annually whether to approve the continuance of each Fund's advisory agreement with AIM. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between each Fund and AIM for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of each Fund's Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of each Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
One of the responsibilities of the Senior Officer of the Funds, who is independent of AIM and AIM's affiliates, is to manage the process by which the Funds' proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation.
The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of each Fund's Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that each Fund's Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under each Fund's Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations.
AIM AGGRESSIVE GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period, comparable to such Index for the three year period, and above such Index for the five year period. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the
Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for four unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM BLUE CHIP FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that, effective July 1, 2005, AIM will change the Fund's portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to further change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large Cap Core Index. The Board noted that the Fund's performance in such periods was below the performance of such Index. The Board noted that, effective July 1, 2005, AIM will change the Fund's portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to further change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for three unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. The Board noted that, effective July 1, 2005, AIM will change the Fund's portfolio management team, which change will need time to be evaluated before a conclusion can be made that the change has addressed the Fund's under-performance. The Board also considered the Senior Officer's recommendation that the Board consider an additional advisory fee waiver for the Fund due to the Fund's under-performance. The Board concluded that such a fee waiver was not appropriate for the Fund at this time and that, rather than requesting such a fee waiver from AIM, the Board should closely monitor the Fund's performance under the new portfolio management team.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM CAPITAL DEVELOPMENT FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that
this rate was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes a breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the
Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM CHARTER FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was
appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one and five year periods and above such median performance for the three year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period, above such Index for the three year period, and below such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate (i) was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for an unaffiliated mutual fund for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual fund were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was above the median rate of the funds advised by other advisors with investment strategies comparable to those of the
Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable,
although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one and five year periods and above such median performance for the three year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period, above such Index for the three year period, and below such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in
connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
AIM CONSTELLATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one year period and above such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate (i) was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was lower than the advisory fee rates for an offshore fund advised by an AIM affiliate with investment strategies comparable to those of the Fund; (iii) was higher than the sub-advisory fee rates for three unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fun; and (iv) was higher than the advisory fee rates for three separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests
of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with
certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one year period and above such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one year period and above such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
AIM DIVERSIFIED DIVIDEND FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one and three calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be
made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one and three calendar years against the performance of the Lipper Large-Cap Core Index. The Board noted that the Fund's performance in such periods was above the performance of such Index. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through October 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund that is lower than the contractual agreement. The Board considered the contractual and voluntary nature of these fee waivers/expense limitations and noted that the contractual agreement remains in effect until October 31, 2005 and that the voluntary agreement can be terminated at any time by AIM without further notice to investors. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which
the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM LARGE CAP BASIC VALUE FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for the one and three year periods was below the median performance of such comparable funds and above such median performance for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Value Index. The Board noted that the Fund's performance for the one and three year periods was below the performance of such Index and above such Index for the five year period.
Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through June 30, 2006 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through June 30, 2006. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to
the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory
services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM LARGE CAP GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for such periods was above the median performance of such comparable funds. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance for such periods was above the performance of such Index. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was higher than the sub-advisory fee rates for two unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by one of these unaffiliated mutual funds were higher than the advisory fee rate for the Fund (data on the total management fees paid by the other unaffiliated mutual fund was unavailable); (iii) was lower than the advisory fee rates for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund; and (iv) was higher than the advisory fee rates for six separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through June 30, 2006 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through June 30, 2006. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the
terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory
services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MID CAP GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that AIM has acknowledged that the Fund continues to require a long-term solution to its under-performance, and that management is continuing to closely monitor the performance of the Fund and analyze various possible long-term solutions. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Growth Index. The Board noted that the Fund's performance was below the performance of such Index for the one and three year periods and comparable to such Index for the five year period. The Board noted that AIM has acknowledged that the Fund continues to require a long-term solution to its under-performance, and that management is continuing to closely monitor the performance of the Fund and analyze various possible long-term solutions. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment
personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was higher than the sub-advisory fee rates for an unaffiliated mutual fund for which an AIM affiliate serves as sub-advisor, and noted that total management fees paid by such unaffiliated mutual fund were lower than the advisory fee rate for the Fund; (ii) was higher than the advisory fee rates for a collective trust portfolio for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund; and (iii) was lower than the advisory fee rates for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the voluntary nature of this fee waiver/expense limitation and noted that it can be terminated at any time by AIM without further notice to investors. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes a breakpoint. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoint. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its
affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM WEINGARTEN FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was above the median performance of such comparable funds for the one year period and below such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and below such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate was comparable to the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes two breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined
that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
Approval of Sub-Advisory Agreement
The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between A I M Capital Management, Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the board's ongoing oversight of the fund. in their deliberations, the board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.
o The nature and extent of the advisory services to be provided by the Sub-Advisor. Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement.
o The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was above the median performance of such comparable funds for the one year period and below such median performance for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large-Cap Growth Index. The Board noted that the Fund's performance was comparable to the performance of such Index for the one year period and below such Index for the three and five year periods. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes
that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement.
o Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory.
o Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement.
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 trustee of other AIM Funds. Each trustee receives a fee, allocated among the AIM Funds for which he or she serves as a trustee, which consists of an annual retainer component and a meeting fee component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive additional compensation for their services.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2004 is found in Appendix D.
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. Notwithstanding the foregoing, the amount of benefits will exclude any additional compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain committees, whether such amounts are paid directly to the Trustee or deferred. 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. Crockett, Dunn, Fields, Frischling and Sklar and Drs. Mathai-Davis and Soll (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 and deemed to be invested in one or more AIM Funds selected by the Deferring Trustees. 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 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, with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase Class A shares of the 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.
CODES OF ETHICS
AIM, the Trust A I M Distributors, Inc. ("AIM Distributors") and A I M Capital Management, Inc. (the "Sub-Advisor") have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading, including personal trading in most of the funds within The AIM Family of Funds(R) ("affiliated funds"). Personal trading, including personal trading involving securities that may be purchased or held by a Fund and in affiliated funds, 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 AIM, the Fund's investment advisor. AIM will vote such proxies in accordance with its proxy policies and procedures, which have been reviewed and approved by the Board, and which are found in Appendix E.
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 their portfolio securities during the 12 months ended June 30, 2005 is available at our website, http://www.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 F. 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. AMVESCAP 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 to the Funds are not exclusive and AIM and the sub-advisor are free to render investment advisory services to others, including other investment companies.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the services of persons believes to be competent to perform all supervisory and administrative services required by the Funds, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders.
The Advisory Agreement provides that each Fund will pay or cause to be paid all expenses of such Fund not assumed by AIM, including, without limitation: brokerage commissions, taxes, legal, auditing or governmental fees, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption, and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to trustees and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in
connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its Advisory Agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the annual rates indicated in the second column below, based on the average daily net assets of each Fund during the year.
Effective January 1, 2005, the advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by each Fund do not exceed the maximum advisory fee rate set forth in the third column below. The maximum advisory fee rates are effective through the Committee Until Date set forth in the fourth column.
MAXIMUM ADVISORY
FUND NAME ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE FEE RATES
PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 COMMITTED UNTIL
DATE
--------- ---------------------- -------------------------- ----
AIM Aggressive Growth Fund 0.80% of first $150M 0.745% of first $250M June 30, 2006
0.625% of amount over $150M 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over$10B
AIM Blue Chip Fund 0.75% of first $350M 0.695% of first $250M December 31, 2009
0.625% of amount over $350M 0.67% of next $250M
0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over$10B
AIM Capital Development Fund 0.75% of first $350M 0.745% of first $250M June 30, 2006
0.625% of amount over $350M 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
AIM Charter Fund 1.00% of first $30M 0.75% of first $150M December 31, 2009
0.75% of next $120M 0.615% of next $4.85B
0.625% of amount over $150M 0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
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MAXIMUM ADVISORY
FUND NAME ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE FEE RATES
PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 COMMITTED UNTIL
DATE
--------- ---------------------- -------------------------- ----
AIM Constellation Fund 1.00% of first $30M 0.75% of first $150M December 31, 2009
0.75% of next $120M 0.615% of next $4.85B
0.625% of amount over $150M 0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
AIM Diversified Dividend Fund 0.75% of first $1B 0.695% of first $250M June 30, 2006
0.70% of next $1B 0.67% of next $250M
0.625% of amount over $2B 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
AIM Large Cap Basic Value Fund 0.60% of first $1B N/A N/A
0.575% of next $1B
0.55% of amount over $2B
AIM Large Cap Growth Fund 0.75% of first $1B 0.695% of first $250M December 31, 2009
0.70% of next $1B 0.67% of next $250M
0.625% of amount over $2B 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
AIM Mid Cap Growth Fund 0.80% of first $1B 0.745% of first $250M December 31, 2009
0.75% of amount over $1B 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
AIM Weingarten Fund 1.00% of first $30M 0.695% of first $250M December 31, 2009
0.75% of next $320M 0.67% of next $250M
0.625% of amount over $350M 0.645% of next $500M
0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of amount over $10B
|
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. See "Description of the Funds and Their Investments and Risks - "Investment Strategies and Risks - Other Investments - Other Investment Companies."
AIM has contractually agreed to waive advisory fees and/or reimburse expenses
(excluding (i) interest; (ii) taxes; (iii) dividend expenses on short sales;
(iv) extraordinary items (these are expenses that are not anticipated to arise
from the Fund's day-to-day operations), or items designated as such by the
Fund's Board; and (v) expenses related to a merger or reorganization as approved
by the Fund's Board; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement for AIM Diversified
Dividend Fund's Institutional Class shares to the extent necessary to limit the
total operating expenses to 1.15%. Such contractual fee waivers or reductions
are set forth in the Fee Table to each Fund's prospectus and may not be
terminated or amended to the Fund's detriment during the period stated in the
agreement between AIM and the Fund.
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 the 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.
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 G.
Portfolio Managers. Appendix H contains the following information regarding the portfolio managers identified in each Fund's prospectus:
o The dollar range of the manager's investments in each Fund.
o A description of the manager's compensation structure.
o Information regarding other accounts managed by the manager and potential conflicts of interest that might arise from the management of multiple accounts.
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, 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. 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 I.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment 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 (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain shareholder services for the Funds. For servicing accounts holding Institutional Class Shares, the TA Agreement provides that the Trust on behalf of the Funds will pay AIS a fee equal to $2.00 per trade executed to be billed monthly plus certain out of pocket expenses. In addition, for servicing accounts holding Institutional Shares, the Trust on behalf of the Funds, is required to reimburse AIS for servicing such accounts to the extent that an account is serviced by a third party pursuant to a sub-transfer agency, omnibus account service, sub-accounting, or networking agreement. AIS has agreed to waive the right to collect any fee or reimbursement to which it is entitled, to the extent that such fee or reimbursement would cause the fees and expenses incurred by the Institutional Class Shares to exceed 0.10% of the average net assets attributable to such class of the Funds.
It is anticipated that most investors will perform their own subaccounting. AIS has contractually agreed to limit transfer agent fees to 0.10% of average net assets of the Institutional Class with respect to AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund and AIM Weingarten Fund. The expense limitation agreement is in effect through October 31, 2005.
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, 2 Hanson Place, Brooklyn, New York 11217-1431, 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. Ernst & Young LLP, 5 Houston Center, 1401 McKinney, Suite 1200, Houston, Texas 77010-4035, the Funds' independent registered public accounting firm, is responsible for auditing the financial statements of the Funds. The Audit Committee of the Board has appointed PriceWaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002, as the independent registered public accounting firm of the Funds for the fiscal year ended October 31, 2005. Such appointment was ratified and approved by the independent trustees of the Board.
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
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor makes decisions to buy and sell securities for each Fund, selects broker-dealers, (each a "Broker"), 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 best execution, which AIM defines as prompt and efficient execution of the transaction at the best obtainable price with payment of commissions, mark-ups or mark-downs which are reasonable in relation to the value of the brokerage services provided by the Broker. 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 on a principle basis at net prices without commissions, but which include compensation to the Broker 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, including electronic communication networks. Purchases of underwritten issues include a commission or concession paid by the issuer (not the Funds) to the underwriter. Purchases of money market instruments may be made directly from issuers without the payment of commissions.
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, 2004 are found in Appendix J.
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 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.
BROKER SELECTION
AIM's primary consideration in selecting Brokers to execute portfolio transactions for a Fund is to obtain best execution. In selecting a Broker to execute a portfolio transaction in equity securities for a Fund, AIM considers the full range and quality of a Broker's services, including the value of research and/or brokerage services provided, execution capability, commission rate, willingness to commit capital, anonymity and responsiveness. AIM's primary consideration when selecting a Broker to execute a portfolio transaction in fixed income securities for a Fund is the Broker's ability to deliver or sell the relevant fixed income securities; however, AIM will also consider the various factors listed above. In each case, the determinative factor is not the lowest commission or spread available but whether the transaction represents the best qualitative execution for the Fund. AIM will not select Brokers based upon their promotion or sale of Fund shares.
In choosing Brokers to execute portfolio transactions for the Funds, AIM may select Brokers that provide brokerage and/or research services ("Soft Dollar Products") to the Funds and/or the other accounts over which AIM and its affiliates have investment discretion. Section 28(e) of the Securities Exchange Act of 1934, as amended, 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, a Fund may pay a Broker higher commissions than those available from another Broker in recognition of such Broker's provision of Soft Dollar Products to AIM.
AIM faces a potential conflict of interest when it uses client trades to obtain Soft Dollar Products. This conflict exists because AIM is able to use the Soft Dollar Products to manage client accounts without paying cash for the Soft Dollar Products, which reduces AIM's expenses to the extent that AIM would have purchased such products had they not been provided by Brokers. Section 28(e) permits AIM to use Soft Dollar Products for the benefit of any account it manages. Certain AIM-managed accounts may generate soft dollars used to purchase Soft Dollar Products that ultimately benefit other AIM-managed accounts, effectively cross subsidizing the other AIM-managed accounts that benefit directly from the product. AIM may not use all of the Soft Dollar Products provided by Brokers through which a Fund effects securities transactions in connection with managing such Fund.
AIM and certain of its affiliates presently engage in the following instances of cross-subsidization:
1. Fixed income funds normally do not generate soft dollar commissions to pay for Soft Dollar Products. Therefore, soft dollar commissions used to pay for Soft Dollar Products which are used to manage the fixed income AIM Funds are generated entirely by equity AIM Funds and other equity client accounts managed by AIM or A I M Capital, Inc. ("AIM Capital"), a subsidiary
of AIM. In other words, the fixed income AIM Funds are cross-subsidized by the equity AIM Funds, in that the fixed income AIM Funds receive the benefit of Soft Dollar Products services for which they do not pay.
2. The investment models used to manage many of the AIM Funds are also used to manage other accounts of AIM and/or AIM Capital. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the AIM Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by both of these advisory affiliates.
This type of cross-subsidization occurs in both directions. For example, soft dollar commissions generated by transactions of the AIM Funds and/or other accounts managed by AIM are used for Soft Dollar Products which may benefit those AIM Funds and/or accounts as well as accounts managed by AIM Capital. Additionally, soft dollar commissions generated by transactions of accounts managed by AIM Capital are used for Soft Dollar Products which may benefit those accounts as well as accounts managed by AIM. In certain circumstances, AIM Capital accounts may indicate that their transactions should not be used to generate soft dollar commissions but may still receive the benefits of Soft Dollar Products received by AIM or AIM Capital.
3. Some of the common investment models used to manage various Funds and other accounts of AIM and/or AIM Capital are also used to manage accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM subsidiary. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by AIM, AIM Capital and APAM. This cross-subsidization occurs in only one direction. Most of APAM's accounts do not generate soft dollar commissions which can be used to purchase Soft Dollar Products. The soft dollar commissions generated by transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used for Soft Dollar Products which may benefit the accounts managed by AIM, AIM Capital and APAM; however, APAM does not provide any soft dollar research benefit to the Funds and/or other accounts managed by AIM or AIM Capital.
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts of interest concerning the use of Soft Dollar Products by directing client trades for Soft Dollar Products only if AIM and AIM Capital conclude that the Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a hard dollar basis; other Soft Dollar Products are available only through Brokers in exchange for soft dollars. AIM uses soft dollars to purchase two types of Soft Dollar Products:
o proprietary research created by the Broker executing the trade, and
o other products created by third parties that are supplied to AIM through the Broker executing the trade.
Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in house research staffs of broker-dealer firms. This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information and assistance. AIM periodically rates the quality of proprietary research produced by various Brokers. Based on the evaluation of the quality of information that AIM receives from each Broker, AIM develops an estimate of each Broker's share of AIM clients' commission dollars. AIM attempts to direct trades to the firms to meet these estimates.
AIM also uses soft dollars to acquire products from third parties that are supplied to AIM through Brokers executing the trades or other Brokers who "step in" to a transaction and receive a portion of the
brokerage commission for the trade. AIM may from time to time instruct the executing Broker to allocate or "step out" a portion of a transaction to another Broker. The Broker to which AIM has "stepped out" would then settle and complete the designated portion of the transaction, and the executing Broker would settle and complete the remaining portion of the transaction that has not been "stepped out." Each Broker may receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes.
Soft Dollar Products received from Brokers supplement AIM's own research (and the research of certain of its affiliates), and may include the following types of products and services:
o Database Services - comprehensive databases containing current and/or historical information on companies and industries and indices. Examples include historical securities prices, earnings estimates and financial data. These services may include software tools that allow the user to search the database or to prepare value-added analyses related to the investment process (such as forecasts and models used in the portfolio management process).
o Quotation/Trading/News Systems - products that provide real time market data information, such as pricing of individual securities and information on current trading, as well as a variety of news services.
o Economic Data/Forecasting Tools - various macro economic forecasting tools, such as economic data or currency and political forecasts for various countries or regions.
o Quantitative/Technical Analysis - software tools that assist in quantitative and technical analysis of investment data.
o Fundamental/Industry Analysis - industry specific fundamental investment research.
o Fixed Income Security Analysis - data and analytical tools that pertain specifically to fixed income securities. These tools assist in creating financial models, such as cash flow projections and interest rate sensitivity analyses, which are relevant to fixed income securities.
o Other Specialized Tools - other specialized products, such as consulting analyses, access to industry experts, and distinct investment expertise such as forensic accounting or custom built investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it also serves functions that do not assist the investment decision-making or trading process), AIM will allocate the costs of such service or product accordingly in its reasonable discretion. AIM will allocate brokerage commissions to Brokers only for the portion of the service or product that AIM determines assists it in the investment decision-making or trading process and will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM tend to provide more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. In addition, such services provide AIM with a diverse perspective on financial markets. Some Brokers 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 in the execution of transactions in portfolio securities. In some cases, Soft Dollar Products are available only from the Broker providing them. In other cases, Soft Dollar Products may be obtainable from alternative sources in return for cash payments. AIM believes that because Broker research supplements rather than replaces AIM's research, the receipt of such research tends to improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. To the extent the Funds' portfolio transactions are used to obtain Soft Dollar Products, the brokerage commissions obtained by the Funds might exceed those that might otherwise have been paid.
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 may be effected through Brokers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients, provided that AIM believes such Brokers provide best execution and such transactions are executed in compliance with AIM's policy against using directed brokerage to compensate Brokers for promoting or selling AIM Fund shares. 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, 2004 are found in Appendix K.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular Brokers during the last fiscal year ended October 31, 2004 is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other 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 other accounts. However, the position of each account in the same security and the length of time that each account may hold its investment in the same security 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 other accounts, and is considered at or about the same time, AIM will allocate transactions in such securities among the Fund(s) and these accounts on a pro rata basis based on order size or in such manner believed by AIM to be fair and equitable. 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.
ALLOCATION OF EQUITY INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in equity IPOs. Purchases of equity IPOs by one AIM Fund or other accounts may also be considered for purchase by one or more other AIM Funds or accounts. AIM shall combine indications of interest for equity IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO. When the full amount of all IPO orders for such AIM Funds and accounts cannot be filled completely, AIM shall 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 equity IPO by reviewing a number of factors, including market capitalization/liquidity suitability and sector/style suitability of the investment with the AIM Fund's or account's investment objective, policies, strategies and current holdings. AIM will allocate securities issued in equity IPOs to eligible AIM Funds and accounts on a pro rata basis based on order size.
TRANSACTIONS THROUGH FINANCIAL INTERMEDIARIES. If you are investing indirectly in a Fund through a financial intermediary such as a broker-dealer, a bank, an insurance company separate account, an
investment advisor, an administrator or trustee [of an IRS recognized tax-deferred savings plan such as a 401(k) retirement plan and a 529 college savings plan] that maintains a master account (an Omnibus Account) with the Fund for trading on behalf of its customers, different guidelines and restrictions may apply, including but not limited to different minimum initial and subsequent purchase amounts, system inability to provide Letter of Intent privileges. The financial intermediary through whom you are investing may also choose to adopt different exchange and/or transfer limit guidelines and restrictions, including different trading restrictions designed to discourage short-term or excessive trading.
If the financial intermediary is managing your account, you may also be charged a transaction or other fee by such financial institution. Consult with your financial intermediary (or, in the case of a 401(k) retirement plan, your plan sponsor) to determine what trading restrictions, including any of the above, may be applicable to you.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Before the initial purchase of shares, an investor must submit a completed account application to his financial intermediary, who should forward the application to AIM Investment Services, Inc. at P.O. Box 4497, Houston, Texas 77210-4497. An investor may change information in his account application by submitting written changes or a new account application to his intermediary or to AIS.
Purchase and redemption orders must be received in good order. To be in good order, the financial intermediary must give AIS all required information and documentation with respect to the investor. If the intermediary fails to deliver the investor's payment on the required settlement date, the intermediary must reimburse the Fund for any overdraft charges incurred.
A financial intermediary may submit a written request to AIS for correction of transactions involving Fund shares. If AIS agrees to correct a transaction, and the correction requires a dividend adjustment, the intermediary must agree in writing to reimburse the Fund for any resulting loss.
An investor may terminate his relationship with an intermediary and become the shareholder of record on his account. However, until the investor establishes a relationship with an intermediary, the investor will not be able to purchase additional shares of the Fund, except through the reinvestment of distributions.
Payment for redeemed shares is normally made by Federal Reserve wire to the bank account designated in the investor's account application, but may be sent by check at the investor's request. By providing written notice to his financial intermediary or to AIS, an investor may change the bank account designated to receive redemption proceeds. AIS may request additional documentation.
AIS may request that an intermediary maintain separate master accounts in the Fund for shares held by the intermediary (a) for its own account, for the account of other institutions and for accounts for which the intermediary acts as a fiduciary; and (b) for accounts for which the intermediary acts in some other capacity. An intermediary may aggregate its master accounts and subaccounts to satisfy the minimum investment requirement.
Platform sponsors that provide investment vehicles to fund Section 401 defined contribution plans and have entered into written agreements with AIM Distributors to waive applicable investment minimums may purchase Institutional Class shares for accounts within such plans.
AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept purchase and redemption orders that are in good form on behalf of the AIM Funds. In certain cases, these authorized agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received the purchase or redemption order when the Fund's
authorized agent or its designee accepts the order. The order will be priced at the net asset value next determined after the order is accepted by the Fund's authorized agent or designee.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that AIS maintains a correct address for his account(s). An incorrect address may cause an investor's account statements and other mailings to be returned to AIS. Upon receiving returned mail, AIS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AIS will retain a shareholder locator service with a national information database to conduct periodic searches for the investor. If the search firm is unable to locate the investor, the search firm will determine whether the investor's account has legally been abandoned. AIS is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
OFFERING PRICE
Shares of the Institutional Class of a Fund are offered at net asset value.
Calculation of Net Asset Value
Each Fund determines its net asset value per share once daily as of the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the NYSE. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statement due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
Each equity 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 equity 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 vendors 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. Debt securities (including convertible bonds) are fair valued using an evaluated quote on the basis of prices provided by an independent pricing vendor. Evaluated quotes provided by the pricing vendor 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 available, including situations where market quotations are unreliable, are valued at fair value as determined in good faith by or under the supervision of the Trust's
officers in accordance with procedures approved by the Board. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of a Fund's shares are determined at such times. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE. If AIM believes a development/event has actually caused a closing price to no longer reflect current market value, the closing price may be adjusted to reflect the fair value of the affected security as of the close of the NYSE as determined in good faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Trading in certain 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. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. Issuer specific events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing vendor to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Multiple factors may be considered by the pricing vendor 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 value of the portfolio securities of a Fund that invests in foreign securities may be significantly affected on days when an investor cannot exchange or redeem shares of the Fund.
REDEMPTIONS IN KIND
Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). For instance, a Fund may make a redemption in kind, if a cash redemption would disrupt its operations or performance. Securities that will be delivered as payment in redemptions in kind will be valued using the same methodologies that the Fund typically utilizes in valuing such securities. Shareholders receiving such securities are likely to incur transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. The Trust, on behalf of the Funds made an election under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore, the Trust, on behalf of a 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. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for non-resident aliens) or Form W-9 (certifying exempt status) accompanying the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect TIN;
3. the investor or the Fund is notified by the IRS that the investor is subject to backup withholding because the investor failed to report all of the interest and dividends on such investor's tax return (for reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not subject to backup withholding under (3) above (for reportable interest and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all five situations discussed above. Redemption proceeds and long-term gain distributions are subject to backup withholding only if (1), (2) or (5) above applies.
Certain payees and payments are exempt from backup withholding and information reporting. AIM or AIS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct TIN will be subject to a $50 penalty imposed by the IRS unless such failure is due to reasonable cause and not willful neglect. If an investor falsifies information on this form or makes any other false statement resulting in no backup withholding on an account which should be subject to backup withholding, such investor may be subject to a $500 penalty imposed by the IRS and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are not subject to the backup withholding previously discussed, but must certify their foreign status by attaching IRS Form W-8 to their application. Form W-8 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net investment income dividends and capital gain distributions. It is each Fund's intention to distribute substantially all of its net
investment income and realized net capital gain. In determining the amount of capital gains, if any, available for distribution, capital gains will generally be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in Institutional Class shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment." Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualification as such in each of its taxable years. As a regulated investment company, each Fund is not subject to federal income tax on the portion of its net investment income (i.e., taxable interest, dividends and other taxable ordinary income, net of expenses) and capital gain net income (i.e., the excess of capital gains over capital losses) that it distributes to shareholders, provided that it distributes an amount equal to (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) for the taxable year (the "Distribution Requirement"), and satisfies certain other requirements of the Code that are described below. Distributions by a Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gain of the taxable year and can therefore satisfy the Distribution Requirement.
Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital (i.e., the excess of net long-term capital gain over net short-term capital loss) for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.
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), 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 and (for Fund taxable years beginning after October 22, 2004) net income derived from certain publicly traded partnerships (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), of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses or of securities of certain publicly traded partnerships (for Fund taxable years beginning after October 22, 2004).
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 or be less than 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. Those Funds that are permitted to invest in foreign equity securities may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition and character of income with respect to PFIC stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock.
SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules governing the tax aspects of swap agreements are in a developing stage and are not entirely clear in certain respects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which a Fund will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations and as qualified dividend income for individuals and other non-corporate taxpayers to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 15% for noncorporate
shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. 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.
Dividends paid by a Fund will not be eligible for the dividends received deduction when received by a corporation that has not held its shares of the Fund for at least 46 days during the 91-day period beginning 45 days before the date on which the shares become ex-dividend and will not be treated as qualified dividend income when received by an individual or other noncorporate shareholder who has not held its shares of the Fund for at least 61 days during the 121-day period beginning 60 days before the date on which the shares become ex-dividend.
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 are not made from earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred under the wash sale rules if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to tax at a maximum rate of 15%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable distributions and/or redemption payments. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term and short-term capital gain and of certain types of interest income) 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.
As a consequence of the enactment of the American Jobs Creation Act of 2004, such a foreign shareholder will also generally be exempt from U.S. federal income tax on distributions that a Fund designates as "short-term capital gain dividends" or as "interest-related dividends" for Fund taxable years beginning after December 31, 2004 and before January 1, 2008. The aggregate amount that may be designated as short-term capital gain dividends for a Fund's taxable year is generally equal to the excess (if any) of the Fund's net short-term capital gain over its net long-term capital loss. The aggregate amount designated as interest-related dividends for any Fund taxable year is generally limited to the excess of the
amount of "qualified interest income" of the Fund over allocable expenses. Qualified interest income is generally equal to the sum of a Fund's U.S.-source income that constitutes (1) bank deposit interest; (2) short-term original issue discount that is exempt from withholding tax; (3) interest on a debt obligation which is in registered form, unless it is earned on a debt obligation issued by a corporation or partnership in which the Fund holds a 10-percent ownership interest or its payment is contingent on certain events; and (4) interest-related dividends received from another regulated investment company.
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, short-term capital gain dividends, interest-related 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 (as defined below), 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 adviser 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. Estates of decedents dying after December 31, 2004 and before January 1, 2008 will be able to exempt from federal estate tax the proportion of the value of a Fund's shares attributable to "qualifying assets" held by the Fund at the end of the quarter immediately preceding the decedent's death (or such other time as the Internal Revenue Service may designate in regulations). Qualifying assets include bank deposits and other debt obligations that pay interest or accrue original issue discount that is exempt from withholding tax, debt obligations of a domestic corporation that are treated as giving rise to foreign source income, and other investments that are not treated for tax purposes as being within the United States. Shareholders will be advised annually of the portion of a Fund's assets that constituted qualifying assets at the end of each quarter of its taxable year.
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 February 21, 2005. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through institutions with whom AIM Distributors has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds.
The Trust (on behalf of the Institutional Classes) or AIM Distributors may terminate the Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment.
AIM Distributors or one or more of its corporate affiliates ("collectively, the "ADI Affiliates") may make additional cash payments to financial advisors in connection with the promotion and sale of shares of AIM Funds. ADI Affiliates make these payments from their own resources and from AIM Distributors' retention of underwriting concessions. These additional cash payments are described below. The categories described below are not mutually exclusive. The same financial advisor may receive payments under more than one or all categories. Most financial advisors that sell shares of AIM Funds receive one or more types of these cash payments. Financial advisors negotiate the cash payments to be paid on an individual basis. Where services are provided, the costs of providing the services and the overall package of services provided may vary from one financial advisor to another. ADI Affiliates do not make an independent assessment of the cost of providing such services.
In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with AIM.
REVENUE SHARING PAYMENTS. ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of AIM Funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing AIM Funds on the financial advisor's funds sales system, placing AIM Funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including AIM Funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor.
The revenue sharing payments ADI Affiliates make may be calculated on the average daily net assets of the applicable AIM Funds attributable to that particular financial advisor ("Asset-Based Payments"), in which case the total amount of such cash payments shall not exceed 0.10% per annum of those assets during a defined period. Asset-Based Payments primarily create incentives to retain previously sold shares of AIM Funds in investor accounts.
ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts. Payments for these services typically do not exceed 0.10% of average annual assets.
OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at their expense, may provide additional compensation to financial advisors which sell or arrange for the sale of shares of the Fund. Such compensation provided by ADI Affiliates may include financial assistance to financial advisors that enable ADI Affiliates to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other financial advisor-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as the NASD, Inc. ADI Affiliates make payments for entertainment events they deem appropriate, subject to ADI Affiliates guidelines and applicable law. These payments may vary depending upon the nature of the event or the relationship.
ADI Affiliates are motivated to make the payments described above since they promote the sale of AIM Fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of AIM Funds or retain shares of AIM Funds in their clients' accounts,
ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the AIM Funds with respect to those assets.
In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this Statement of Additional Information. You can ask your financial advisor about any payments it receives from ADI Affiliates or the AIM Funds, as well as about fees and/or commissions it charges.
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as follows:
n P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the one, five, or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the one, five, or ten year
periods (or fractional portion of such period).
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The average annual total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix L.
Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period.
Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return.
A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula:
n P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix L.
Calculation of Certain Performance Data
AIM Diversified Dividend Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund and AIM Mid Cap Growth Fund may use a restated or a blended performance calculation to derive certain performance data shown for their Institutional Class shares in this Statement of Additional Information and in the Funds' advertisements and other sales material. If the Funds' Institutional Class shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Funds' Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Institutional 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 the Funds' Institutional Class shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to inception of the Institutional Class shares) at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Institutional Class shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Funds' Institutional Class shares.
A restated or blended performance calculation may be used to derive (i)
the Funds' standardized average annual total returns over a stated period and
(ii) the Funds' 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 Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than ten years) ended October 31 are found in Appendix L.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its
average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n
P(1+T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment
DR made at the beginning of the one, five, or ten year
periods (or since inception, if applicable) at the
end of the one, five, or ten year periods (or since
inception, if applicable), after taxes on fund
distributions and redemption.
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Standardized average annual total return (after taxes on distributions and redemption) for Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than 10 years) ended October 31, are found in Appendix L.
Performance Information
All advertisements for the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data for such classes does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return.
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 Financial World Nation's Business Barron's Forbes New York Times Best's Review Fortune Pension World Bloomberg Hartford Courant Inc. Pensions & Investments Broker World Institutional Investor Personal Investor Business Week Insurance Forum Philadelphia Inquirer Changing Times Insurance Week The Bond Buyer Christian Science Monitor Investor's Business Daily USA Today Consumer Reports Journal of the American U.S. News & World Report Economist Society of CLU & ChFC Wall Street Journal FACS of the Week Kiplinger Letter Washington Post Financial Planning Money CNN Financial Product News Mutual Fund Forecaster CNBC Financial Services Week PBS |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Standard & Poors Bloomberg Stanger Donoghue's Strategic Insight FactSet Data Systems Thompson Financial Lipper, Inc. Weisenberger Mutual Fund Values (Morningstar) |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Large Cap Core Fund Index Russell 1000--Registered Trademark-- Growth Index Lipper Large Cap Growth Fund Index Russell 2500--Registered Trademark-- Growth Index Lipper Large Cap Value Fund Index Russell 3000--Registered Trademark-- Index Lipper Mid Cap Core Fund Index Russell Mid Cap Index Lipper Mid Cap Growth Fund Index Russell Mid Cap(TM) Growth Index Lipper Multi Cap Growth Fund Index Standard & Poor's 500 Index MSCI World Index Standard & Poor's MidCap 400 Index Russell 1000--Registered Trademark-- Index Russell 1000--Registered Trademark-- Value Index Russell 2500--Registered Trademark-- Index |
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
PENDING LITIGATION
Regulatory Action Alleging Market Timing
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed a civil lawsuit against AIM, INVESCO Funds Group, Inc. ("IFG")
(the former investment advisor to certain AIM Funds) and ADI, as well as
numerous unrelated mutual fund complexes and financial institutions. None of the
AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint,
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties;
a writ of quo warranto against the defendants; pre-judgment and post-judgment
interest; costs and expenses, including counsel fees; and other relief.
If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment adviser for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any
other investment advisor directly or indirectly owned by AMVESCAP PLC ("AMVESCAP"), from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There is not assurance that such exemptive relief will be granted.
On May 31, 2005, the defendants removed this lawsuit to the U.S. District Court for the Northern District of West Virginia at Wheeling. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court. On June 29, 2005 the WVAG filed a Notice of Opposition to this Conditional Transfer Order. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix M-1.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings, with one exception. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. A list identifying the amended complaints in the MDL Court is included in Appendix M-1. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. One lawsuit based on allegations of market timing, late trading and related issues has not been transferred to the MDL Court. These lawsuits are identified in Appendix M-1.
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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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, AIM, the AIM Funds
or related entities, or for which service of process has been waived, as of
August 19, 2005 is set forth in Appendix M-2.
Private Civil Actions Alleging Excessive Advisory and/or 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/or 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix M-3.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including 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 Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix M-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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of August 19, 2005 is set forth in Appendix M-5.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
A civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, A I M Capital Management, Inc. ("AIM Capital") and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate. This lawsuit alleges as theories of recovery: (i) violation of various provisions of the Federal securities laws; (ii) common law breach of fiduciary duty; and (iii) common law negligence. This lawsuit has been filed in Federal court and seeks such remedies as compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and attorneys' fees. Such lawsuit, which was dismissed by the Court on August 12, 2005, is set forth in Appendix M-6.
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 are as 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
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF JULY 27, 2005)
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel
Foley & Lardner LLP Legal Counsel (for certain AIM Funds)
Kramer, Levin Naftalis & Frankel LLP Legal Counsel
Ernst & Young LLP Independent Registered Public Accounting Firm (for
certain AIM Funds)
PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm (for
certain AIM Funds)
Brown Brothers Harriman & Co. Securities Lender (for certain AIM Funds)
Fitch, Inc. Rating & Ranking Agency (for certain AIM Funds)
iMoneyNet Ranking Agency (for certain AIM funds)
Lipper Inc. Rating & Ranking Agency (for certain AIM Funds)
Moody's Investors Service Rating & Ranking Agency (for certain AIM Funds)
Institutional Shareholder Services, Inc. Proxy Voting Service
State Street Bank and Trust Company Custodian (for certain AIM Funds), Software Provider,
Securities Lender (for certain AIM Funds)
The Bank of New York Custodian (for certain AIM Funds)
AIM Investment Services, Inc. Transfer Agent
Bloomberg System Provider (for certain AIM Funds)
Reuters America Inc. Pricing Service (for certain AIM Funds)
The MacGregor Group, Inc. Software Provider
Thomson Financial, Inc. Software Provider
Xcitek Solutions Software Provider
Plus
Bowne & Co., Inc. Financial Printer
CENVEO Financial Printer
Classic Printers Inc. Financial Printer
Color Dynamics Financial Printer
Earth Color Houston Financial Printer
EMCO Press Financial Printer
Grover Printing Financial Printer
Gulfstream Graphics Corp. Financial Printer
Signature Financial Printer
Southwest Precision Printers, Inc. Financial Printer
ABN Amro Financial Services, Inc. Broker (for certain AIM Funds)
BB&T Capital Markets Broker (for certain AIM Funds)
Belle Haven Investments L.P. Broker (for certain AIM Funds)
BOSC, Inc. Broker (for certain AIM Funds)
Cabrera Capital Markets Broker (for certain AIM Funds)
Coastal Securities, LP Broker (for certain AIM Funds)
|
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Duncan-Williams, Inc. Broker (for certain AIM Funds)
Fidelity Investments Broker (for certain AIM Funds)
First Albany Capital Broker (for certain AIM Funds)
First Tryon Securities Broker (for certain AIM Funds)
Anglemyer & Co. Analyst (for certain AIM Funds)
Empirical Research Partners Analyst (for certain AIM Funds)
Factset Research Systems, Inc. Analyst (for certain AIM Funds)
Global Trend Alert Analyst (for certain AIM Funds)
J.P. Morgan Chase Analyst (for certain AIM Funds)
Kevin Dann & Partners Analyst (for certain AIM Funds)
Muzea Insider Consulting Services, LLC Analyst (for certain AIM Funds)
Noah Financial, LLC Analyst (for certain AIM Funds)
Piper Jaffray Analyst (for certain AIM Funds)
|
APPENDIX C
TRUSTEES AND OFFICERS
As of July 31, 2005
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109 portfolios in the AIM 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 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE HELD BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
1988 Director and Chairman, A I M Management Group None
Robert H. Graham(1) -- 1946 Inc. (financial services holding company);
Trustee, Vice Chair and Director and Vice Chairman, AMVESCAP PLC and
President 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
2003 Director, President and Chief Executive None
Mark H. Williamson(2) -- 1951 Officer, A I M Management Group Inc.; Director,
Trustee and Executive Vice Chairman and President, A I M Advisors, Inc.;
President Director, A I M Capital Management, Inc. and A
I M Distributors, Inc.; Director and Chairman,
AIM Investment Services, Inc., Fund Management
Company and INVESCO Distributors, Inc.
(registered broker dealer); and Chief Executive
Officer, AMVESCAP PLC - AIM Division
Formerly: Director, Chairman, President and
Chief Executive Officer, INVESCO Funds Group,
Inc.; President and Chief Executive Officer,
INVESCO Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC - Managed Products
|
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust.
(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 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE HELD BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett(3) -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited
Trustee and Chair (technology consulting company) (insurance company);
and Captaris, Inc.
(unified messaging
provider)
Bob R. Baker - 1936 2003 Retired None
Trustee
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc.
Trustee
Formerly: Partner, law firm of Baker & McKenzie (registered
investment company)
(2 portfolios)
James T. Bunch - 1942 2003 Co-President and Founder, Green, Manning & None
Trustee Bunch Ltd. (investment banking firm); and
Director, Policy Studies, Inc. and Van Gilder
Insurance Corporation
Albert R. Dowden -- 1941 2000 Director of a number of public and private None
Trustee business corporations, including the Boss
Group, Ltd. (private investment and
management); Cortland Trust, Inc. (Chairman)
(registered investment company (3 portfolios));
Annuity and Life Re (Holdings), Ltd (insurance
company); and CompuDyne Corporation (provider
of products and services to the public security
market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo; and
director of various affiliated Volvo companies
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff; and
Trustee Group, Inc. (government affairs company); and Discovery Global
Owner, Dos Angelos Ranch, L.P. Education Fund
(non-profit)
Formerly: Chief Executive Officer, Texana
Timber LP (sustainable forestry company)
|
(3) Mr. Crockett was elected Chair of the Board effective October 4, 2004.
TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE HELD BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc.
Trustee Frankel LLP (registered
investment company)
(3 portfolios)
Gerald J. Lewis - 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.
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
Larry Soll - 1942 2003 Retired None
Trustee
OTHER OFFICERS
Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M Management Group N/A
Senior Vice President and Inc.; Senior Vice President and Chief
Chief Compliance Officer Compliance Officer, A I M Advisors, Inc.; Vice
President and Chief Compliance Officer, A I M
Capital Management, Inc.; and Vice, President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management Company
Formerly: Senior Vice President and Compliance
Director, Delaware Investments
Family of Funds; and Chief
Compliance Officer, A I M
Distributors, Inc.
Russell C. Burk(5) - 1958 2005 Director of Compliance and Assistant General N/A
Senior Vice President Counsel, ICON Advisors, Inc.; Financial
(Senior Officer) Consultant, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
|
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 31, 2004.
(5) Mr. Burk was elected Senior Vice President of the Trust effective February 15, 2005.
TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, YEAR OF BIRTH AND AND/OR
POSITION(S) HELD WITH THE OFFICER OTHER TRUSTEESHIP(S)
TRUST SINCE HELD BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------
2003 Director, Senior Vice President, Secretary and N/A
Kevin M. Carome- 1956 Senior General Counsel, A I M Management Group Inc.
Vice President, Chief Legal and A I M Advisors, Inc.; Director and Vice
Officer and Secretary President, INVESCO Distributors, Inc.; Vice
President, A I M Capital Management, Inc. and
AIM Investment Services, Inc.; Director, Vice
President and General Counsel, Fund Management
Company; and Senior Vice President, A I M
Distributors, Inc.
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.;
Senior Vice President and General Counsel,
Liberty Funds Group, LLC; and Vice President,
A I M Distributors, Inc., and Director, Fund
Management Company
2004 Vice President and Fund Treasurer, A I M N/A
Sidney M. Dilgren -- 1961 Advisors, Inc.
Vice President and Treasurer Formerly: Senior Vice President, AIM Investment
Services, Inc.; and Vice President, A I M
Distributors, Inc.
J. Philip Ferguson(6) -- 1945 2005 Senior Vice President and Chief Investment N/A
Vice President Officer, A I M Advisors Inc.; Director,
Chairman, Chief Executive Officer, President
and Chief Investment Officer, A I M Capital
Management, Inc; Executive Vice President, A I M
Management Group Inc.; Director, Chairman and
President, AIM Alternative Asset Advisors,
Inc.; Director and President, AIM Alternative
Asset Management Company, Inc.; and Chairman
and Chief Executive Officer, AIM Private Asset
Management, Inc.
Formerly: Senior Vice President, AIM Private
Asset Management, Inc.; Chief Equity Officer,
and Senior Investment Officer, A I M Capital
Management, Inc.; and Managing Partner, Beutel,
Goodman Capital Management
2004 Director of Cash Management, Managing N/A
Karen Dunn Kelley - 1960 Director and Chief Cash Management Officer,
Vice President A I M Capital Management, Inc.; Director and
President, Fund Management Company;
and Vice President, A I M Advisors,
Inc.
|
(1) Mr. Ferguson was elected Vice President of the Trust effective February 24, 2005.
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2004
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES COMPANIES OVERSEEN BY TRUSTEE
NAME OF TRUSTEE PER FUND IN THE AIM FAMILY OF 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
Diversified Dividend Over $100,000
Emerging Growth 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 Large Cap Growth $50,001 - $100,000 Over $100,000
Bob R. Baker -0- Over $100,000
Frank S. Bayley Charter $10,001 - $50,000 Over $100,000
Mid Cap Growth $10,001 - $50,000
James T. Bunch Blue Chip $1 - $10,000 Over $100,000
Large Cap Basic Value $50,001 - $100,000
Large Cap Growth $1 - $10,000
Bruce L. Crockett Aggressive Growth $1 - $10,000 $50,001 - $100,000(7)
Charter $1 - $10,000
Constellation $1 - $10,000
Weingarten $1 - $10,000
|
(7) 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 on one or more of the AIM Funds.
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES COMPANIES OVERSEEN BY TRUSTEE
NAME OF TRUSTEE PER FUND IN THE AIM FAMILY OF FUNDS--Registered Trademark--
-------------------------- -------------------------------------------------- ---------------------------------------------------
Albert R. Dowden Blue Chip $10,001 - $50,000 Over $100,000
Emerging Growth $10,001 - $50,000
Edward K. Dunn, Jr. Capital Development Over $100,000 Over $100,000(8)
Jack M. Fields Blue Chip $1 - $10,000 Over $100,000(8)
Charter Over $100,000
Constellation Over $100,000
Weingarten Over $100,000
Carl Frischling Aggressive Growth Over $100,000 Over $100,000(8)
Blue Chip $50,001 - $100,000
Capital Development Over $100,000
Charter Over $100,000
Mid Cap Growth $10,001 - $50,000
Weingarten $50,001 - $100,000
Gerald J. Lewis Blue Chip $1 - $10,000 Over $100,000
Capital Development $10,001 - $50,000
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
Prema Mathai-Davis -0- $1 -$10,000(8)
Lewis F. Pennock Capital Development $1 - $10,000 Over $100,000
Charter $10,001 - $50,000
Diversified Dividend $1 - $10,000
Large Cap Basic Value $1 - $10,000
Ruth H. Quigley -0- $10,001 -$50,000
Larry Soll Blue Chip $50,001 - $100,000 Over $100,000(8)
Large Cap Basic Value $1 - $10,000
Large Cap Growth $1 - $10,000
|
(8) 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 on one or more of the AIM Funds.
\
APPENDIX D
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, 2004:
RETIREMENT ESTIMATED
AGGREGATE BENEFITS ANNUAL TOTAL
COMPENSATION ACCRUED BENEFITS UPON COMPENSATION
FROM THE BY ALL RETIREMENT FOR FROM ALL AIM
TRUSTEE TRUST(1)(2) AIM FUNDS(3) AIM FUNDS(4) FUNDS(5)(6)
-------------------------------- ------------------ ---------------- ------------------ --------------------
Bob R. Baker $ 26,824 $ 198,871 $ 144,786 $ 189,750
Frank S. Bayley 26,774 175,241 112,500 193,500
James T. Bunch 26,824 143,455 112,500 186,000
Bruce L. Crockett 26,774 75,638 112,500 223,500
Albert R. Dowden 26,634 93,210 112,500 192,500
Edward K. Dunn, Jr. 26,774 133,390 112,500 193,500
Jack M. Fields 26,774 48,070 112,500 186,000
Carl Frischling(7) 26,616 62,040 112,500 185,000
Gerald J. Lewis 26,824 143,455 112,500 186,000
Prema Mathai-Davis 26,774 55,768 112,500 189,750
Lewis F. Pennock 26,774 80,777 112,500 186,000
Ruth H. Quigley 26,774 154,767 112,500 189,750
Louis S. Sklar(8) 26,774 115,160 101,250 186,000
Larry Soll 26,824 184,356 130,823 186,000
|
(2) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Aggregate Compensation From The Trust") above does not include $6,777 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the fiscal year ended October 31, 2004.
(3) During the fiscal year ended October 31, 2004, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $197,215.
(4) These amounts represent the estimated annual benefits payable by the AIM Funds upon the trustee's retirement and assumes each trustee serves until his or her normal retirement date.
(5) All trustees currently serve as trustees of 18 registered investment companies advised by AIM.
(6) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Total Compensation From All AIM Funds" above does not include $44,000 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the calendar year ended December 31, 2004.
(7) During the fiscal year ended October 31, 2004, the Trust paid $140,199 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
(8) Mr. Sklar retired effective December 31, 2004.
APPENDIX E
PROXY POLICIES AND PROCEDURES
(AS AMENDED SEPTEMBER 16, 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 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 F
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 August 15, 2005.
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
------------------------------- ---------------- -------------- -------------- ----------------- -----------------
AMVESCAP National Trust - - - 6.17% -
Company Trustee
Frost FBO B&O
Management Co.
Discretionary Contribution Pl
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 7th Fl 6.01% - - - -
333 West 34th St
New York, NY 10001-2402
JC Penney Company Inc Savings
PS & Stock Ownership Pl Tr - - - - 97.58%
105 Rosemont Rd
Westwood, MA 02090-2318
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers 7.03% - 8.29% - -
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
|
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
------------------------------- ---------------- -------------- -------------- ----------------- -----------------
Wilmington Trust Comp. Cust.
FBO
Olson International Employee
401(k) - - - 5.84% -
Salary Plan
c/o Mutual Funds
P. O. Box 8971
Wilmington, DE 19899-8971
|
AIM BLUE CHIP FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
-------------- --------------- --------------- --------------- --------------- ---------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------- -------------- --------------- --------------- --------------- --------------- ---------------
AMVESCAP National Trust Co. - - - 24.11% - -
Trustee
FBO The McDevitt Co. Employees
401(k) Plan
PO Box 105779
Atlanta, GA 30348-5779
Capital Bank & Trust Co. FBO
Government Micro Resources
Inc. 401(k)
C/O Planpremier/FASCORP - - - 7.35% - -
8515 E Orchard Rd #2T2
Greenwood Village, CO
80111-5002
Charles Schwab & Co. Inc. - - - - - 7.76%
Special Custody FBO Customers
(SIM)
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
Citigroup Global Markets House - 6.21% 7.01% - - -
Acct
Attn: Cindy Tempesta
7th Floor
333 West 34th Street
New York, NY 10001-2402
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
-------------- --------------- --------------- --------------- --------------- ---------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------- -------------- --------------- --------------- --------------- --------------- ---------------
MCB Trust Services Cust. FBO
Fresh Meadow Mechanical Corp. - - - 6.06% - -
700 17th St. Ste 300
Denver, CO 80202-3531
Merrill Lynch Pierce Fenner & 5.38% 5.78% 11.95% - - -
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246-6484
Wells Fargo Bank NA FBO - - - - 50.86% -
WF Wealthbuilder Growth
Balanced PO
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO
WF Wealthbuilder Equity
Portfolio - - - - 25.80% -
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO - - - - 11.45% -
WF Wealthbuildertactical
Equity PO
P. O. Box 1533
Minneapolis, MN 55480-1533
Wells Fargo Bank NA FBO
WF Wealthbuilder Growth
Allocation POR - - - - 5.02% -
P. O. Box 1533
Minneapolis, MN 55480-1533
|
AIM CAPITAL DEVELOPMENT FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------------- --------------- ---------------- -------------- ---------------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------ ---------------- --------------- ---------------- -------------- ---------------- -------------
AIM Moderate Asset - - - - 72.36% -
Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E Greenway Plz Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust Co.
TTEE FBO Equator
Technologies, Inc. 401(k) - - - 8.04% - -
Retirement Plan
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co.
TTEE
FBO Palmer & Cay Inc. Ret Plan - - - - 17.78% -
P. O. Box 105779
Atlanta, GA 30348-5779
Capital Bank & Trust Co.
Trustee FBO Sakson & Taylor
Inc. 401(k) PSP
C/O Planpremier/FASCORP - - - 11.59% - -
8515 E Orchard Rd Ste 2T2
Greenwood Village, CO
80111-5002
Citigroup Global Markets
House Acct
Attn: Cindy Tempesta - 6.08% - - - -
7th Floor
333 West 34th St
New York, NY 10001-2402
Coastgear & Company
State Street Bank & Trust
Attn: Kevin Smith - - 8.12% - - -
105 Rosemont Avenue
Westwood, MA 02090-2318
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
---------------- --------------- ---------------- -------------- ---------------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------ ---------------- --------------- ---------------- -------------- ---------------- -------------
FTB&T Trustee for Defined
Contribution Services 401(k)
FBO
North Pointe Financial - - - 11.63% - -
Services, Inc.
Attn: Securities Settlement
3555 Data Dr.
Rancho Cordova, CA 95670-7312
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers 5.54% 6.82% 12.08% - - -
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
MG Trustco TTEE
SONITEK 401k PL - - - 5.64% - -
700 17th St. Ste. 300
Denver, CO 80202-3531
|
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
--------------------------------- --------------- -------------- --------------- --------------- -----------------
AIM Conservative Asset - - - - 6.36%
Allocation Fund Omnibus Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust Co. TTEE
FBO Equator Technologies, Inc.
401(k) Retirement Plan - - - 9.70% -
PO Box 105779
Atlanta, GA 30348-5779
|
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 Hartman-Walsh Corp. - - - 5.10% -
401(k)
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 6.10% - 7.12% - -
7th Floor
333 West 34th Street
New York, NY 10001-2402
First Command Bank Trust
Attention: Trust Department - - - - 90.78%
P.O. Box 901075
Fort Worth, TX 76101-2075
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 7.57% 5.11% 11.70% - -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Reliance Trust Company Custodian
FBO Morley Incentives 401(k)
Profit Sharing Plan & Trust - - - 18.80% -
PO Box 48529
Atlanta, GA 30362-1529
|
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
-------------------------------- --------------- -------------- ----------------- --------------- ----------------
American Express Trust American - - - - 8.08%
Express
996 AXP Financial Ctr
Minneapolis, MN 55474-0009
AMVESCAP National Trust Co.
Trustee
FBO Guys Inc. 401(k) Plan - - - 7.86% -
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co. - - - 7.36% -
Trustee
FBO Speidel Inc. 401(k) Plan
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets
House Account
Attn: Cindy Tempesta 5.92% - 6.29% - -
7th Floor
333 West 34th Street
New York, NY 10001-2402
Merrill Lynch Pierce Fenner & 8.79% - 13.91% - 22.19%
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Ohio Public
Employees Deferred Compensation
Plan - - - - 54.63%
250 Civic Center Dr, Ste 350
Columbus, OH 43215-5450
Wells Fargo Bank West NA - - - - 9.32%
Custodian
City of Houston
457 Deferred Compensation Plan
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-0000
|
AIM DIVERSIFIED DIVIDEND FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES*
-------------- -------------- -------------- --------------- -------------- ------------------
NAME AND ADDRESS PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
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. 7.07% - - - - -
FBO AMVESCAP 401(k) Plan
P.O. Box 105779
Atlanta, GA 30348-5779
Charles Schwab & Co., Inc.
Special Custody FBO
Customers (SIM)
Attn. Mutual Funds 5.41% - - - - -
101 Montgomery St.
San Francisco, CA
94104-4122
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration - 9.19% 7.16% - - -
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL
32246-6484
Morgan Stanley DW
Attn: Mutual Funds
Operations - - 5.98% - - -
3 Harborside PL FL 6
Jersey City, NJ 07311-3907
|
* Investor Class shares commenced operations on July 18, 2005. Class R shares and Institutional Class shares commenced operations on October 25, 2005.
AIM LARGE CAP BASIC VALUE FUND
INVESTOR
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
-------------- ---------------- --------------- ---------------- ---------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
-------------------------------- -------------- ---------------- --------------- ---------------- ---------------- ------------
AIM Growth Allocation Fund - - - - 39.22% -
Omnibus Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AIM Moderate Asset Allocation
Fund
Omnibus Acct - - - - 40.56% -
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust Co. FBO - - - 10.52% - -
Itasca Bank & Trust Co. 401(k)
Plan
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co.
TTEE
FBO Palmer & Cay Inc. Ret Plan - - - - 10.16% -
P. O. Box 105779
Atlanta, GA 30348-5779
Charles Schwab & Co. Inc.
Special Custody FBO Customers
(SIM) - - - - - 7.54%
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
Federated Lighting Inc.
401(k) Profit Sharing Plan
1600 Trade Zone Ave. - - - 13.96% - -
Ste 406
Upper Marlboro, MD 20774-8789
INVESCO Trust Co.
FBO Hanger Orthopedic Group
Inc. & Sel. Sub Tax Deferred
Savings Plan Trust 401(k) - - - - - 6.88%
400 Colony Sq, Ste 2200
1201 Peachtree, Ste NE
Atlanta, GA 30361-6302
|
INVESTOR
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
-------------- ---------------- --------------- ---------------- ---------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
-------------------------------- -------------- ---------------- --------------- ---------------- ---------------- ------------
INVESCO Trust Co. Trustee
Magellan Health Services
Retirement Savings Plan Trust - - - - - 25.59%
401(k)
PO Box 105779
Atlanta, GA 30348-5779
Merrill Lynch Pierce Fenner & 15.65% 13.49% 17.23% - - -
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
- - - 9.56% - -
Reliance Trust Company
Custodian FBO Rosin Optical Co.
Inc. Profit Sharing Plan
PO Box 48529
Atlanta, GA 30362-1529
|
AIM LARGE CAP GROWTH FUND
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------- --------------- --------------- ---------------- --------------- ---------------- ------------
AIM Growth Allocation Fund - - - - 33.41% -
Omnibus Acct
C/O AIM Advisors
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
--------------- --------------- ---------------- --------------- ---------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------- --------------- --------------- ---------------- --------------- ---------------- ------------
AIM Moderate Asset Allocation
Fund Omnibus Acct
C/O AIM Advisors - - - - 37.80% -
11 E Greenway Plz, Ste 100
Houston, TX 77046-1113
AMVESCAP National Trust Co. - - - - 17.24% -
FBO AMVESCAP 401(k) Plan
P.O. Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co.
FBO AMVESCAP Money Purchase
Plan - - - - 5.21% -
P.O. Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Co.
Trustee
FBO Spiedel, Inc. - - - 5.01% - -
401(k)
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta - 5.83% 10.49% - - -
7th Floor
333 West 34th Street
New York, NY 10001-2402
Merrill Lynch Pierce Fenner & - 10.05% 10.49% - - -
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
Reliance Trust Company
Custodian FBO Continental
Products Inc. 401(k) Plan - - - 8.97% - -
PO Box 48529
Atlanta, GA 30362-1529
|
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
--------------- --------------- ---------------- --------------- ---------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------------------- --------------- --------------- ---------------- --------------- ---------------- ------------
Reliance Trust Company
Custodian FBO Morley
Incentives 401(k) Profit - - - 28.10% - -
Sharing Plan & Trust
PO Box 48529
Atlanta, GA 30362-1529
RR-USA Inc. 401k
Carlo Pecorari TTEE
Omnibus Account - - - 6.51% - -
8 Creek Pkwy
Boothwyn, PA 19061-3132
|
AIM MID CAP GROWTH FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
--------------- --------------- --------------- --------------- ---------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
---------------------------------- --------------- --------------- --------------- --------------- ---------------
A I M Advisors, Inc.(1) - - - - 100.00%
Attn: Corporate Comptroller
11 E. Greenway Plz ,Ste 100
Houston, TX 77046-1103
AMVESCAP National Trust Co. FBO - - - 9.69% -
West Boylston Insurance Agency
Inc.
401(k) Plan
PO Box 105779
Atlanta, GA 30348-5779
MCB Trust Services Custodian FBO
Sandberg Gonzalez & Creeden PC - - - 6.26% -
700 17th St, Ste 300
Denver, CO 80202-3531
MCB Trust Services Custodian FBO
Standard Tool & Die, Inc.
Employees 401k Plan - - - 14.74% -
700 17th St, Ste 300
Denver, CO 80202-3531
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------ ---------- ---------- ---------- ---------- -------------
Merrill Lynch Pierce Fenner &
Smith FBO The Sole Benefit of
Customers
Attn: Fund Administration 6.39% 6.80% 15.21% - -
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
|
AIM SELECT BASIC VALUE FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------- -------------------------- -------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
---------------------------------------- ------------------------- -------------------------- -------------------------
Citigroup Global Markets House Acct.
Attn: Cindy Tempesta
7th Floor 5.11% - -
333 W. 34th St.
New York, NY 10001-2402
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 5.42% 5.29% 6.21%
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
|
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
--------------------------------- ---------------- --------------- --------------- ------------------ -----------------
AIM Foundation
Attn: Patricia Lewis - - - - 29.08%
11 Greenway Plz, Ste 2600
Houston, TX 77046-1100
Citigroup Global Markets House
Acct
Attn: Cindy Tempesta 7.34% 6.99% 8.73% - -
7th Floor
333 West 34th Street
New York, NY 10001-2483
|
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
--------------------------------- ---------------- --------------- --------------- ------------------ -----------------
City of Cambridge, Trustee FBO
City of Cambridge 457 Deferred
Compensation Plan - - - - 8.63%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
City of Springfield, Trustee
FBO City of Springfield 457 DCP
C/O Great West, Recordkeeper - - - - 7.70%
8515 E Orchard Rd. 2T2
Engelwood, CO 80111-5002
Cortina Tool & Molding Co.
Michael Giannelli - - - 5.40% -
912 Tamer Ln
Glenview, IL 60025-3767
David Leary, Trustee
FBO Town of Weymouth
457 Deferred Compensation Plan - - - - 10.54%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
First Command Bank Trust
Attn: Trust Department - - - - 6.67%
PO Box 901075
Fort Worth, TX 76101-2075
Macquarium Inc. 401(k)
Louis K or
Mark F Adler Trustees - - - 9.22% -
Omnibus Acct
910 Travis St, Ste 1950
Houston, TX 77002-5806
MCB Trust Services Custodian
FBO Harmony Printing &
Development - - - 15.63% -
700 17th St, Ste 300
Denver, CO 80202-3531
|
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 8.92% 5.76% 14.85% 15.11% -
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246
Reginald B Berka or William
Nichtberger Trustees FBO
Aphelion Inc. Employees Savings - - - 6.75% -
Trust
1100 Nasa Rd 1, Ste 606
Houston, TX 77058-3325
Town of Watertown, Trustee
FBO Town of Watertown
457 Deferred Compensation Plan - - - - 5.32%
C/O Great West, Recordkeeper
8515 E Orchard Rd 2T2
Englewood, CO 80111-5002
William Wilson Assoc Architects
401(k)
James Leslie TTEE - - - 7.02% -
Omnibus Acct
374 Congress St, Ste 400
Boston, MA 02210-1807
|
MANAGEMENT OWNERSHIP
As of August 15, 2005, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund.
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended October 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2004 2003
------------------- ----------------------------------------------- -------------------------------------------------
NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAID FEE WAIVERS FEE PAID
------------------- --------------- --------------- --------------- ---------------- --------------- ----------------
AIM Aggressive $14,026,309 $12,113 $14,014,196 $13,458,191 $16,521 $13,441,670
Growth Fund
AIM Blue Chip Fund $18,508,235 $11,809 $18,496,426 $17,924,075 $21,702 $17,902,373
AIM Capital $7,018,923 $8,699 $7,010,224 $6,014,863 $11,378 $ 6,003,485
Development Fund
AIM Charter Fund $20,136,790 $44,820 $20,091,970 $20,917,533 $71,387 $20,846,146
AIM Constellation $46,243,987 $623,391 $45,620,596 $46,349,081 $638,100 $45,710,981
Fund
AIM Diversified 600,345 531,230 69,115 215,768 175,090 40,678
Dividend Fund
AIM Large Cap $2,109,274 $2,312 $2,106,962 $1,211,828 $1,844 $1,209,984
Basic Value
AIM Large Cap $5,663,512 $3,368 $5,660,144 $1,987,347 $1,994 $1,985,353
Growth Fund
AIM Mid Cap $1,780,749 $2,147 $1,778,602 $1,343,201 $2,625 $1,340,576
Growth Fund
AIM Weingarten $17,028,857 $5,987 $17,022,870 $17,030,956 $8,168 $17,022,788
Fund
FUND NAME 2002
------------------- ----------------------------------------------
MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAYABLE
------------------- --------------- ---------------- -------------
AIM Aggressive $17,081,494 $16,400 $17,065,094
Growth Fund
AIM Blue Chip Fund $24,803,281 $26,519 $24,776,762
AIM Capital $7,368,692 $11,465 $7,357,227
Development Fund
AIM Charter Fund $29,583,893 $58,255 $29,525,638
AIM Constellation $63,117,935 $1,334,866 $61,783,069
Fund
AIM Diversified 44,236 44,236 -0-
Dividend Fund
AIM Large Cap $1,168,281 $793 $1,167,488
Basic Value
AIM Large Cap $2,371,037 $3,052 $2,367,985
Growth Fund
AIM Mid Cap $1,620,211 $2,679 $1,617,532
Growth Fund
AIM Weingarten $26,086,537 $28,985 $26,057,552
Fund
|
APPENDIX H
PORTFOLIO MANAGERS
As of October 31, 2004
INVESTMENTS IN EACH FUND
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
------------------------------------------------------- ------------------------------------------------------
AIM AGGRESSIVE GROWTH FUND
Jay K. Rushin $50,001 - $100,000
AIM BLUE CHIP FUND
Kirk L. Anderson $1.00 - $10,000
AIM CAPITAL DEVELOPMENT FUND
Paul J. Rasplicka $100,001 - $500,000
AIM CHARTER FUND
Ronald S. Sloan $500,001 - $1,000,000
AIM CONSTELLATION FUND
Christian A. Costanzo $100,001 - $500,000
Robert J. Lloyd None
Bryan A. Unterhalter $10,001 - $50,000
Kenneth A. Zschappel $100,001 - $500,000
AIM DIVERSIFIED DIVIDEND FUND
Meggan Walsh $100,001 - $500,000
AIM LARGE CAP BASIC VALUE FUND
R. Canon Coleman II $50,001 - $100,000
Matthew W. Seinsheimer $10,001 - $50,000
Michael J. Simon $10,001 - $50,000
Bret W. Stanley $500,001 - $1,000,000
AIM LARGE CAP GROWTH FUND
Geoffrey V. Keeling $100,001 - $500,000
Robert L. Shoss $100,001 - $500,000
|
AIM MID CAP GROWTH FUND
Karl Farmer $50,001 - $100,000
Paul Rasplicka(2) $1.00 - $10,000
AIM WEINGARTEN FUND
James G. Birdsall $100,001 - $500,000
Lanny H. Sachnowitz $500,001 - $1,000,000
|
DESCRIPTION OF COMPENSATION STRUCTURE
AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements:
o BASE SALARY. Each portfolio manager is paid a base salary. In setting the base salary, AIM's intention is to be competitive in light of the particular portfolio manager's experience and responsibilities.
o ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and non-quantitative components. Generally, 70% of the bonus is quantitatively determined, based typically on a four-year rolling average of pre-tax performance of all registered investment company accounts for which a portfolio manager has day-to-day management responsibilities versus the performance of a pre-determined peer group. In instances where a portfolio manager has responsibility for management of more than one fund, an asset weighted four-year rolling average is used.
High fund performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided compensation survey information) and poor fund performance (versus applicable peer group) could result in no bonus. The amount of fund assets under management typically have an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance. The remaining 30% portion of the bonus is discretionary as determined by AIM and takes into account other subjective factors.
o EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent.
o PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes.
o PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation.
Portfolio managers also participate in benefit plans and programs available generally to all employees.
OTHER MANAGED ACCOUNTS
As of October 31, 2004
AIM's portfolio managers develop investment models which are used in connection with the management of certain AIM funds as well as other mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals. The following chart reflects information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) mutual funds, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.
NAME OF PORTFOLIO MANAGER NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
TOTAL ASSETS BY CATEGORY
--------------------------------- -------------------------------------------------------------------------
AIM AGGRESSIVE GROWTH FUND
Jay K. Rushin 10 Registered Mutual Funds with $1,832,566,185 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $14,146,084 in total assets
under management
2 Other Accounts with $302,491 in total assets under management(3)
AIM BLUE CHIP FUND
Kirk L. Anderson 16 Registered Mutual Funds with $5,446,066,160 in total assets under
management
4 Unregistered Pooled Investment Vehicle with $403,532,853 in total assets
under management
AIM CAPITAL DEVELOPMENT FUND
Paul J. Rasplicka 6 Registered Mutual Funds with $3,195,133,930 in total assets under
management
1 Other Account with $1,722,818 in total assets under management
AIM CHARTER FUND
Ronald S. Sloan 10 Registered Mutual Funds with $14,243,823,980 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $54,820,135 in total assets
under management
7,696 Other Accounts with $1,605,249,642 in total assets under management(3)
|
NAME OF PORTFOLIO MANAGER NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
TOTAL ASSETS BY CATEGORY
--------------------------------- -------------------------------------------------------------------------
AIM CONSTELLATION FUND
Christian A. Costanzo 4 Registered Mutual Funds with $1,771,220,355 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(3)
Robert J. Lloyd 5 Registered Mutual Funds with $3,853,316,960 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(3)
Bryan A. Unterhalter 13 Registered Mutual Funds with $4,169,122,766 in total assets under
management
5 Unregistered Pooled Investment Vehicles with $441,234,148 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management(3)
Kenneth A. Zschappel 5 Registered Mutual Funds with $3,853,316,960 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $59,249,113 in total assets
under management
201 Other Accounts with $32,983,919 in total assets under management
AIM DIVERSIFIED DIVIDEND FUND
Meggan M. Walsh 3 Registered Mutual Funds with $1,211,843,828 in total assets under management
AIM LARGE CAP BASIC VALUE FUND
R. Canon Coleman II 8 Registered Mutual Funds with $10,090,324,076 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under managementERROR!
BOOKMARK NOT DEFINED.
|
NAME OF PORTFOLIO MANAGER NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
TOTAL ASSETS BY CATEGORY
--------------------------------- -------------------------------------------------------------------------
Matthew W. Seinsheimer 8 Registered Mutual Funds with $10,090,324,076 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(3)
Michael J. Simon 12 Registered Mutual Funds with $11,384,494,170 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under managementERROR!
BOOKMARK NOT DEFINED.
Bret W. Stanley 11 Registered Mutual Funds with $20,628,926,879 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $19,874,242 in total assets
under management
3577 Other Accounts with $969,329,361 in total assets under management(3)
|
NAME OF PORTFOLIO MANAGER NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
TOTAL ASSETS BY CATEGORY
--------------------------------- ----------------------------------------------------------------------------
AIM LARGE CAP GROWTH FUND
Geoffrey V. Keeling 2 Registered Mutual Funds with $147,937,233 in total assets under management
1 Unregistered Pooled Investment Vehicle with $12,348,024 in total assets
under management
12 Other Accounts with $3,182,749 in total assets under management(3)
Robert L. Shoss 2 Registered Mutual Funds with $147,937,233 in total assets under management
1 Unregistered Pooled Investment Vehicle with $12,348,024 in total assets
under management
12 Other Accounts with $3,182,749 in total assets under management(3)
AIM MID CAP GROWTH FUND
Karl Farmer 7 Registered Mutual Funds with $2,849,187,575 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $14,146,084 in total
assets under management
2 Other Accounts with $302,491 in total assets under management(4)
Paul Rasplicka(2) 7 Registered Mutual Funds with $3,712,416,204 in total assets under
management
1 Other Account with $2,239,001 in total assets under management(3)
AIM WEINGARTEN FUND
James G. Birdsall 5 Registered Mutual Funds with $1,842,889,409 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $18,369,509 in total assets
under management
Lanny H. Sachnowitz 6 Registered Mutual Funds with $9,453,773,386 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $18,369,509 in total assets
under management
|
(3) These are accounts of individual investors for which AIM's affiliate, AIM Private Asset Management, Inc. ("APAM") provides investment advice. APAM offers separately managed accounts that are managed according to the investment models developed by AIM's portfolio managers and used in connection with the management of certain AIM funds. APAM accounts may be invested in accordance with one or more of those investment models and investments held in those accounts are traded in accordance with the applicable models.
(4) These are accounts of individual investors for which AIM's affiliate, AIM Private Asset Management, Inc. ("APAM") provides investment advice. APAM offers separately managed accounts that are managed according to the investment models developed by AIM's portfolio mangers and used in connection with the management of certain AIM funds. APAM accounts may be invested in accordance with one or more of those investment models and investments held in those accounts are traded in accordance with the applicable models.
POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and /or other accounts may be presented with one or more of the following potential conflicts:
o The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. AIM seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds.
o If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, AIM and the Funds have adopted procedures for allocating portfolio transactions across multiple accounts.
o With respect to securities transactions for the Funds, AIM determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), AIM may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a Fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of the Fund or other account(s) involved.
o Finally, the appearance of a conflict of interest may arise where AIM has an incentive, such as a performance-based management fee, which relates to the management of one Fund or account but not all Funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities.
AIM and the Funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended October 31:
FUND NAME 2004 2003 2002
----------------------------- -------- -------- -------
AIM Aggressive Growth Fund $476,287 $453,825 383,159
AIM Blue Chip Fund 575,871 540,113 441,011
AIM Capital Development Fund 282,196 240,864 205,580
AIM Charter Fund 585,397 574,103 468,551
AIM Constellation Fund 710,711 696,174 629,514
AIM Diversified Dividend Fund 50,000 50,000 41,781
AIM Large Cap Basic Value Fund 125,883 50,000 50,000
AIM Large Cap Growth Fund 218,708 91,795 87,337
AIM Mid Cap Growth Fund 86,224 50,000 50,000
AIM Weingarten Fund 533,540 519,857 450,564
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APPENDIX J
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 2004 2003 2002
---------------------------------- ----------- ----------- -----------
AIM Aggressive Growth Fund(2) $ 7,102,771 $ 5,139,873 $ 5,920,899
AIM Blue Chip Fund(3) 2,264,163 2,832,412 4,014,589
AIM Capital Development Fund(4) 2,240,761 3,101,168 4,525,600
AIM Charter Fund(5) 3,381,601 3,525,696 12,272,154
AIM Constellation Fund(6) 10,626,009 13,209,426 16,936,943
AIM Diversified Dividend Fund 67,689 66,926 17,394
AIM Large Cap Basic Value Fund(7) 149,169 280,781 300,919
AIM Large Cap Growth Fund(8) 2,273,002 1,051,689 864,959
AIM Mid Cap Growth Fund 1,108,221 1,267,594 1,118,766
AIM Weingarten Fund(10) 6,145,868 12,206,561 23,824,701
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(2) The variation in brokerage commissions paid by AIM Aggressive Growth Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to the realignment of the Fund's portfolio to fit the investment process of the current management team that assumed management of the Fund in April of 2004.
(3) The variation in brokerage commissions paid by AIM Blue Chip Fund for the fiscal year ended October 31, 2003, as compared to the prior fiscal year was due to a decrease in the average net assets of the Fund.
(4) The variation in brokerage commissions paid by AIM Capital Development Fund for the fiscal year ended October 31, 2003, as compared to the prior fiscal year was due to decrease in portfolio turnover.
(5) The variation in brokerage commissions paid by AIM Charter Fund for the fiscal year ended October 31, 2003, as compared to the two prior fiscal years was due to the repositioning of the Fund in 2002, resulting in decreased portfolio turnover and decreased commissions.
(6) The variation in brokerage commissions paid by AIM Constellation Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
(7) The variation in brokerage commissions paid by AIM Large Cap Basic Value Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
(8) The variation in brokerage commissions paid by AIM Large Cap Growth Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to increased trading costs as a result of acquiring additional assets from the acquisition of INVESCO Growth Fund.
(9) Commenced operations on August 30, 2002.
(10) The variation in brokerage commissions paid by AIM Weingarten Fund for the fiscal year ended October 31, 2004, as compared to the prior fiscal year, was due to a decrease in portfolio turnover.
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2004, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions(1) Brokerage Commissions(1)
------------------------------ ----------------- ------------------------
AIM Aggressive Growth Fund $3,661,519,389.34 $ 7,930,626.33
AIM Blue Chip Fund 1,648,521,328.82 1,915,196.70
AIM Capital Development Fund 1,005,659,315.62 4,761,859.73
AIM Charter Fund 2,131,213,461.20 3,018,888.70
AIM Constellation Fund 6,012,345,994.81 12,147,962.04
AIM Large Cap Basic Value Fund 156,558,434.56 129,622.91
AIM Diversified Dividend Fund 91,049,675.43 91,950.71
AIM Large Cap Growth Fund 1,537,684,180.51 2,048,160.67
AIM Mid Cap Growth Fund 571,548,936.58 1,201,521.39
AIM Weingarten Fund 3,324,018,528.77 5,983,786.10
|
During the last fiscal year ended October 31, 2004, 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, 2004)
---------------------------------- ------------ -------------------------------------
AIM Aggressive Growth Fund
Edwards (A.G), Inc. Common Stock $ 9,065,000
Legg Mason, Inc. Common Stock 28,669,500
Lehman Brothers Holdings Inc. Common Stock 14,376,250
AIM Blue Chip Fund
Goldman Sachs Group, Inc. (The) Common Stock 30,989,700
J.P. Morgan Chase & Co. Common Stock 52,882,000
Merrill Lynch & Co., Inc. Common Stock 29,667,000
Morgan Stanley Common Stock 25,545,000
AIM Charter Fund
Morgan Stanley Common Stock 29,747,152
AIM Constellation Fund
Goldman Sachs Group, Inc. (The) Common Stock $24,595,000
JPMorgan Chase & Co. Common Stock 57,900,000
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AIM Diversified Dividend Fund
Morgan Stanley Common Stock 2,166,216
AIM Large Cap Basic Value Fund
JPMorgan Chase & Co. Common Stock 12,481,542
Merrill Lynch & Co., Inc. Common Stock 6,893,532
Morgan Stanley Common Stock 8,276,580
AIM Mid Cap Growth Fund
Legg Mason, Inc. Common Stock 2,357,270
AIM Weingarten Fund
Goldman Sachs Group, Inc. (The) Common Stock 39,352,000
JPMorgan Chase & Co. Common Stock 38,600,000
Lehman Brothers Holdings Inc. Common Stock 24,645,000
Merrill Lynch & Co., Inc. Common Stock 26,970,000
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APPENDIX L
PERFORMANCE DATA
The average annual total returns for each Fund for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are as follows:
AVERAGE ANNUAL TOTAL RETURN
PERIODS ENDED APRIL 30, 2005
---------------------------------------------------------------------------------
10
INSTITUTIONAL SHARES: 1 YEAR 5 YEARS YEARS SINCE INCEPTION INCEPTION DATE
------ ------- ----- --------------- --------------
AIM Aggressive Growth Fund 3.15% N/A N/A 0.93 03/15/2002
AIM Blue Chip Fund 0.72 N/A N/A -2.49 03/15/2002
AIM Capital Development Fund 5.08 N/A N/A 3.41 03/15/2002
AIM Charter Fund 4.76 -6.13% 8.69% N/A 07/30/1991
AIM Constellation Fund 1.72 -8.48 6.66 N/A 04/08/1992
AIM Diversified Dividend Fund(1) 8.63 N/A N/A 6.61 12/31/2001(3)
AIM Large Cap Basic Value(2) 4.20 4.59 N/A 5.45 06/30/1999(3)
AIM Large Cap Growth(2) 1.86 -10.95 N/A -1.06 03/01/1999(3)
AIM Mid Cap Growth(2) 0.65 -9.59 N/A -1.35 11/01/1999(3)
AIM Weingarten Fund 2.78 -14.54 4.80 N/A 10/08/1991
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(2) The returns shown for the five year period and since inception are the blended returns of AIM Diversified Dividend Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Institutional Class shares since April 30, 2004 and the restated historical performance of each Funds' Class A shares (for periods prior to April 30, 2004) at net asset value, and reflect the Rule 12b-1 fees applicable to the Class A shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the AIM Large Cap Basic Value Fund's, AIM Large Cap Growth Fund's and AIM Mid Cap Growth Fund's Institutional Class shares is April 30, 2004. As of the date of this Statement of Additional Information, the Institutional Class Shares of AIM Diversified Dividend Fund had not yet commenced operations.
The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) from inception through April 30 are as follows:
CUMULATIVE TOTAL RETURN
PERIODS ENDED APRIL 30, 2005
-------------------------------------------------------------------------------
10
INSTITUTIONAL SHARES: 1 YEAR 5 YEARS YEARS SINCE INCEPTION INCEPTION DATE
------ ------- ----- --------------- --------------
AIM Aggressive Growth Fund 3.15% N/A N/A 2.94% 03/15/2002
AIM Blue Chip Fund 0.72 N/A N/A -7.58 03/15/2002
AIM Capital Development Fund 5.08 N/A N/A 11.04 03/15/2002
AIM Charter Fund 4.76 -27.12% 130.04% N/A 07/30/1991
AIM Constellation Fund 1.72 -35.78 90.58 N/A 04/08/1992
AIM Diversified Dividend Fund(1) 8.63 N/A N/A 23.74 12/31/2001(3)
AIM Large Cap Basic Value(2) 4.20 25.17 N/A 36.32 06/30/1999(3)
AIM Large Cap Growth(2) 1.86 -44.01 N/A -6.34 03/01/1999(3)
AIM Mid Cap Growth(2) 0.65 -39.58 N/A -7.20 11/01/1999(3)
AIM Weingarten Fund 2.78 -54.41 59.87 N/A 10/08/1991
|
(1) The returns shown for these periods are the restated historical performance of AIM Diversified Dividend Fund's Class A shares at the net asset value, and reflect the Rule 12b-1 fees applicable to Class A shares.
(2) The returns shown for the five year period and since inception are the blended returns of AIM Diversified Dividend Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Institutional Class shares since April 30, 2004 and the restated historical performance of each Funds' Class A shares (for periods prior to April 30, 2004) at net asset value, and reflect the Rule 12b-1 fees applicable to the Class A shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the AIM Large Cap Basic Value Fund's, AIM Large Cap Growth Fund's and AIM Mid Cap Growth Fund's Institutional Class shares is April 30, 2004. As of the date of this Statement of Additional Information, the Institutional Class Shares of AIM Diversified Dividend Fund had not yet commenced operations.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are as follows:
PERIODS ENDED APRIL 30, 2005
-------------------------------------------------------------------------------
10
INSTITUTIONAL SHARES: 1 YEAR 5 YEARS YEARS SINCE INCEPTION INCEPTION DATE
------ ------- ----- --------------- --------------
AIM Aggressive Growth Fund 3.15% N/A N/A 0.93% 03/15/2002
AIM Blue Chip Fund 0.72 N/A N/A -2.49 03/15/2002
AIM Capital Development Fund 3.95 N/A N/A 2.93 03/15/2002
AIM Charter Fund 4.54 -6.39% 7.04% N/A 07/30/1991
AIM Constellation Fund 1.72 -9.20 5.63 N/A 04/08/1992
AIM Diversified Dividend Fund(1) 7.93 N/A N/A 6.34 12/31/2001(3)
AIM Large Cap Basic Value(2) 4.20 4.55 N/A 5.20 06/30/1999(3)
AIM Large Cap Growth(2) 1.86 -10.95 N/A -1.06 03/01/1999(3)
AIM Mid Cap Growth(2) 0.65 -9.59 N/A -1.35 11/01/1999(3)
AIM Weingarten Fund 2.78 -15.03 2.79 N/A 10/08/1991
|
(1) The returns shown for these periods are the restated historical performance of AIM Diversified Dividend Fund's Class A shares at the net asset value, and reflect the Rule 12b-1 fees applicable to Class A shares.
(2) The returns shown for the five year period and since inception are the blended returns of AIM Diversified Dividend Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Institutional Class shares since April 30, 2004 and the restated historical performance of each Funds' Class A shares (for periods prior to April 30, 2004) at net asset value, and reflect the Rule 12b-1 fees applicable to the Class A shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the AIM Large Cap Basic Value Fund's, AIM Large Cap Growth Fund's and AIM Mid Cap Growth Fund's Institutional Class shares is April 30, 2004. As of the date of this Statement of Additional Information, the Institutional Class Shares of AIM Diversified Dividend 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) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30 are as follows:
PERIODS ENDED APRIL 30, 2005
-----------------------------------------------------------------------------
10
INSTITUTIONAL SHARES: 1 YEAR 5 YEARS YEARS SINCE INCEPTION INCEPTION DATE
------ ------- ----- --------------- --------------
AIM Aggressive Growth Fund 2.05% N/A N/A 0.79% 03/15/2002
AIM Blue Chip Fund 0.47 N/A N/A -2.11 03/15/2002
AIM Capital Development Fund 4.94 N/A N/A 2.92 03/15/2002
AIM Charter Fund 3.39 -5.13% 6.73% N/A 07/30/1991
AIM Constellation Fund 1.12 -7.03 5.61 N/A 04/08/1992
AIM Diversified Dividend Fund(1) 6.09 N/A N/A 5.61 12/31/2001(3)
AIM Large Cap Basic Value(2) 2.73 3.93 N/A 4.54 06/30/1999(3)
AIM Large Cap Growth(2) 1.21 -8.94 N/A -0.90 03/01/1999(3)
AIM Mid Cap Growth(2) 0.42 -7.88 N/A -1.14 11/01/1999(3)
AIM Weingarten Fund 1.81 -11.62 3.50 N/A 10/08/1991
|
(1) The returns shown for these periods are the restated historical performance of AIM Diversified Dividend Fund's Class A shares at the net asset value, and reflect the Rule 12b-1 fees applicable to Class A shares.
(2) The returns shown for the five year period and since inception are the blended returns of AIM Diversified Dividend Fund's, AIM Large Cap Basic Value Fund's and AIM Large Cap Growth Fund's Institutional Class shares since April 30, 2004 and the restated historical performance of each Funds' Class A shares (for periods prior to April 30, 2004) at net asset value, and reflect the Rule 12b-1 fees applicable to the Class A shares.
(3) The inception dates shown in the table are those of each Fund's Class A shares. The inception date of the AIM Large Cap Basic Value Fund's, AIM Large Cap Growth Fund's and AIM Mid Cap Growth Fund's Institutional Class shares is April 30, 2004. As of the date of this Statement of Additional Information, the Institutional Class Shares of AIM Diversified Dividend Fund had not yet commenced operations.
APPENDIX M-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 Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived as of August 19, 2005 (with the exception of the Sayegh lawsuit discussed below).
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.
ANNE G. PERENTESIS (WIDOW) v. AIM INVESTMENTS, ET AL (INVESCO FUNDS
GROUP, INC.), in the District Court of Maryland for Baltimore County
(Case No. 080400228152005), filed on July 21, 2005. This claim alleges
financial losses, mental anguish and emotional distress as a result of
unlawful market timing and related activity by the defendants. The
plaintiff in this case is seeking damages and costs and expenses.
Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits
(with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc.
et al., Mike Sayegh v. Janus Capital Corporation, et al. and Anne G. Perentesis
(widow) v. AIM Investments, et al.) consolidated their claims for pre-trial
purposes into three amended complaints against various AIM- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds (the Lepera lawsuit discussed below);
(ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on
behalf of the AIM Funds and fund registrants (the Essenmacher lawsuit discussed
below); and (iii) an Amended Class Action Complaint for Violations of the
Employee Retirement Income Securities Act ("ERISA") purportedly brought on
behalf of participants in AMVESCAP's 401(k) plan (the Calderon lawsuit discussed
below). The plaintiffs in the Vonder Haar and Sayegh lawsuits continue to seek
remand of their lawsuits to state court. Set forth below is detailed information
about these three amended complaints.
RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS
MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND FUNDS, AIM SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO DISTRIBUTORS, INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY J. MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN GOLDBERG, MICHAEL GRADY, CITIGROUP, INC.,
CITIGROUP GLOBAL MARKETS HOLDINGS, INC., SALOMON SMITH BARNEY, INC.,
MORGAN STANLEY DW, ANNA BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO.
SECURITIES INC., SECURITY TRUST COMPANY, N.A., GRANT D. SEEGER, JB
OXFORD HOLDINGS, INC., NATIONAL CLEARING CORPORATION, JAMES G. LEWIS,
KRAIG L. KIBBLE, JAMES Y. LIN, BANK OF AMERICA CORPORATION, BANC OF
AMERICA SECURITIES LLC, THEODORE C. SIHPOL, III, BEAR STEARNS & CO.,
INC., BEAR STEARNS SECURITIES CORP., CHARLES SCHWAB & CO., CREDIT
SUISSE FIRST BOSTON (USA) INC., PRUDENTIAL FINANCIAL, INC., PRUDENTIAL
SECURITIES, INC., CANADIAN IMPERIAL BANK OF COMMERCE, JP MORGAN CHASE
AND CO., AND JOHN DOE DEFENDANTS 1-100, in the MDL Court (Case No.
04-MD-15864; No. 04-CV-00814-JFM) (originally in the United States
District Court for the District of Colorado), filed on September 29,
2004. This lawsuit alleges violations of Sections 11, 12(a) (2), and 15
of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder; Section 20(a) of the Exchange Act; Sections
34(b), 36(a), 36(b) and 48(a) of the Investment Company Act; breach of
fiduciary duty/constructive fraud; aiding and abetting breach of
fiduciary duty; and unjust enrichment. The plaintiffs in this lawsuit
are seeking: compensatory damages, including interest; and other costs
and expenses, including counsel and expert fees.
CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS
CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY,
SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN,
HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON
SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY
SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND
CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V.
AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC.,
INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED,
INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC.,
AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS,
INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R.
CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL
BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H.
BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL,
RONALD L. GROOMS, WILLIAM J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S.
BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M.
FIELDS, CARL FRISCHILING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H.
QUIGLEY, LOUIS S. SKLAR, OWEN DALY II, AURUM SECURITIES CORP., AURUM
CAPITAL MANAGEMENT CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF
AMERICA CORP., BANC OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A.,
BEAR STEARNS & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL
PARTNERS, LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN,
CANADIAN IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN
GOLDBERG, MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE
& CO., OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA
MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE
INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND CORPORATIONS THAT
COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT WERE MANAGED BY INVESCO
AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No.
04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This lawsuit
alleges violations of Sections 206 and 215 of the Investment Advisers
Act; Sections 36(a), 36(b) and 47 of the Investment Company Act;
control person liability under Section 48 of the Investment Company
Act; breach of fiduciary duty; aiding and abetting breach of fiduciary
duty; breach of contract; unjust enrichment; interference with
contract; and
civil conspiracy. The plaintiffs in this lawsuit are seeking: removal of director defendants; removal of adviser, sub-adviser and distributor defendants; rescission of management and other contracts between the Funds and defendants; rescission of 12b-1 plans; disgorgement of management fees and other compensation/profits paid to adviser defendants; compensatory and punitive damages; and fees and expenses, including attorney and expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL
TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F.
MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R.
CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on
September 29, 2004. This lawsuit alleges violations of ERISA Sections
404, 405 and 406. The plaintiffs in this lawsuit are seeking:
declaratory judgment; restoration of losses suffered by the plan;
disgorgement of profits; imposition of a constructive trust; injunctive
relief; compensatory damages; costs and attorneys' fees; and equitable
restitution.
APPENDIX M-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM 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 August 19, 2005.
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 these cases are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. The Third Judicial Circuit Court for Madison County, Illinois has issued an order severing the claims of plaintiff Parthasarathy from the claims of the other plaintiffs against AIM and other defendants. As a result, AIM is a defendant in the following severed action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and the relief sought in the Woodbury lawsuit are identical to those in the Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury lawsuit removed the action to Federal Court (U.S. District Court, Southern District of Illinois, No. 05-CV-302-DRH). Based on a recent Federal appellate court decision (the "Kircher" case), AIM and the other defendants in the Woodbury lawsuit removed the action to Federal court (U.S. District Court, Southern District of Illinois, Cause No. 05-CV-302-DRH) on April 22, 2005. On April 26, 2005, AIM and the other defendants filed their Motion to Dismiss the plaintiffs' state law based claims. On June 10, 2005, the Court dismissed the Woodbury lawsuit based upon the Kircher ruling and ordered the court clerk to close this case. Plaintiffs filed a Motion to Amend the Judgment arguing that the Kircher ruling does not apply to require the dismissal of the claims against AIM in the Woodbury lawsuit. On July 7, 2005, the Court denied this Motion.
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. This lawsuit has been transferred to the MDL Court by order of
the United States District Court, Southern District of Illinois (East
St. Louis).
APPENDIX M-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR 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/or 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 August 19, 2005.
All of the lawsuits discussed below 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. By order of the United States District Court for the Southern District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed below have been consolidated for pre-trial purpose into the Berdat lawsuit discussed below and administratively closed.
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 M-4
PENDING LITIGATION ALLEGING IMPROPER CHARGING OF DISTRIBUTION FEES
ON LIMITED OFFERING FUNDS OR SHARE CLASSES
The following civil lawsuits, including shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, ADI and/or certain of the trustees of the AIM Funds and allege that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of August 19, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the Lieber lawsuit discussed below has been consolidated for pre-trial purposes into the Zucker lawsuit discussed below and administratively closed.
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. In March 2005, the parties
entered a Stipulation whereby, among other things, the plaintiff agreed
to dismiss without prejudice all claims against all of the individual
defendants and his claims based on state law causes of action. This
effectively limits this case to alleged violations of Section 36(b)
against ADI.
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, INVESCO 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. In
March 2005, the parties entered a Stipulation whereby, among other
things, the plaintiff agreed to dismiss without prejudice all claims
against all of the individual defendants and his claims based on state
law causes of action. This effectively limits this case to alleged
violations of Section 36(b) against ADI.
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 M-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 Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM 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 August 19, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On June 7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they make substantially identical allegations to those of the individual underlying lawsuits. However, the City of Chicago Deferred Compensation Plan has been joined as an additional plaintiff in the Consolidated Amended Complaint. Plaintiffs added defendants, including current and former directors/trustees of the AIM Funds formerly advised by IFG.
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.
APPENDIX M-6
PENDING LITIGATION ALLEGING FAILURE TO ENSURE PARTICIPATION IN
CLASS ACTION SETTLEMENTS
The following civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, AIM Capital and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate. This lawsuit was dismissed by the Court on August 12, 2005.
AVO HOGAN AND JULIAN W. MEADOWS, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, V. BOB R. BAKER, FRANK S. BAYLEY, JAMES T. BUNCH, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, ROBERT H. GRAHAM, GERALD J. LEWIS, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, LARRY SOLL, PH.D, MARK H. WILLIAMSON, AIM INVESTMENTS, LTD., AIM ADVISORS, INC., AIM CAPITAL MANAGEMENT, INC., INVESCO INSTITUTIONAL (N.A.), INC. AND JOHN DOES NO. 1 THROUGH 100, in the United States District Court, Northern District of Texas (Civil Action No. 3:05-CV-73-P), filed on January 11, 2005. This claim alleges violations of Sections 36(a), 36(b) and 47(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty and negligence. The plaintiffs in this case are seeking: compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and counsel fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X, unaudited financials for the period ended April 30, 2005, for Registrant's portfolios have been included in addition to the portfolios' audited financials for the period ended October 31, 2004. 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 REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS-95.48%
ADVERTISING-1.94%
Lamar Advertising Co.-Class A(a)(b) 350,000 $ 14,497,000
---------------------------------------------------------------------------
Omnicom Group Inc. 300,000 23,670,000
===========================================================================
38,167,000
===========================================================================
AIRLINES-0.80%
Southwest Airlines Co. 1,000,000 15,770,000
===========================================================================
APPAREL RETAIL-3.93%
Aeropostale, Inc.(a)(c) 475,000 14,986,250
---------------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 500,000 11,230,000
---------------------------------------------------------------------------
Foot Locker, Inc. 500,000 12,200,000
---------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)(b) 490,800 15,254,064
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a)(c) 1,000,000 23,440,000
===========================================================================
77,110,314
===========================================================================
APPLICATION SOFTWARE-4.15%
Amdocs Ltd. (United Kingdom)(a) 625,000 15,718,750
---------------------------------------------------------------------------
Citrix Systems, Inc.(a)(b) 750,000 18,097,500
---------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 450,000 17,779,500
---------------------------------------------------------------------------
Mercury Interactive Corp.(a) 425,000 18,457,750
---------------------------------------------------------------------------
Synopsys, Inc.(a) 700,000 11,368,000
===========================================================================
81,421,500
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-5.61%
Affiliated Managers Group, Inc.(a)(b) 300,000 16,752,000
---------------------------------------------------------------------------
Investors Financial Services Corp.(b) 1,100,000 42,339,000
---------------------------------------------------------------------------
Legg Mason, Inc.(b) 450,000 28,669,500
---------------------------------------------------------------------------
T. Rowe Price Group Inc. 400,000 22,308,000
===========================================================================
110,068,500
===========================================================================
BIOTECHNOLOGY-2.79%
Amylin Pharmaceuticals, Inc.(a)(b) 675,000 14,377,500
---------------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 235,000 9,973,400
---------------------------------------------------------------------------
Invitrogen Corp.(a) 300,000 17,370,000
---------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a)(b) 200,000 12,996,000
===========================================================================
54,716,900
===========================================================================
BROADCASTING & CABLE TV-2.09%
Radio One, Inc.-Class D(a) 1,000,000 14,690,000
---------------------------------------------------------------------------
Univision Communications Inc.-Class A(a)(b) 850,000 26,316,000
===========================================================================
41,006,000
===========================================================================
BUILDING PRODUCTS-1.26%
American Standard Cos. Inc.(a) 678,000 24,794,460
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-6.52%
ADTRAN, Inc. 239,400 $ 5,171,040
---------------------------------------------------------------------------
Andrew Corp.(a) 925,000 12,931,500
---------------------------------------------------------------------------
Avaya Inc.(a)(b) 1,250,000 18,000,000
---------------------------------------------------------------------------
Avocent Corp.(a) 350,000 12,460,000
---------------------------------------------------------------------------
Comverse Technology, Inc.(a)(b) 1,500,000 30,960,000
---------------------------------------------------------------------------
Plantronics, Inc. 528,600 22,994,100
---------------------------------------------------------------------------
Polycom, Inc.(a) 500,000 10,325,000
---------------------------------------------------------------------------
Tekelec(a) 682,500 15,233,400
===========================================================================
128,075,040
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.98%
Best Buy Co., Inc. 325,000 19,246,500
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
Joy Global Inc. 375,000 12,671,250
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-7.24%
Alliance Data Systems Corp.(a)(b) 1,000,000 42,280,000
---------------------------------------------------------------------------
Fiserv, Inc.(a) 1,000,000 35,540,000
---------------------------------------------------------------------------
Paychex, Inc.(b) 750,000 24,595,500
---------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 1,500,000 39,735,000
===========================================================================
142,150,500
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.81%
Cintas Corp.(b) 750,000 32,355,000
---------------------------------------------------------------------------
Corporate Executive Board Co. (The)(c) 200,000 12,730,000
---------------------------------------------------------------------------
CoStar Group Inc.(a) 250,000 10,092,500
===========================================================================
55,177,500
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.47%
Cooper Industries, Ltd.-Class A (Bermuda) 225,000 14,377,500
---------------------------------------------------------------------------
EnerSys(a) 1,100,000 14,520,000
===========================================================================
28,897,500
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.99%
Agilent Technologies, Inc.(a)(b) 750,000 18,795,000
---------------------------------------------------------------------------
Littelfuse, Inc.(a) 250,000 8,155,000
---------------------------------------------------------------------------
Tektronix, Inc. 400,000 12,132,000
===========================================================================
39,082,000
===========================================================================
EMPLOYMENT SERVICES-2.23%
Robert Half International Inc. 1,650,000 43,774,500
===========================================================================
|
FS-2
MARKET
SHARES VALUE
---------------------------------------------------------------------------
GENERAL MERCHANDISE STORES-0.94%
Family Dollar Stores, Inc.(b) 625,000 $ 18,468,750
===========================================================================
HEALTH CARE EQUIPMENT-3.05%
Cytyc Corp.(a) 385,000 10,044,650
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 600,000 34,416,000
---------------------------------------------------------------------------
PerkinElmer, Inc. 750,000 15,405,000
===========================================================================
59,865,650
===========================================================================
HEALTH CARE FACILITIES-1.95%
Health Management Associates, Inc.-Class A(b) 500,000 10,330,000
---------------------------------------------------------------------------
LifePoint Hospitals, Inc.(a) 350,000 11,347,000
---------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 500,000 16,515,000
===========================================================================
38,192,000
===========================================================================
HEALTH CARE SERVICES-4.90%
Caremark Rx, Inc.(a) 1,250,000 37,462,500
---------------------------------------------------------------------------
DaVita, Inc.(a) 600,000 17,772,000
---------------------------------------------------------------------------
Express Scripts, Inc.(a)(b) 400,000 25,600,000
---------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 450,000 15,259,500
===========================================================================
96,094,000
===========================================================================
HOTELS, RESORTS & CRUISE LINES-0.83%
Royal Caribbean Cruises Ltd. (Liberia)(b) 350,000 16,310,000
===========================================================================
INDUSTRIAL CONGLOMERATES-2.17%
Textron Inc.(c) 625,000 42,593,750
===========================================================================
INDUSTRIAL MACHINERY-1.28%
Danaher Corp.(b) 200,000 11,026,000
---------------------------------------------------------------------------
Eaton Corp. 221,000 14,132,950
===========================================================================
25,158,950
===========================================================================
INVESTMENT BANKING & BROKERAGE-1.86%
Ameritrade Holding Corp.(a) 1,000,000 13,020,000
---------------------------------------------------------------------------
Edwards (A.G.), Inc.(b) 250,000 9,065,000
---------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 175,000 14,376,250
===========================================================================
36,461,250
===========================================================================
IT CONSULTING & OTHER SERVICES-1.35%
Acxiom Corp. 600,000 15,000,000
---------------------------------------------------------------------------
CACI International Inc.-Class A(a) 188,800 11,511,136
===========================================================================
26,511,136
===========================================================================
LEISURE PRODUCTS-0.72%
Brunswick Corp. 300,000 14,076,000
===========================================================================
MOVIES & ENTERTAINMENT-0.92%
Regal Entertainment Group-Class A(b) 912,200 18,161,902
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OIL & GAS DRILLING-0.59%
Patterson-UTI Energy, Inc.(c) 600,000 $ 11,538,000
===========================================================================
PAPER PRODUCTS-0.47%
Bowater Inc. 250,000 9,210,000
===========================================================================
PHARMACEUTICALS-4.21%
Allergan, Inc. 34,100 2,440,196
---------------------------------------------------------------------------
Barr Pharmaceuticals Inc.(a) 550,000 20,707,500
---------------------------------------------------------------------------
Eon Labs, Inc.(a) 354,939 8,735,049
---------------------------------------------------------------------------
Impax Laboratories, Inc.(a)(b) 922,200 13,611,672
---------------------------------------------------------------------------
IVAX Corp.(a)(b) 937,500 16,968,750
---------------------------------------------------------------------------
MGI Pharma, Inc.(a) 400,000 10,668,000
---------------------------------------------------------------------------
Valeant Pharmaceuticals International 400,000 9,600,000
===========================================================================
82,731,167
===========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.99%
CB Richard Ellis Group, Inc.-Class A(a) 750,000 19,425,000
===========================================================================
RESTAURANTS-3.69%
Brinker International, Inc.(a)(b) 750,000 24,225,000
---------------------------------------------------------------------------
CBRL Group, Inc. 500,000 18,130,000
---------------------------------------------------------------------------
Ruby Tuesday, Inc. 675,000 16,672,500
---------------------------------------------------------------------------
Wendy's International, Inc. 400,000 13,348,000
===========================================================================
72,375,500
===========================================================================
SEMICONDUCTOR EQUIPMENT-3.10%
KLA-Tencor Corp.(a)(b) 500,000 22,765,000
---------------------------------------------------------------------------
Novellus Systems, Inc.(a)(b) 1,000,000 25,910,000
---------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 350,000 12,113,500
===========================================================================
60,788,500
===========================================================================
SEMICONDUCTORS-6.63%
Marvell Technology Group Ltd. (Bermuda)(a)(c) 375,000 10,713,750
---------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 1,100,000 16,720,000
---------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 625,000 16,906,250
---------------------------------------------------------------------------
Integrated Device Technology, Inc.(a) 1,500,000 17,730,000
---------------------------------------------------------------------------
Microchip Technology Inc.(b) 1,000,000 30,250,000
---------------------------------------------------------------------------
Micron Technology, Inc.(a)(b) 1,000,000 12,180,000
---------------------------------------------------------------------------
RF Micro Devices, Inc.(a)(b) 1,525,000 9,927,750
---------------------------------------------------------------------------
Semtech Corp.(a)(b) 750,000 15,660,000
===========================================================================
130,087,750
===========================================================================
SPECIALTY CHEMICALS-0.48%
Valspar Corp. (The) 200,000 9,332,000
===========================================================================
SPECIALTY STORES-4.23%
Advance Auto Parts, Inc.(a) 61,000 2,386,320
---------------------------------------------------------------------------
Linens 'n Things, Inc.(a) 750,000 18,060,000
---------------------------------------------------------------------------
|
FS-3
MARKET
SHARES VALUE
---------------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Staples, Inc.(b) 1,000,000 $ 29,740,000
---------------------------------------------------------------------------
Tiffany & Co. 500,000 14,665,000
---------------------------------------------------------------------------
Tractor Supply Co.(a) 500,000 18,140,000
===========================================================================
82,991,320
===========================================================================
TECHNOLOGY DISTRIBUTORS-1.26%
CDW Corp. 400,000 24,812,000
===========================================================================
THRIFTS & MORTGAGE FINANCE-0.70%
New York Community Bancorp, Inc.(b) 750,000 13,770,000
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.87%
MSC Industrial Direct Co., Inc.-Class A 500,000 17,070,000
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
TRUCKING-1.83%
Sirva Inc.(a) 1,500,000 $ 36,000,000
===========================================================================
Total Common Stocks (Cost $1,607,325,016) 1,874,154,089
===========================================================================
MONEY MARKET FUNDS-4.94%
Liquid Assets Portfolio-Institutional
Class(d) 48,442,076 48,442,076
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 48,442,076 48,442,076
===========================================================================
Total Money Market Funds (Cost
$96,884,152) 96,884,152
===========================================================================
TOTAL INVESTMENTS-100.42%
(excluding investments purchased with cash
collateral from securities loaned) (Cost
$1,704,209,168) 1,971,038,241
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-13.03%
Liquid Assets Portfolio-Institutional
Class(d)(e) 127,900,554 127,900,554
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 127,900,554 127,900,554
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $255,801,108) 255,801,108
===========================================================================
TOTAL INVESTMENTS-113.45% (Cost
$1,960,010,276) 2,226,839,349
===========================================================================
OTHER ASSETS LESS LIABILITIES-(13.45%) (263,934,602)
===========================================================================
NET ASSETS-100.00% $1,962,904,747
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
security lending transactions at October 31, 2004.
(c) A portion of this security is subject to call options written. See Note 1F
and Note 9.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$1,607,325,016)* $1,874,154,089
------------------------------------------------------------
Investments in affiliated money market funds
(cost $352,685,260) 352,685,260
============================================================
Total investments (cost $1,960,010,276) 2,226,839,349
____________________________________________________________
============================================================
Cash 990,624
------------------------------------------------------------
Receivables for:
Investments sold 45,624,834
------------------------------------------------------------
Fund shares sold 1,096,985
------------------------------------------------------------
Dividends 545,715
------------------------------------------------------------
Premium options written 402,609
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 152,955
------------------------------------------------------------
Other assets 31,627
============================================================
Total assets 2,275,684,698
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 50,838,522
------------------------------------------------------------
Fund shares reacquired 3,237,399
------------------------------------------------------------
Options written, at market value (premiums
received $830,758) 1,000,960
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 289,833
------------------------------------------------------------
Collateral upon return of securities
loaned 255,801,108
------------------------------------------------------------
Accrued distribution fees 586,155
------------------------------------------------------------
Accrued trustees' fees 2,700
------------------------------------------------------------
Accrued transfer agent fees 820,724
------------------------------------------------------------
Accrued operating expenses 202,550
============================================================
Total liabilities 312,779,951
============================================================
Net assets applicable to shares outstanding $1,962,904,747
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,288,155,491
------------------------------------------------------------
Undistributed net investment income (loss) (256,874)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (591,652,741)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 266,658,871
============================================================
$1,962,904,747
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,640,288,448
____________________________________________________________
============================================================
Class B $ 248,424,615
____________________________________________________________
============================================================
Class C $ 71,229,207
____________________________________________________________
============================================================
Class R $ 2,834,226
____________________________________________________________
============================================================
Institutional Class $ 128,251
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 170,545,391
____________________________________________________________
============================================================
Class B 27,157,561
____________________________________________________________
============================================================
Class C 7,787,511
____________________________________________________________
============================================================
Class R 296,658
____________________________________________________________
============================================================
Institutional Class 13,141
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.62
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.62 divided by
94.50%) $ 10.18
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 9.15
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 9.15
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.55
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.76
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $250,914,612 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-5
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,050) $ 8,323,244
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $631,176)* 1,249,812
===========================================================================
Total investment income 9,573,056
===========================================================================
EXPENSES:
Advisory fees 14,026,309
---------------------------------------------------------------------------
Administrative services fees 476,287
---------------------------------------------------------------------------
Custodian fees 216,364
---------------------------------------------------------------------------
Distribution fees:
Class A 4,656,901
---------------------------------------------------------------------------
Class B 2,595,972
---------------------------------------------------------------------------
Class C 763,418
---------------------------------------------------------------------------
Class R 11,194
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 7,320,608
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 106
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 53,801
---------------------------------------------------------------------------
Other 1,046,299
===========================================================================
Total expenses 31,167,259
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements 238,837
===========================================================================
Net expenses 30,928,422
===========================================================================
Net investment income (loss) (21,355,366)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 455,938,443
---------------------------------------------------------------------------
Option contracts written 261,654
===========================================================================
456,200,097
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (287,875,082)
---------------------------------------------------------------------------
Option contracts written (170,202)
===========================================================================
(288,045,284)
===========================================================================
Net gain from investment securities and option contracts 168,154,813
===========================================================================
Net increase in net assets resulting from operations $ 146,799,447
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-6
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (21,355,366) $ (22,556,283)
------------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 456,200,097 61,969,001
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (288,045,284) 408,592,565
================================================================================================
Net increase in net assets resulting from operations 146,799,447 448,005,283
================================================================================================
Share transactions-net:
Class A (469,733,957) (198,927,862)
------------------------------------------------------------------------------------------------
Class B (28,990,427) (13,011,938)
------------------------------------------------------------------------------------------------
Class C (14,524,768) (6,417,966)
------------------------------------------------------------------------------------------------
Class R 1,554,735 879,113
------------------------------------------------------------------------------------------------
Institutional Class (2,730,852) 1,928,983
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (514,425,269) (215,549,670)
================================================================================================
Net increase (decrease) in net assets (367,625,822) 232,455,613
================================================================================================
NET ASSETS:
Beginning of year 2,330,530,569 2,098,074,956
================================================================================================
End of year (including undistributed net investment income
(loss) of $(256,874) and $(235,341) for 2004 and 2003,
respectively) $1,962,904,747 $2,330,530,569
________________________________________________________________________________________________
================================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-7
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-8
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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $12,113.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $187,437 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $476,287 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $7,320,608 for Class A, Class B, Class C and Class R shares and $106 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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
FS-9
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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $4,656,901, $2,595,972, $763,418 and $11,194, 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, 2004, AIM Distributors advised the Fund that it retained $227,703 in front-end sales commissions from the sale of Class A shares and $24,499, $28,619, $9,130 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $37,783,111 $ 543,189,076 $ (532,530,111) $ -- $48,442,076 $ 311,874 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 37,783,111 543,189,076 (532,530,111) -- 48,442,076 306,762 --
=================================================================================================================================
Subtotal $75,566,222 $1,086,378,152 $(1,065,060,222) $ -- $96,884,152 $ 618,636 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $261,330,936 $ 376,727,435 $ (510,157,817) $ -- $127,900,554 $ 318,715 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 261,330,936 376,727,435 (510,157,817) -- 127,900,554 312,461 --
=================================================================================================================================
Subtotal $522,661,872 $ 753,454,870 $(1,020,315,634) $ -- $255,801,108 $ 631,176 $ --
=================================================================================================================================
Total $598,228,094 $1,839,833,022 $(2,085,375,856) $ -- $352,685,260 $1,249,812 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $36,617,685 and $34,757,881, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $33,422 and credits in custodian fees of $5,865 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $39,287.
FS-10
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $12,315 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $250,914,612 were on loan to brokers. The loans were secured by cash collateral of $255,801,108 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $631,176 for securities lending transactions.
FS-11
NOTE 9--OPTIONS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------------
Written 20,359 1,201,222
-------------------------------------------------------------------------------------
Closed (2,250) (204,468)
-------------------------------------------------------------------------------------
Expired (2,000) (165,996)
=====================================================================================
End of year 16,109 $ 830,758
_____________________________________________________________________________________
=====================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
------------------------------------------------------------------------------------------------------------------------------
OCTOBER 31,
2004 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
Aeropostale, Inc. Dec-04 $35 863 $63,170 $ 69,040 $ (5,870)
------------------------------------------------------------------------------------------------------------------------------
Corporate Executive Board Co. (The) Dec-04 $65 476 79,490 80,920 (1,430)
------------------------------------------------------------------------------------------------------------------------------
Marvell Technology Group Ltd. Nov-04 $30 3,750 254,994 365,625 (110,631)
------------------------------------------------------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. Dec-04 $25 4,250 177,560 233,750 (56,190)
------------------------------------------------------------------------------------------------------------------------------
Patterson-UTI Energy, Inc. Nov-04 $20 6,000 173,156 165,000 8,156
------------------------------------------------------------------------------------------------------------------------------
Textron Inc. Dec-04 $70 770 82,388 86,625 (4,237)
==============================================================================================================================
16,109 $830,758 $1,000,960 $(170,202)
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 263,785,561 ---------------------------------------------------------------------------- Temporary book/tax differences (256,874) ---------------------------------------------------------------------------- Capital loss carryforward (588,779,431) ---------------------------------------------------------------------------- Shares of beneficial interest 2,288,155,491 ============================================================================ Total net assets $1,962,904,747 ____________________________________________________________________________ ============================================================================ |
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 losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on option contracts written of $(170,202).
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-12
The Fund utilized $451,377,424 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------------
October 31, 2009 $125,040,407
---------------------------------------------------------------------------------
October 31, 2010 463,739,024
=================================================================================
Total capital loss carryforward $588,779,431
_________________________________________________________________________________
=================================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $2,480,691,107 and $3,053,547,607, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $301,188,049 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (37,232,286) ============================================================================== Net unrealized appreciation of investment securities $263,955,763 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,962,883,586. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $21,333,833 and shares of beneficial interest decreased by $21,333,833. This reclassification had no effect on the net assets of the Fund.
FS-13
NOTE 13 -- 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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 19,503,343 $ 183,246,538 35,791,336 $ 277,895,468
--------------------------------------------------------------------------------------------------------------------------
Class B 2,785,031 24,931,760 4,508,173 33,128,293
--------------------------------------------------------------------------------------------------------------------------
Class C 1,454,243 13,022,624 2,072,120 15,430,661
--------------------------------------------------------------------------------------------------------------------------
Class R 233,461 2,175,865 162,296 1,283,289
--------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 275,456 2,002,058
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 366,882 3,476,875 337,998 2,617,107
--------------------------------------------------------------------------------------------------------------------------
Class B (384,365) (3,476,875) (351,540) (2,617,107)
==========================================================================================================================
Reacquired:
Class A (69,860,562) (656,457,370) (62,095,032) (479,440,437)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,651,768) (50,445,312) (5,947,043) (43,523,124)
--------------------------------------------------------------------------------------------------------------------------
Class C (3,075,625) (27,547,392) (2,982,429) (21,848,627)
--------------------------------------------------------------------------------------------------------------------------
Class R (66,756) (621,130) (51,154) (404,176)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (272,069) (2,730,852) (9,111) (73,075)
==========================================================================================================================
(54,968,185) $(514,425,269) (28,288,930) $(215,549,670)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are record owners of more than 5% of the outstanding shares of the Fund and in aggregate they own 16% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-14
NOTE 14--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,
----------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.07)(a) (0.09)(a) (0.09)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.71 1.76 (1.29) (6.34) 11.08
=================================================================================================================================
Total from investment operations 0.63 1.69 (1.38) (6.43) 10.95
=================================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.01% 23.15% (15.90)% (40.51)% 47.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,640,288 $1,983,600 $1,798,318 $2,516,407 $4,444,515
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.29%(c)(d) 1.30% 1.32% 1.17% 1.04%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.86)%(c) (0.96)% (1.00)% (0.79)% (0.77)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,862,760,352.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.30%.
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.67 1.71 (1.26) (6.20) 11.04
===========================================================================================================================
Total from investment operations 0.53 1.58 (1.41) (6.37) 10.75
===========================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
===========================================================================================================================
Net asset value, end of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 6.15% 22.44% (16.69)% (40.90)% 46.29%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $248,425 $262,098 $226,806 $294,303 $374,010
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.05% 2.07% 1.94% 1.86%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.61)%(c) (1.71)% (1.75)% (1.55)% (1.59)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $259,597,199.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
FS-15
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.04 $ 8.45 $ 18.11 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.67 1.71 (1.26) (6.19) 11.03
=================================================================================================================================
Total from investment operations 0.53 1.58 (1.41) (6.36) 10.74
=================================================================================================================================
Less distributions from net realized gains -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.15% 22.44% (16.69)% (40.86)% 46.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $71,229 $81,079 $72,676 $96,640 $120,591
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.61)%(c) (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $76,341,843.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
CLASS R
-----------------------------------------------
YEAR ENDED JUNE 3, 2002
OCTOBER 31, (DATE SALES
----------------------- COMMENCED) TO
2004 2003 OCTOBER 31, 2002
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.96 $ 7.29 $ 8.89
-------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.10)(a) (0.04)(a)
-------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.69 1.77 (1.56)
=============================================================================================================
Total from investment operations 0.59 1.67 (1.60)
=============================================================================================================
Net asset value, end of period $ 9.55 $ 8.96 $ 7.29
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 6.58% 22.91% (18.00)%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,834 $1,164 $ 137
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets 1.54%(c)(d) 1.55% 1.62%(e)
=============================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (1.30)%(e)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(f) 115% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,238,723.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-16
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------
YEAR ENDED MARCH 15, 2002
OCTOBER 31, (DATE SALES
--------------------- COMMENCED) TO
2004 2003 OCTOBER 31, 2002
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.08 $7.32 $ 9.53
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.03)(a) (0.02)(a)
------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.71 1.79 (2.19)
============================================================================================================
Total from investment operations 0.68 1.76 (2.21)
============================================================================================================
Net asset value, end of period $9.76 $9.08 $ 7.32
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 7.49% 24.04% (23.19)%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 128 $2,589 $ 138
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets 0.72%(c)(d) 0.71% 0.81%(e)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.29)%(c) (0.37)% (0.49)%(e)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(f) 115% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $1,271,385.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.73%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-17
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-18
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-19
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-21
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.17%
AEROSPACE & DEFENSE-2.17%
Honeywell International Inc. 700,000 $ 23,576,000
--------------------------------------------------------------------------
United Technologies Corp. 350,000 32,487,000
==========================================================================
56,063,000
==========================================================================
AIR FREIGHT & LOGISTICS-1.01%
United Parcel Service, Inc.-Class B 330,000 26,129,400
==========================================================================
ALUMINUM-0.71%
Alcoa Inc. 567,200 18,434,000
==========================================================================
APPAREL RETAIL-0.70%
Gap, Inc. (The) 900,000 17,982,000
==========================================================================
BIOTECHNOLOGY-2.09%
Amgen Inc.(a) 570,000 32,376,000
--------------------------------------------------------------------------
Genentech, Inc.(a)(b) 475,000 21,626,750
==========================================================================
54,002,750
==========================================================================
BUILDING PRODUCTS-0.90%
Masco Corp. 675,000 23,125,500
==========================================================================
COMMUNICATIONS EQUIPMENT-2.91%
Cisco Systems, Inc.(a) 3,100,000 59,551,000
--------------------------------------------------------------------------
Motorola, Inc. 900,000 15,534,000
==========================================================================
75,085,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.88%
Best Buy Co., Inc.(b) 385,000 22,799,700
==========================================================================
COMPUTER HARDWARE-3.26%
Dell Inc.(a) 1,375,000 48,207,500
--------------------------------------------------------------------------
International Business Machines Corp. 400,000 35,900,000
==========================================================================
84,107,500
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.87%
EMC Corp.(a) 1,750,000 22,522,500
==========================================================================
CONSUMER FINANCE-2.54%
American Express Co. 635,000 33,699,450
--------------------------------------------------------------------------
MBNA Corp. 550,000 14,096,500
--------------------------------------------------------------------------
SLM Corp. 390,000 17,651,400
==========================================================================
65,447,350
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.65%
Automatic Data Processing, Inc. 527,300 22,879,547
--------------------------------------------------------------------------
First Data Corp. 475,000 19,608,000
==========================================================================
42,487,547
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DEPARTMENT STORES-0.64%
J.C. Penney Co., Inc. 475,000 $ 16,430,250
==========================================================================
DIVERSIFIED BANKS-2.52%
Bank of America Corp. 850,000 38,071,500
--------------------------------------------------------------------------
Wells Fargo & Co. 450,000 26,874,000
==========================================================================
64,945,500
==========================================================================
DIVERSIFIED CHEMICALS-0.96%
Dow Chemical Co. (The) 550,000 24,717,000
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.65%
Apollo Group, Inc.-Class A(a) 300,000 19,800,000
--------------------------------------------------------------------------
Cendant Corp. 1,100,000 22,649,000
==========================================================================
42,449,000
==========================================================================
ELECTRIC UTILITIES-1.01%
FPL Group, Inc. 275,000 18,947,500
--------------------------------------------------------------------------
Southern Co. (The) 225,000 7,107,750
==========================================================================
26,055,250
==========================================================================
ENVIRONMENTAL SERVICES-0.80%
Waste Management, Inc. 725,000 20,648,000
==========================================================================
FOOD DISTRIBUTORS-0.69%
Sysco Corp. 550,000 17,748,500
==========================================================================
FOOTWEAR-1.02%
NIKE, Inc.-Class B 325,000 26,425,750
==========================================================================
GENERAL MERCHANDISE STORES-0.85%
Target Corp. 440,000 22,008,800
==========================================================================
HEALTH CARE EQUIPMENT-2.81%
Medtronic, Inc. 650,000 33,221,500
--------------------------------------------------------------------------
Waters Corp.(a) 375,000 15,483,750
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 305,000 23,664,950
==========================================================================
72,370,200
==========================================================================
HOME IMPROVEMENT RETAIL-1.91%
Home Depot, Inc. (The) 1,200,000 49,296,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.51%
Carnival Corp. (Panama)(b) 425,000 21,488,000
--------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 365,000 17,421,450
==========================================================================
38,909,450
==========================================================================
HOUSEHOLD PRODUCTS-2.77%
Colgate-Palmolive Co. 450,000 20,079,000
--------------------------------------------------------------------------
Procter & Gamble Co. (The) 1,005,000 51,435,900
==========================================================================
71,514,900
==========================================================================
|
FS-22
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOUSEWARES & SPECIALTIES-0.56%
Fortune Brands, Inc. 200,000 $ 14,564,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-3.54%
Costco Wholesale Corp.(b) 525,000 25,168,500
--------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1,225,000 66,052,000
==========================================================================
91,220,500
==========================================================================
INDUSTRIAL CONGLOMERATES-6.01%
3M Co. 250,000 19,392,500
--------------------------------------------------------------------------
General Electric Co. 2,405,000 82,058,600
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,720,000 53,578,000
==========================================================================
155,029,100
==========================================================================
INDUSTRIAL GASES-0.65%
Air Products & Chemicals, Inc. 315,000 16,751,700
==========================================================================
INDUSTRIAL MACHINERY-2.05%
Danaher Corp.(b) 580,000 31,975,400
--------------------------------------------------------------------------
Eaton Corp. 325,000 20,783,750
==========================================================================
52,759,150
==========================================================================
INTEGRATED OIL & GAS-3.47%
Exxon Mobil Corp. 1,820,000 89,580,400
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.98%
SBC Communications Inc. 1,005,000 25,386,300
==========================================================================
INTERNET RETAIL-0.76%
eBay Inc.(a) 200,000 19,522,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.34%
Goldman Sachs Group, Inc. (The) 315,000 30,989,700
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 550,000 29,667,000
--------------------------------------------------------------------------
Morgan Stanley 500,000 25,545,000
==========================================================================
86,201,700
==========================================================================
IT CONSULTING & OTHER SERVICES-0.52%
Accenture Ltd.-Class A (Bermuda)(a) 550,000 13,315,500
==========================================================================
MANAGED HEALTH CARE-1.47%
UnitedHealth Group Inc. 525,000 38,010,000
==========================================================================
MOVIES & ENTERTAINMENT-0.92%
Viacom Inc.-Class B 650,000 23,718,500
==========================================================================
MULTI-LINE INSURANCE-1.77%
American International Group, Inc. 750,000 45,532,500
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.61%
Dominion Resources, Inc. 245,000 15,758,400
==========================================================================
OIL & GAS DRILLING-0.41%
ENSCO International Inc. 350,000 10,692,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-1.00%
Schlumberger Ltd. (Netherlands) 410,000 $ 25,805,400
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.28%
Citigroup Inc. 1,875,000 83,193,750
--------------------------------------------------------------------------
JPMorgan Chase & Co. 1,370,000 52,882,000
==========================================================================
136,075,750
==========================================================================
PERSONAL PRODUCTS-2.07%
Avon Products, Inc. 625,000 24,718,750
--------------------------------------------------------------------------
Gillette Co. (The) 690,000 28,621,200
==========================================================================
53,339,950
==========================================================================
PHARMACEUTICALS-7.28%
Allergan, Inc.(b) 230,000 16,458,800
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 250,000 11,150,000
--------------------------------------------------------------------------
Johnson & Johnson 1,000,000 58,380,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 290,000 15,923,900
--------------------------------------------------------------------------
Pfizer Inc. 2,450,000 70,927,500
--------------------------------------------------------------------------
Wyeth 375,000 14,868,750
==========================================================================
187,708,950
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.03%
Allstate Corp. (The) 550,000 26,449,500
==========================================================================
RAILROADS-0.77%
Canadian National Railway Co. (Canada) 370,000 19,998,500
==========================================================================
RESTAURANTS-1.36%
McDonald's Corp. 1,200,000 34,980,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.01%
Applied Materials, Inc.(a) 800,000 12,880,000
--------------------------------------------------------------------------
KLA-Tencor Corp.(a)(b) 290,000 13,203,700
==========================================================================
26,083,700
==========================================================================
SEMICONDUCTORS-3.92%
Analog Devices, Inc. 420,000 16,909,200
--------------------------------------------------------------------------
Intel Corp. 1,600,000 35,616,000
--------------------------------------------------------------------------
Linear Technology Corp. 355,000 13,447,400
--------------------------------------------------------------------------
Microchip Technology Inc. 500,000 15,125,000
--------------------------------------------------------------------------
Xilinx, Inc. 650,000 19,890,000
==========================================================================
100,987,600
==========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 435,000 21,567,300
==========================================================================
SPECIALTY STORES-0.59%
Bed Bath & Beyond Inc.(a) 375,000 15,296,250
==========================================================================
SYSTEMS SOFTWARE-6.08%
Microsoft Corp. 3,100,000 86,769,000
--------------------------------------------------------------------------
Oracle Corp.(a) 2,125,000 26,902,500
--------------------------------------------------------------------------
|
FS-23
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Symantec Corp.(a) 375,000 $ 21,352,500
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 1,000,000 21,880,000
==========================================================================
156,904,000
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.18%
Fannie Mae 435,000 30,515,250
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.87%
Vodafone Group PLC-ADR (United Kingdom) 870,000 22,437,300
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,015,015,477) 2,557,896,547
==========================================================================
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.06%
1.61%, 12/16/04 (Cost $1,496,976)(c) $1,500,000 1,496,976
==========================================================================
MONEY MARKET FUNDS-0.56%
Liquid Assets Portfolio-Institutional
Class(d) 7,279,701 $ 7,279,701
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 7,279,701 7,279,701
==========================================================================
Total Money Market Funds (Cost
$14,559,402) 14,559,402
==========================================================================
TOTAL INVESTMENTS-99.79% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,031,071,855) 2,573,952,925
==========================================================================
|
--------------------------------------------------------------------------
MARKET
SHARES VALUE
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.36%
STIC Prime Portfolio-Institutional
Class(d)(e) 34,975,975 $ 34,975,975
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $34,975,975) 34,975,975
==========================================================================
TOTAL INVESTMENTS-101.15% (Cost
$2,066,047,830) 2,608,928,900
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.15%) (29,754,052)
==========================================================================
NET ASSETS-100.00% $2,579,174,848
__________________________________________________________________________
==========================================================================
|
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
security lending transactions at October 31, 2004.
(c) Security traded on a discount basis. Unless otherwise indicated, the
interest rate shown represents the discount rate at the time of purchase by
the Fund.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-24
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$2,016,512,453)* $ 2,559,393,523
------------------------------------------------------------
Investments in affiliated money market
funds (cost $49,535,377) 49,535,377
============================================================
Total investments (cost $2,066,047,830) 2,608,928,900
============================================================
Receivables for:
Investments sold 17,741,398
------------------------------------------------------------
Fund shares sold 1,201,975
------------------------------------------------------------
Dividends 2,809,147
------------------------------------------------------------
Investment for trustee deferred compensation and retirement
plans 154,126
------------------------------------------------------------
Other assets 49,427
============================================================
Total assets 2,630,884,973
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,373,237
------------------------------------------------------------
Fund shares reacquired 6,807,910
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 275,117
------------------------------------------------------------
Collateral upon return of securities
loaned 34,975,975
------------------------------------------------------------
Accrued distribution fees 1,444,569
------------------------------------------------------------
Accrued trustees' fees 4,120
------------------------------------------------------------
Accrued transfer agent fees 1,351,948
------------------------------------------------------------
Accrued operating expenses 477,249
============================================================
Total liabilities 51,710,125
============================================================
Net assets applicable to shares outstanding $ 2,579,174,848
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 3,728,825,373
------------------------------------------------------------
Undistributed net investment income (loss) (228,692)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures
contracts (1,692,302,903)
------------------------------------------------------------
Unrealized appreciation of investment
securities 542,881,070
============================================================
$ 2,579,174,848
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,236,433,569
____________________________________________________________
============================================================
Class B $ 1,032,773,714
____________________________________________________________
============================================================
Class C $ 222,839,537
____________________________________________________________
============================================================
Class R $ 6,000,455
____________________________________________________________
============================================================
Investor Class $ 32,083,995
____________________________________________________________
============================================================
Institutional Class $ 49,043,578
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 113,014,179
____________________________________________________________
============================================================
Class B 99,354,990
____________________________________________________________
============================================================
Class C 21,438,780
____________________________________________________________
============================================================
Class R 550,240
____________________________________________________________
============================================================
Investor Class 2,927,332
____________________________________________________________
============================================================
Institutional Class 4,403,381
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.94
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.94 divided by
94.50%) $ 11.58
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.39
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.39
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.91
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 10.96
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.14
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $34,048,041 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-25
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $61,297) $ 35,608,376
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $18,674)* 479,651
--------------------------------------------------------------------------
Interest 3,768
==========================================================================
Total investment income 36,091,795
==========================================================================
EXPENSES:
Advisory fees 18,508,235
--------------------------------------------------------------------------
Administrative services fees 575,871
--------------------------------------------------------------------------
Custodian fees 287,107
--------------------------------------------------------------------------
Distribution fees:
Class A 4,938,054
--------------------------------------------------------------------------
Class B 11,670,174
--------------------------------------------------------------------------
Class C 2,664,429
--------------------------------------------------------------------------
Class R 27,995
--------------------------------------------------------------------------
Investor Class 88,542
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 10,479,508
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 690
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 67,595
--------------------------------------------------------------------------
Other 1,761,913
==========================================================================
Total expenses 51,070,113
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (300,558)
==========================================================================
Net expenses 50,769,555
==========================================================================
Net investment income (loss) (14,677,760)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 141,430,751
--------------------------------------------------------------------------
Futures contracts 121,194
==========================================================================
141,551,945
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (63,358,526)
==========================================================================
Net gain from investment securities and futures contracts 78,193,419
==========================================================================
Net increase in net assets resulting from operations $ 63,515,659
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-26
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (14,677,760) $ (14,101,484)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and futures contracts 141,551,945 (105,157,212)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and futures
contracts (63,358,526) 519,286,935
==============================================================================================
Net increase in net assets resulting from operations 63,515,659 400,028,239
==============================================================================================
Share transactions-net:
Class A (236,834,043) (162,460,380)
----------------------------------------------------------------------------------------------
Class B (213,672,955) (136,334,779)
----------------------------------------------------------------------------------------------
Class C (73,035,331) (51,018,964)
----------------------------------------------------------------------------------------------
Class R 4,401,189 1,425,250
----------------------------------------------------------------------------------------------
Investor Class 30,994,771 99,068
----------------------------------------------------------------------------------------------
Institutional Class 48,256,952 (43,881)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (439,889,417) (348,333,686)
==============================================================================================
Net increase (decrease) in net assets (376,373,758) 51,694,553
==============================================================================================
NET ASSETS:
Beginning of year 2,955,548,606 2,903,854,053
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(228,692) and $(193,930), respectively) $2,579,174,848 $2,955,548,606
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-27
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-28
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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). Voluntary fee waivers or reimbursements may
FS-29
be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $11,809.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $242,427 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $575,871 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $10,479,508 for Class A, Class B, Class C, Class R and Investor Class shares and $690 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 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, Class R or Investor Class 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $4,938,054, $11,670,174, $2,664,429, $27,995 and $88,542, 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, 2004, AIM Distributors advised the Fund that it retained $330,881 in front-end sales commissions from the sale of Class A shares and $9,771, $99,868, $15,188 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-30
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $32,255,406 $208,774,062 $(233,749,767) $ -- $ 7,279,701 $232,259 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 32,255,406 208,774,062 (233,749,767) -- 7,279,701 228,718 --
===========================================================================================================================
Subtotal $64,510,812 $417,548,124 $(467,499,534) $ -- $14,559,402 $460,977 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 447,700 $401,247,004 $(401,694,704) $ -- $ -- $14,488 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 84,068,150 (49,092,175) -- 34,975,975 4,186 --
===========================================================================================================================
Subtotal $ 447,700 $485,315,154 $(450,786,879) $ -- $34,975,975 $18,674 $ --
===========================================================================================================================
Total $64,958,512 $902,863,278 $(918,286,413) $ -- $49,535,377 $479,651 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $12,437,600 and $3,790,920, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $46,302 and credits in custodian fees of $20 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $46,322.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $14,743 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.
FS-31
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $34,048,041 were on loan to brokers. The loans were secured by cash collateral of $34,975,975 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $18,674 for securities lending transactions.
NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 502,259,018
-----------------------------------------------------------------------------
Temporary book/tax differences (228,692)
-----------------------------------------------------------------------------
Capital loss carryforward (1,651,680,851)
-----------------------------------------------------------------------------
Shares of beneficial interest 3,728,825,373
=============================================================================
Total net assets $ 2,579,174,848
_____________________________________________________________________________
=============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,642,177,803 of capital loss carryforward in the fiscal year ended October 31, 2005.
FS-32
The Fund utilized $138,205,191 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
----------------------------------------------------------------------------
October 31, 2008 $ 85,920,513
----------------------------------------------------------------------------
October 31, 2009 845,288,837
----------------------------------------------------------------------------
October 31, 2010 617,527,392
----------------------------------------------------------------------------
October 31, 2011 102,944,109
============================================================================
Total capital loss carryforward $1,651,680,851
____________________________________________________________________________
============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth & Income Fund into the Fund, are realized on securities held in each fund on such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $827,221,607 and $1,262,244,981, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $545,012,455 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (42,753,437) ============================================================================== Net unrealized appreciation of investment securities $502,259,018 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $2,106,669,882. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $14,647,924 and shares of beneficial interest decreased by $14,647,924. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Growth & Income Fund into the Fund, undistributed income was decreased by $4,926, undistributed net realized gain was decreased by $13,855,504 and shares of beneficial interest increased by $13,860,430. These reclassifications had no effect on the net assets of the Fund.
FS-33
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 21,493,299 $ 237,822,246 30,092,109 $ 289,868,346
--------------------------------------------------------------------------------------------------------------------------
Class B 7,106,647 75,074,355 12,053,281 111,049,162
--------------------------------------------------------------------------------------------------------------------------
Class C 2,785,689 29,371,888 4,161,204 38,212,257
--------------------------------------------------------------------------------------------------------------------------
Class R 672,346 7,394,140 164,023 1,619,420
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 513,156 5,688,744 12,285 130,138
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 4,421,094 48,593,658 -- --
==========================================================================================================================
Issued in connection with acquisitions:(c)
Class A 63,333 676,707 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B 14,065 143,763 -- --
--------------------------------------------------------------------------------------------------------------------------
Class C 98,131 1,002,254 -- --
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 3,554,717 38,013,823 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,357,674 26,110,071 1,670,042 16,099,491
--------------------------------------------------------------------------------------------------------------------------
Class B (2,474,910) (26,110,071) (1,741,215) (16,099,491)
==========================================================================================================================
Reacquired:
Class A (45,616,888) (501,443,066) (49,132,867) (468,428,217)
--------------------------------------------------------------------------------------------------------------------------
Class B (25,052,874) (262,781,002) (25,556,829) (231,284,450)
--------------------------------------------------------------------------------------------------------------------------
Class C (9,864,695) (103,409,473) (9,824,798) (89,231,221)
--------------------------------------------------------------------------------------------------------------------------
Class R (270,057) (2,992,951) (20,044) (194,170)
--------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (1,149,919) (12,707,797) (2,907) (31,070)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (30,273) (336,706) (4,720) (43,881)
==========================================================================================================================
(41,379,465) $(439,889,417) (38,130,436) $(348,333,686)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 8% of the outstanding shares of the
Fund. AIM Distributors has an agreement with the entity to sell Fund shares.
The Fund, AIM and/or AIM affiliates may make payments to this entity, which
is considered to be related to the Fund, for providing services to the Fund,
AIM and/or AIM affiliates including but not limited to services such as,
securities brokerage, distributions, third party record keeping and account
servicing. The Trust has no knowledge as to whether all or any portion of
the shares owned of record by these shareholders are also owned
beneficially.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) 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-34
NOTE 13--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,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.04)(a) (0.04) (0.05)(a)
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 1.49 (1.96) (6.03) 1.85
====================================================================================================================
Total from investment operations 0.25 1.47 (2.00) (6.07) 1.80
====================================================================================================================
Net asset value, end of period $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 2.34% 15.94% (17.82)% (35.11)% 11.60%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,236,434 $1,439,518 $1,402,589 $2,067,602 $3,163,453
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 1.44%(c)(d) 1.47% 1.40% 1.28% 1.19%
====================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.19)%(c) (0.17)% (0.33)% (0.29)% (0.31)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,410,872,545.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.45%.
CLASS B
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.08) (0.10)(a) (0.13) (0.17)(a)
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 1.42 (1.89) (5.87) 1.82
====================================================================================================================
Total from investment operations 0.17 1.34 (1.99) (6.00) 1.65
====================================================================================================================
Net asset value, end of period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 1.66% 15.09% (18.31)% (35.57)% 10.87%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,032,774 $1,223,821 $1,198,513 $1,806,464 $2,746,149
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 2.09%(c)(d) 2.12% 2.05% 1.94% 1.88%
====================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (0.82)% (0.98)% (0.94)% (1.00)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________
====================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,167,017,423.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.10%.
FS-35
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.08) (0.10)(a) (0.13) (0.17)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 1.42 (1.89) (5.86) 1.82
===============================================================================================================================
Total from investment operations 0.17 1.34 (1.99) (5.99) 1.65
===============================================================================================================================
Net asset value, end of period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 1.66% 15.09% (18.31)% (35.53)% 10.82%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $222,840 $290,396 $302,555 $487,838 $720,186
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.09%(c)(d) 2.12% 2.05% 1.94% 1.88%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.84)%(c) (0.82)% (0.98)% (0.94)% (1.00)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 29% 28% 28% 31% 22%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $266,442,859.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.10%.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.03) (0.00) (0.02)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 1.44 (1.29)
====================================================================================================
Total from investment operations 0.25 1.44 (1.31)
====================================================================================================
Net asset value, end of period $10.91 $10.66 $ 9.22
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 2.35% 15.62% (12.44)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,000 $1,578 $ 37
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.59%(c)(d) 1.62% 1.55%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.34)%(c) (0.32)% (0.49)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 29% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $5,598,909.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.60%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-36
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
------------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.69 $10.16
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.24 (0.00)
==================================================================================================
Net gains on securities (both realized and unrealized) 0.03 0.53
==================================================================================================
Total from investment operations 0.27 0.53
==================================================================================================
Net asset value, end of period $ 10.96 $10.69
__________________________________________________________________________________________________
==================================================================================================
Total return(a) 2.53% 5.22%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,084 $ 100
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets 1.34%(b)(c) 1.29%(d)
==================================================================================================
Ratio of net investment income (loss) to average net assets (0.09)%(b) (0.01)%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(e) 29% 28%
__________________________________________________________________________________________________
==================================================================================================
|
(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. Not annualized for periods less than one year.
(b) Ratios are based on average daily net assets of $35,416,969.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.35%.
(d) Annualized.
(e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
----------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
---------------------- OCTOBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.81 $ 9.26 $ 12.13
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04 0.06 0.02(a)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.49 (2.89)
======================================================================================================
Total from investment operations 0.33 1.55 (2.87)
======================================================================================================
Net asset value, end of period $ 11.14 $10.81 $ 9.26
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 3.05% 16.74% (23.66)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $49,044 $ 136 $ 160
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets 0.74%(c)(d) 0.77% 0.77%(e)
======================================================================================================
Ratio of net investment income to average net assets 0.51%(c) 0.53% 0.30%(e)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(f) 29% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $5,968,822.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.75%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-37
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-38
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-39
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-41
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.73%
ADVERTISING-1.59%
Lamar Advertising Co.-Class A(a)(b) 136,000 $ 5,633,120
--------------------------------------------------------------------------
R.H. Donnelley Corp.(a) 210,700 11,430,475
==========================================================================
17,063,595
==========================================================================
AIR FREIGHT & LOGISTICS-1.38%
Robinson (C.H.) Worldwide, Inc. 274,900 14,828,106
==========================================================================
APPAREL RETAIL-2.22%
Limited Brands 487,700 12,085,206
--------------------------------------------------------------------------
Ross Stores, Inc. 446,900 11,740,063
==========================================================================
23,825,269
==========================================================================
APPLICATION SOFTWARE-4.27%
Amdocs Ltd. (United Kingdom)(a) 473,400 11,906,010
--------------------------------------------------------------------------
Autodesk, Inc. 273,600 14,432,400
--------------------------------------------------------------------------
Intuit Inc.(a)(b) 274,300 12,442,248
--------------------------------------------------------------------------
Mercury Interactive Corp.(a) 161,000 6,992,230
==========================================================================
45,772,888
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.72%
Calamos Asset Management, Inc.-Class A(a) 338,600 6,602,700
--------------------------------------------------------------------------
Franklin Resources, Inc. 194,900 11,814,838
==========================================================================
18,417,538
==========================================================================
BROADCASTING & CABLE TV-0.44%
Cox Radio, Inc.-Class A(a) 300,000 4,770,000
==========================================================================
BUILDING PRODUCTS-1.05%
American Standard Cos. Inc.(a) 306,900 11,223,333
==========================================================================
CASINOS & GAMING-2.44%
Harrah's Entertainment, Inc.(b) 234,400 13,717,088
--------------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 590,600 12,508,908
==========================================================================
26,225,996
==========================================================================
COMMERCIAL PRINTING-1.11%
Donnelley (R.R.) & Sons Co. 379,764 11,943,578
==========================================================================
COMMUNICATIONS EQUIPMENT-1.77%
Harris Corp. 224,400 13,807,332
--------------------------------------------------------------------------
Scientific-Atlanta, Inc. 189,300 5,184,927
==========================================================================
18,992,259
==========================================================================
COMPUTER HARDWARE-0.89%
PalmOne, Inc.(a)(b) 331,200 9,594,864
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.50%
Emulex Corp.(a) 510,000 5,360,100
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.77%
Cummins Inc. 117,100 $ 8,206,368
==========================================================================
CONSUMER ELECTRONICS-1.19%
Garmin Ltd. (Cayman Islands)(b) 255,500 12,775,000
==========================================================================
CONSUMER FINANCE-0.91%
AmeriCredit Corp.(a)(b) 503,600 9,769,840
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.53%
Alliance Data Systems Corp.(a) 268,600 11,356,408
--------------------------------------------------------------------------
Certegy Inc. 164,550 5,816,842
--------------------------------------------------------------------------
CSG Systems International, Inc.(a) 516,000 8,673,960
--------------------------------------------------------------------------
DST Systems, Inc.(a)(b) 278,000 12,468,300
--------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 311,850 10,306,642
==========================================================================
48,622,152
==========================================================================
DEPARTMENT STORES-1.02%
Kohl's Corp.(a)(b) 216,200 10,974,312
==========================================================================
DISTILLERS & VINTNERS-0.89%
Constellation Brands, Inc.-Class A(a) 244,000 9,572,120
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.89%
Corrections Corp. of America(a) 284,500 9,886,375
--------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 595,500 12,505,500
--------------------------------------------------------------------------
United Rentals, Inc.(a) 560,300 8,656,635
==========================================================================
31,048,510
==========================================================================
DRUG RETAIL-0.60%
Shoppers Drug Mart Corp. (Canada)(a) 212,100 6,452,340
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.27%
Cooper Industries, Ltd.-Class A (Bermuda) 214,000 13,674,600
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.66%
Aeroflex Inc.(a) 580,000 6,438,000
--------------------------------------------------------------------------
Amphenol Corp.-Class A(a) 332,400 11,411,292
==========================================================================
17,849,292
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.54%
Benchmark Electronics, Inc.(a) 170,000 5,774,900
==========================================================================
|
FS-42
MARKET
SHARES VALUE
--------------------------------------------------------------------------
EMPLOYMENT SERVICES-0.50%
Manpower Inc. 118,200 $ 5,348,550
==========================================================================
ENVIRONMENTAL SERVICES-1.74%
Republic Services, Inc. 435,000 13,398,000
--------------------------------------------------------------------------
Stericycle, Inc.(a) 115,900 5,253,747
==========================================================================
18,651,747
==========================================================================
GENERAL MERCHANDISE STORES-1.40%
Dollar General Corp. 498,400 9,594,200
--------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a)(b) 188,800 5,456,320
==========================================================================
15,050,520
==========================================================================
HEALTH CARE DISTRIBUTORS-0.79%
Henry Schein, Inc.(a) 133,900 8,466,497
==========================================================================
HEALTH CARE EQUIPMENT-3.99%
Bio-Rad Laboratories, Inc.-Class A(a) 131,400 6,835,428
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 240,100 13,772,136
--------------------------------------------------------------------------
Varian Inc.(a) 278,300 10,152,384
--------------------------------------------------------------------------
Waters Corp.(a) 292,400 12,073,196
==========================================================================
42,833,144
==========================================================================
HEALTH CARE FACILITIES-1.47%
Community Health Systems Inc.(a) 435,000 11,666,700
--------------------------------------------------------------------------
Select Medical Corp. 241,400 4,149,666
==========================================================================
15,816,366
==========================================================================
HEALTH CARE SERVICES-3.79%
Caremark Rx, Inc.(a) 410,277 12,296,002
--------------------------------------------------------------------------
Covance Inc.(a)(b) 198,900 7,900,308
--------------------------------------------------------------------------
DaVita, Inc.(a) 338,550 10,027,851
--------------------------------------------------------------------------
Express Scripts, Inc.(a) 162,800 10,419,200
==========================================================================
40,643,361
==========================================================================
HOME FURNISHINGS-1.35%
Tempur-Pedic International Inc.(a) 891,300 14,474,712
==========================================================================
HOMEBUILDING-1.05%
Ryland Group, Inc. (The) 118,200 11,275,098
==========================================================================
HOTELS, RESORTS & CRUISE LINES-0.51%
Starwood Hotels & Resorts Worldwide, Inc.(b) 113,800 5,431,674
==========================================================================
HOUSEWARES & SPECIALTIES-2.00%
Jarden Corp.(a) 287,700 10,104,024
--------------------------------------------------------------------------
Yankee Candle Co., Inc. (The)(a) 408,400 11,312,680
==========================================================================
21,416,704
==========================================================================
HYPERMARKETS & SUPER CENTERS-1.05%
BJ's Wholesale Club, Inc.(a)(b) 389,800 11,315,894
==========================================================================
INDUSTRIAL GASES-1.04%
Airgas, Inc. 455,000 11,193,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INDUSTRIAL MACHINERY-1.72%
Eaton Corp. 84,000 $ 5,371,800
--------------------------------------------------------------------------
Parker Hannifin Corp. 185,600 13,108,928
==========================================================================
18,480,728
==========================================================================
INSURANCE BROKERS-1.08%
Willis Group Holdings Ltd. (Bermuda) 320,900 11,536,355
==========================================================================
INTEGRATED OIL & GAS-0.97%
Murphy Oil Corp. 129,500 10,362,590
==========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.41%
iShares Nasdaq Biotechnology Index Fund(a)(b) 222,500 15,161,150
==========================================================================
LEISURE PRODUCTS-1.99%
Brunswick Corp. 262,700 12,325,884
--------------------------------------------------------------------------
Polaris Industries Inc.(b) 152,700 9,062,745
==========================================================================
21,388,629
==========================================================================
METAL & GLASS CONTAINERS-0.98%
Pactiv Corp.(a) 444,200 10,523,098
==========================================================================
MULTI-LINE INSURANCE-0.95%
Quanta Capital Holdings Ltd. (Bermuda)
(Acquired 08/27/2003: Cost
$10,000,000)(a)(c)(e) 1,000,000 9,000,000
--------------------------------------------------------------------------
Quanta Capital Holdings Ltd. (Bermuda)(a)(b) 138,100 1,242,900
==========================================================================
10,242,900
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.13%
Questar Corp. 251,900 12,091,200
==========================================================================
OFFICE ELECTRONICS-0.60%
Zebra Technologies Corp.-Class A(a) 121,725 6,450,208
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.59%
BJ Services Co.(b) 213,200 10,873,200
--------------------------------------------------------------------------
Key Energy Services, Inc.(a) 539,500 6,204,250
==========================================================================
17,077,450
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.37%
XTO Energy Inc. 439,125 14,657,992
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-3.16%
Ashland Inc. 226,300 13,039,406
--------------------------------------------------------------------------
Kinder Morgan, Inc. 105,800 6,810,346
--------------------------------------------------------------------------
Williams Cos., Inc. (The) 1,120,100 14,012,451
==========================================================================
33,862,203
==========================================================================
PACKAGED FOODS & MEATS-0.54%
Flowers Foods, Inc. 228,400 5,792,224
==========================================================================
PAPER PACKAGING-1.41%
Sealed Air Corp.(a)(b) 107,000 5,300,780
--------------------------------------------------------------------------
|
FS-43
MARKET
SHARES VALUE
--------------------------------------------------------------------------
PAPER PACKAGING-(CONTINUED)
Smurfit-Stone Container Corp.(a) 563,800 $ 9,787,568
==========================================================================
15,088,348
==========================================================================
PERSONAL PRODUCTS-1.02%
NBTY, Inc.(a) 398,800 10,982,952
==========================================================================
PHARMACEUTICALS-1.12%
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 423,647 12,031,575
==========================================================================
REAL ESTATE-4.01%
Fieldstone Investment Corp. (Acquired
11/10/2003-11/11/2003; Cost
$9,984,140)(d)(e) 661,900 11,417,775
--------------------------------------------------------------------------
Friedman, Billings, Ramsey Group, Inc.-Class
A 574,555 9,847,873
--------------------------------------------------------------------------
KKR Financial Corp. (Acquired 08/05/2004;
Cost $10,250,000)(a)(d)(e) 1,025,000 10,506,250
--------------------------------------------------------------------------
New Century Financial Corp. 100,000 5,515,000
--------------------------------------------------------------------------
Saxon Capital, Inc.(a) 296,600 5,694,720
==========================================================================
42,981,618
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.30%
CB Richard Ellis Group, Inc.-Class A(a) 540,400 13,996,360
==========================================================================
REGIONAL BANKS-1.08%
Zions Bancorp 175,200 11,592,984
==========================================================================
RESTAURANTS-0.86%
Ruby Tuesday, Inc.(b) 372,400 9,198,280
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.73%
Cabot Microelectronics Corp.(a)(b) 212,200 7,645,566
--------------------------------------------------------------------------
KLA-Tencor Corp.(a) 247,700 11,277,781
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 402,000 10,415,820
==========================================================================
29,339,167
==========================================================================
SEMICONDUCTORS-2.07%
ATI Technologies Inc. (Canada)(a) 322,100 5,813,905
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 185,100 5,006,955
--------------------------------------------------------------------------
Microchip Technology Inc.(b) 374,762 11,336,551
==========================================================================
22,157,411
==========================================================================
SPECIALTY CHEMICALS-0.95%
Great Lakes Chemical Corp. 397,300 10,178,826
==========================================================================
SPECIALTY STORES-1.03%
Advance Auto Parts, Inc.(a) 281,200 11,000,544
==========================================================================
SYSTEMS SOFTWARE-1.24%
McAfee Inc.(a) 550,000 13,310,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-0.90%
CDW Corp. 156,100 $ 9,682,883
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.08%
Radian Group Inc.(b) 242,800 11,637,404
==========================================================================
TRUCKING-1.07%
Sirva Inc.(a) 477,300 11,455,200
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.04%
NII Holdings Inc.(a)(b) 246,600 10,916,982
--------------------------------------------------------------------------
SpectraSite, Inc.(a) 213,100 10,932,030
==========================================================================
21,849,012
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $800,639,901) 1,048,763,518
==========================================================================
|
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
OPTIONS
PURCHASED-0.04%
PUTS-0.04%
Murphy Oil Corp.
(Integrated Oil &
Gas) 1,295 $80 Nov-04 301,087
-------------------------------------------------------------------------
XTO Energy Inc. (Oil
& Gas Exploration &
Production) 4,391 30 Nov-04 76,843
=========================================================================
Total Options Purchased (Cost $884,638) 377,930
=========================================================================
|
SHARES
MONEY MARKET FUNDS-1.91%
Liquid Assets Portfolio-Institutional
Class(f) 10,261,930 10,261,930
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 10,261,930 10,261,930
==========================================================================
Total Money Market Funds (Cost $20,523,860) 20,523,860
==========================================================================
TOTAL INVESTMENTS-99.68% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $822,048,399) 1,069,665,308
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-12.89%
Liquid Assets Portfolio-Institutional
Class(f)(g) 69,189,281 69,189,281
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(f)(g) 69,189,281 69,189,281
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $138,378,562) 138,378,562
==========================================================================
TOTAL INVESTMENTS-112.57% (Cost $960,426,961) 1,208,043,870
==========================================================================
OTHER ASSETS LESS LIABILITIES-(12.57%) (134,877,684)
==========================================================================
NET ASSETS-100.00% $1,073,166,186
__________________________________________________________________________
==========================================================================
|
FS-44
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
security lending transactions at October 31, 2004.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The market value of this security at
October 31, 2004 represented 0.75% of the Fund's Total Investments. See Note
1A.
(d) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at October 31, 2004 was $21,924,025, which
represented 2.04% of the Fund's net assets.
(e) 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 October 31, 2004 was
$30,924,025, which represented 2.88% of the Fund's net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-45
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$801,524,539)* $1,049,141,448
------------------------------------------------------------
Investments in affiliated money market funds
(cost $158,902,422) 158,902,422
============================================================
Total investments (cost $960,426,961) 1,208,043,870
============================================================
Receivables for:
Investments sold 23,158,959
------------------------------------------------------------
Fund shares sold 1,040,163
------------------------------------------------------------
Dividends 140,573
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 72,551
------------------------------------------------------------
Other assets 46,726
============================================================
Total assets 1,232,502,842
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 18,056,931
------------------------------------------------------------
Fund shares reacquired 1,569,825
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 117,451
------------------------------------------------------------
Collateral upon return of securities
loaned 138,378,562
------------------------------------------------------------
Accrued distribution fees 630,739
------------------------------------------------------------
Accrued trustees' fees 2,277
------------------------------------------------------------
Accrued transfer agent fees 387,654
------------------------------------------------------------
Accrued operating expenses 193,217
============================================================
Total liabilities 159,336,656
============================================================
Net assets applicable to shares outstanding $1,073,166,186
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 738,072,716
------------------------------------------------------------
Undistributed net investment income (loss) (98,307)
------------------------------------------------------------
Undistributed net realized gain from
investment securities 87,611,149
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 247,580,628
============================================================
$1,073,166,186
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 617,193,910
____________________________________________________________
============================================================
Class B $ 376,354,647
____________________________________________________________
============================================================
Class C $ 73,929,300
____________________________________________________________
============================================================
Class R $ 5,621,711
____________________________________________________________
============================================================
Institutional Class $ 66,618
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 34,565,765
____________________________________________________________
============================================================
Class B 22,421,759
____________________________________________________________
============================================================
Class C 4,407,579
____________________________________________________________
============================================================
Class R 316,184
____________________________________________________________
============================================================
Institutional Class 3,674
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 17.86
------------------------------------------------------------
Offering price per share:
(Net asset value of $17.86 divided by
94.50%) $ 18.90
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 16.79
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 16.77
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 17.78
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 18.13
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $135,274,803 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-46
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,998) $ 9,123,366
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $316,380)* 782,270
==========================================================================
Total investment income 9,905,636
==========================================================================
EXPENSES:
Advisory fees 7,018,923
--------------------------------------------------------------------------
Administrative services fees 282,196
--------------------------------------------------------------------------
Custodian fees 120,476
--------------------------------------------------------------------------
Distribution fees:
Class A 2,031,361
--------------------------------------------------------------------------
Class B 3,967,972
--------------------------------------------------------------------------
Class C 729,633
--------------------------------------------------------------------------
Class R 14,320
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,027,243
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 54
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 32,363
--------------------------------------------------------------------------
Other 650,014
==========================================================================
Total expenses 17,874,555
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (125,412)
==========================================================================
Net expenses 17,749,143
==========================================================================
Net investment income (loss) (7,843,507)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from investment securities 92,544,722
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 9,292,934
--------------------------------------------------------------------------
Foreign currencies (36,281)
==========================================================================
9,256,653
==========================================================================
Net gain from investment securities and foreign currencies 101,801,375
==========================================================================
Net increase in net assets resulting from operations $ 93,957,868
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-47
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (7,843,507) $ (7,651,741)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 92,544,722 64,445,148
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investments
securities and foreign currencies 9,256,653 180,427,376
==============================================================================================
Net increase in net assets resulting from operations 93,957,868 237,220,783
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (13,528,020) --
----------------------------------------------------------------------------------------------
Class B (10,257,718) --
----------------------------------------------------------------------------------------------
Class C (1,789,455) --
----------------------------------------------------------------------------------------------
Class R (30,198) --
----------------------------------------------------------------------------------------------
Institutional Class (242) --
==============================================================================================
Decrease in net assets resulting from distributions (25,605,633) --
==============================================================================================
Share transactions-net:
Class A 31,588,830 (40,295,276)
----------------------------------------------------------------------------------------------
Class B (40,086,908) (45,852,897)
----------------------------------------------------------------------------------------------
Class C 1,351,823 (3,420,452)
----------------------------------------------------------------------------------------------
Class R 4,312,014 902,244
----------------------------------------------------------------------------------------------
Institutional Class 55,370 --
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (2,778,871) (88,666,381)
==============================================================================================
Net increase in net assets 65,573,364 148,554,402
==============================================================================================
NET ASSETS:
Beginning of year 1,007,592,822 859,038,420
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(98,307) and $(85,597), respectively) $1,073,166,186 $1,007,592,822
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-48
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-49
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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-50
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $8,699.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $96,092 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $282,196 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $3,027,243 for Class A, Class B, Class C and Class R shares and $14 for Institutional Class shares after AISI reimbursed fees for the Institutional Class shares of $40. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $2,031,361, $3,967,972, $729,633 and $14,320, 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, 2004, AIM Distributors advised the Fund that it retained $171,202 in front-end sales commissions from the sale of Class A shares and $519, $25,762, $5,602 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-51
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $16,395,571 $221,684,483 $(227,818,124) $ -- $10,261,930 $235,656 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 16,395,571 221,684,483 (227,818,124) -- 10,261,930 230,234 --
===========================================================================================================================
Subtotal $32,791,142 $443,368,966 $(455,636,248) $ -- $20,523,860 $465,890 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $77,943,886 $210,017,597 $(218,772,202) $ -- $69,189,281 $158,802 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 77,943,886 210,017,597 (218,772,202) -- 69,189,281 157,578 --
===========================================================================================================================
Subtotal $155,887,772 $420,035,194 $(437,544,404) $ -- $138,378,562 $316,380 $ --
===========================================================================================================================
Total $188,678,914 $863,404,160 $(893,180,652) $ -- $158,902,422 $782,270 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $27,195,023 and $10,946,219, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $16,199 and credits in custodian fees of $4,382 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $20,581.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $7,855 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.
FS-52
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $135,274,803 were on loan to brokers. The loans were secured by cash collateral of $138,378,562 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $316,380 for securities lending transactions.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
--------------------------------------------------------------------------------------
Distributions paid from long-term capital gain $25,605,633 $ --
______________________________________________________________________________________
======================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed long-term gain $ 88,000,687
----------------------------------------------------------------------------
Unrealized appreciation -- investments 247,191,090
----------------------------------------------------------------------------
Temporary book/tax differences (98,307)
----------------------------------------------------------------------------
Shares of beneficial interest 738,072,716
============================================================================
Total net assets $1,073,166,186
____________________________________________________________________________
============================================================================
|
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 deferral of losses on certain straddles. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(36,281).
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 trustee deferral of compensation and retirement plan expenses.
FS-53
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 year ended October 31, 2004 was $748,265,373 and $776,755,843, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $260,704,530 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (13,477,159) ============================================================================== Net unrealized appreciation of investment securities $247,227,371 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $960,816,499. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $7,830,797, undistributed net realized gain (loss) was decreased by $2,894,200 and shares of beneficial interest decreased by $4,936,597. This reclassification had no effect on the net assets of the Fund.
NOTE 12--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 certain 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(a)
-------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2004 2003
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,956,116 $ 121,226,684 7,864,878 $ 109,808,336
-------------------------------------------------------------------------------------------------------------------------
Class B 2,589,525 42,660,392 2,057,426 27,535,873
-------------------------------------------------------------------------------------------------------------------------
Class C 1,128,395 18,630,607 834,828 11,240,012
-------------------------------------------------------------------------------------------------------------------------
Class R 275,328 4,806,109 74,458 986,707
-------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,080 55,129 -- --
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 727,483 12,170,787 -- --
-------------------------------------------------------------------------------------------------------------------------
Class B 564,080 8,923,747 -- --
-------------------------------------------------------------------------------------------------------------------------
Class C 96,104 1,519,408 -- --
-------------------------------------------------------------------------------------------------------------------------
Class R 1,810 30,198 -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class 14 241 -- --
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 834,769 14,693,499 340,670 4,868,315
-------------------------------------------------------------------------------------------------------------------------
Class B (886,014) (14,693,499) (358,616) (4,868,315)
=========================================================================================================================
Reacquired:
Class A (6,701,600) (116,502,140) (11,106,766) (154,971,927)
-------------------------------------------------------------------------------------------------------------------------
Class B (4,698,851) (76,977,548) (5,230,794) (68,520,455)
-------------------------------------------------------------------------------------------------------------------------
Class C (1,149,534) (18,798,192) (1,117,790) (14,660,464)
-------------------------------------------------------------------------------------------------------------------------
Class R (30,395) (524,293) (5,766) (84,463)
=========================================================================================================================
(289,690) $ (2,778,871) (6,647,472) $ (88,666,381)
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) There is one entity that is record owner of more than 5% of the outstanding shares of the Fund and owns 7% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this shareholder are also owned beneficially.
FS-54
NOTE 13--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,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.08)(a) (0.04)(a) (0.04) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.70 3.94 (1.85) (4.27) 6.68
=================================================================================================================================
Total from investment operations 1.62 3.86 (1.89) (4.31) 6.55
=================================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.87% 30.16% (12.87)% (21.76)% 42.98%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $617,194 $545,691 $456,268 $576,660 $759,838
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.40%(c)(d) 1.53% 1.38% 1.33% 1.28%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.56)% (0.29)% (0.21)% (0.60)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $580,388,749.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.41%.
CLASS B
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a) (0.16)(a) (0.14)(a) (0.15) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.60 3.74 (1.75) (4.12) 6.52
=================================================================================================================================
Total from investment operations 1.42 3.58 (1.89) (4.27) 6.26
=================================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.13% 29.32% (13.40)% (22.29)% 42.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $376,355 $392,382 $346,456 $454,018 $617,576
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.05%(c)(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $396,797,209.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%
FS-55
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a) (0.16)(a) (0.14)(a) (0.14) (0.25)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.59 3.74 (1.76) (4.12) 6.51
============================================================================================================================
Total from investment operations 1.41 3.58 (1.90) (4.26) 6.26
============================================================================================================================
Less distributions from net realized gains (0.42) -- -- (2.79) --
============================================================================================================================
Net asset value, end of period $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 9.07% 29.34% (13.48)% (22.24)% 42.04%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $73,929 $68,356 $56,298 $66,127 $82,982
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.05%(c)(d) 2.18% 2.03% 1.99% 1.99%
============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.21)% (0.94)% (0.87)% (1.30)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 74% 101% 120% 130% 101%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $72,963,303.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
CLASS R
-----------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.10)(a) (0.03)(a)
-------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.68 3.93 (3.80)
=======================================================================================================
Total from investment operations 1.58 3.83 (3.83)
=======================================================================================================
Less distributions from net realized gains (0.42) -- --
=======================================================================================================
Net asset value, end of period $17.78 $16.62 $ 12.79
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 9.65% 29.95% (23.05)%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,622 $1,154 $ 10
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets 1.55%(c)(d) 1.68% 1.54%(e)
=======================================================================================================
Ratio of net investment income (loss) to average net assets (0.61)%(c) (0.71)% (0.44)%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 74% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,864,084.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.56%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-56
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
----------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------- OCTOBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.83 $12.84 $ 17.25
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.01(a) 0.01(a) 0.02(a)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.71 3.98 (4.43)
======================================================================================================
Total from investment operations 1.72 3.99 (4.41)
======================================================================================================
Less distributions from net realized gains (0.42) -- --
======================================================================================================
Net asset value, end of period $18.13 $16.83 $ 12.84
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 10.38% 31.08% (25.57)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 67 $ 10 $ 7
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.86%(c) 0.87% 0.84%(d)
------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(c) 1.25% 0.99%(d)
======================================================================================================
Ratio of net investment income to average net assets 0.08%(c) 0.10% 0.25%(d)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(e) 74% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $14,384.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered
FS-57
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or
FS-58
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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
FS-59
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-61
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-94.34%
AEROSPACE & DEFENSE-1.26%
Northrop Grumman Corp. 700,000 $ 36,225,000
==========================================================================
BREWERS-1.48%
Heineken N.V. (Netherlands)(a)(b) 1,347,106 42,595,608
==========================================================================
BUILDING PRODUCTS-1.40%
Masco Corp. 1,174,500 40,238,370
==========================================================================
COMMUNICATIONS EQUIPMENT-1.03%
Nokia Oyj-ADR (Finland) 1,924,100 29,669,622
==========================================================================
COMPUTER HARDWARE-1.59%
International Business Machines Corp. 510,000 45,772,500
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.36%
First Data Corp. 945,000 39,009,600
==========================================================================
DEPARTMENT STORES-1.91%
Kohl's Corp.(c) 1,081,700 54,907,092
==========================================================================
DIVERSIFIED BANKS-2.53%
Bank of America Corp. 1,011,000 45,282,690
--------------------------------------------------------------------------
Wachovia Corp. 554,850 27,304,168
==========================================================================
72,586,858
==========================================================================
DIVERSIFIED CHEMICALS-1.19%
Dow Chemical Co. (The) 758,000 34,064,520
==========================================================================
ELECTRIC UTILITIES-1.23%
FPL Group, Inc. 511,200 35,221,680
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.17%
Emerson Electric Co. 525,000 33,626,250
==========================================================================
ENVIRONMENTAL SERVICES-1.99%
Waste Management, Inc. 2,006,500 57,145,120
==========================================================================
FOOD RETAIL-2.91%
Kroger Co. (The)(c) 3,460,000 52,280,600
--------------------------------------------------------------------------
Safeway Inc.(c) 1,720,000 31,372,800
==========================================================================
83,653,400
==========================================================================
HOUSEHOLD PRODUCTS-1.07%
Kimberly-Clark Corp. 513,000 30,610,710
==========================================================================
HOUSEWARES & SPECIALTIES-1.05%
Newell Rubbermaid Inc. 1,400,000 30,184,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-0.94%
Wal-Mart Stores, Inc. 500,000 26,960,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-4.26%
General Electric Co. 1,434,500 $ 48,945,140
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 2,360,000 73,514,000
==========================================================================
122,459,140
==========================================================================
INDUSTRIAL MACHINERY-2.48%
Dover Corp. 1,040,800 40,872,216
--------------------------------------------------------------------------
Illinois Tool Works Inc. 329,500 30,406,260
==========================================================================
71,278,476
==========================================================================
INTEGRATED OIL & GAS-7.03%
Amerada Hess Corp. 290,500 23,446,255
--------------------------------------------------------------------------
BP PLC-ADR (United Kingdom) 1,015,000 59,123,750
--------------------------------------------------------------------------
ChevronTexaco Corp. 467,000 24,779,020
--------------------------------------------------------------------------
ConocoPhillips 305,300 25,739,843
--------------------------------------------------------------------------
Exxon Mobil Corp. 892,700 43,938,694
--------------------------------------------------------------------------
Murphy Oil Corp. 310,900 24,878,218
==========================================================================
201,905,780
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.34%
ALLTEL Corp. 700,000 38,451,000
==========================================================================
INTERNET RETAIL-0.80%
IAC/InterActiveCorp.(a)(c) 1,070,000 23,133,400
==========================================================================
INVESTMENT BANKING & BROKERAGE-1.04%
Morgan Stanley 582,250 29,747,152
==========================================================================
IT CONSULTING & OTHER SERVICES-1.01%
Accenture Ltd.-Class A (Bermuda)(c) 1,200,000 29,052,000
==========================================================================
LIFE & HEALTH INSURANCE-1.16%
Prudential Financial, Inc. 716,200 33,281,814
==========================================================================
OFFICE ELECTRONICS-1.62%
Xerox Corp.(c) 3,156,300 46,618,551
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.14%
Baker Hughes Inc. 763,000 32,679,290
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.29%
Citigroup Inc. 670,000 29,727,900
--------------------------------------------------------------------------
Principal Financial Group, Inc. 955,000 36,060,800
==========================================================================
65,788,700
==========================================================================
PACKAGED FOODS & MEATS-8.23%
Campbell Soup Co. 2,107,000 56,551,880
--------------------------------------------------------------------------
General Mills, Inc. 1,880,000 83,190,000
--------------------------------------------------------------------------
Kraft Foods Inc.-Class A 1,600,000 53,296,000
--------------------------------------------------------------------------
|
FS-62
MARKET
SHARES VALUE
--------------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
Sara Lee Corp. 1,865,000 $ 43,417,200
==========================================================================
236,455,080
==========================================================================
PAPER PRODUCTS-1.44%
Georgia-Pacific Corp. 1,200,000 41,508,000
==========================================================================
PHARMACEUTICALS-12.68%
Bristol-Myers Squibb Co. 1,635,000 38,308,050
--------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom) 1,430,000 60,632,000
--------------------------------------------------------------------------
Johnson & Johnson 495,000 28,898,100
--------------------------------------------------------------------------
Merck & Co. Inc. 2,420,000 75,770,200
--------------------------------------------------------------------------
Pfizer Inc. 2,395,000 69,335,250
--------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,168,000 30,368,000
--------------------------------------------------------------------------
Wyeth 1,540,000 61,061,000
==========================================================================
364,372,600
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.97%
ACE Ltd. (Cayman Islands) 750,000 28,545,000
--------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 828,122 28,123,023
==========================================================================
56,668,023
==========================================================================
PUBLISHING-3.71%
Gannett Co., Inc. 450,000 37,327,500
--------------------------------------------------------------------------
New York Times Co. (The)-Class A(a) 952,900 38,163,645
--------------------------------------------------------------------------
Tribune Co. 720,000 31,104,000
==========================================================================
106,595,145
==========================================================================
RAILROADS-2.76%
Norfolk Southern Corp. 1,334,000 45,289,300
--------------------------------------------------------------------------
Union Pacific Corp. 538,000 33,877,860
==========================================================================
79,167,160
==========================================================================
REGIONAL BANKS-1.87%
BB&T Corp. 709,300 29,159,323
--------------------------------------------------------------------------
SunTrust Banks, Inc. 351,150 24,713,937
==========================================================================
53,873,260
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SEMICONDUCTORS-5.07%
Analog Devices, Inc. 855,000 $ 34,422,300
--------------------------------------------------------------------------
Intel Corp. 1,889,500 42,060,270
--------------------------------------------------------------------------
National Semiconductor Corp.(c) 2,139,000 35,721,300
--------------------------------------------------------------------------
Xilinx, Inc. 1,097,000 33,568,200
==========================================================================
145,772,070
==========================================================================
SOFT DRINKS-0.99%
Coca-Cola Co. (The) 700,000 28,462,000
==========================================================================
SYSTEMS SOFTWARE-5.23%
Computer Associates International, Inc. 2,099,000 58,163,290
--------------------------------------------------------------------------
Microsoft Corp. 3,287,000 92,003,130
==========================================================================
150,166,420
==========================================================================
THRIFTS & MORTGAGE FINANCE-2.11%
Washington Mutual, Inc. 1,564,560 60,564,118
==========================================================================
Total Common Stocks & Other Equity
Interests
(Cost $2,396,059,963) 2,710,469,509
==========================================================================
MONEY MARKET FUNDS-5.78%
Liquid Assets Portfolio-Institutional
Class(d) 83,058,993 83,058,993
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 83,058,993 83,058,993
==========================================================================
Total Money Market Funds (Cost
$166,117,986) 166,117,986
==========================================================================
TOTAL INVESTMENTS-100.12% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,562,177,949) 2,876,587,495
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.95%
STIC Prime Portfolio-Institutional
Class(d)(e) 27,336,279 27,336,279
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $27,336,279) 27,336,279
==========================================================================
TOTAL INVESTMENTS-101.07% (Cost $2,589,514,228) 2,903,923,774
==========================================================================
OTHER ASSETS LESS LIABILITIES-(1.07%) (30,677,348)
==========================================================================
NET ASSETS-100.00% $2,873,246,426
__________________________________________________________________________
==========================================================================
|
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
security lending transactions as of October 31, 2004.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
market value of this security at October 31, 2004 represented 1.47% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-63
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$2,396,059,963)* $2,710,469,509
------------------------------------------------------------
Investments in affiliated money market funds
(cost $193,454,265) 193,454,265
============================================================
Total investments (cost $2,589,514,228) 2,903,923,774
------------------------------------------------------------
Receivables for:
Investments sold 91,749
------------------------------------------------------------
Fund shares sold 677,874
------------------------------------------------------------
Dividends 3,441,529
------------------------------------------------------------
Investments matured (Note 10) 2,616,170
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 225,690
------------------------------------------------------------
Other assets 61,803
============================================================
Total assets 2,911,038,589
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 7,281,636
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 444,079
------------------------------------------------------------
Collateral upon return of securities
loaned 27,336,279
------------------------------------------------------------
Accrued distribution fees 1,338,545
------------------------------------------------------------
Accrued trustees' fees 4,421
------------------------------------------------------------
Accrued transfer agent fees 1,070,958
------------------------------------------------------------
Accrued operating expenses 316,245
============================================================
Total liabilities 37,792,163
============================================================
Net assets applicable to shares outstanding $2,873,246,426
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,220,676,279
------------------------------------------------------------
Undistributed net investment income 5,696,221
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (667,535,620)
------------------------------------------------------------
Unrealized appreciation of investment
securities 314,409,546
============================================================
$2,873,246,426
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,843,623,034
____________________________________________________________
============================================================
Class B $ 885,499,723
____________________________________________________________
============================================================
Class C $ 138,305,296
____________________________________________________________
============================================================
Class R $ 2,533,768
____________________________________________________________
============================================================
Institutional Class $ 3,284,605
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 151,588,810
____________________________________________________________
============================================================
Class B 76,298,853
____________________________________________________________
============================================================
Class C 11,883,687
____________________________________________________________
============================================================
Class R 209,486
____________________________________________________________
============================================================
Institutional Class 262,233
____________________________________________________________
============================================================
Class A :
Net asset value per share $ 12.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.16 divided by
94.50%) $ 12.87
____________________________________________________________
============================================================
Class B :
Net asset value and offering price per
share $ 11.61
____________________________________________________________
============================================================
Class C :
Net asset value and offering price per
share $ 11.64
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.10
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.53
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $26,097,344 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-64
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $182,690) $ 55,078,131
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $25,015)* 2,075,348
--------------------------------------------------------------------------
Interest 956
==========================================================================
Total investment income 57,154,435
==========================================================================
EXPENSES:
Advisory fees 20,136,790
--------------------------------------------------------------------------
Administrative services fees 585,397
--------------------------------------------------------------------------
Custodian fees 243,906
--------------------------------------------------------------------------
Distribution fees:
Class A 5,883,153
--------------------------------------------------------------------------
Class B 10,549,491
--------------------------------------------------------------------------
Class C 1,572,686
--------------------------------------------------------------------------
Class R 11,195
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 8,357,015
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,847
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 73,380
--------------------------------------------------------------------------
Other 1,564,364
==========================================================================
Total expenses 48,979,224
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (360,129)
==========================================================================
Net expenses 48,619,095
==========================================================================
Net investment income 8,535,340
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 284,896,878
--------------------------------------------------------------------------
Foreign currencies 47,518
==========================================================================
284,944,396
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (662,843)
==========================================================================
Net gain from investment securities and foreign currencies 284,281,553
==========================================================================
Net increase in net assets resulting from operations $292,816,893
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-65
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,535,340 $ 3,496,816
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 284,944,396 (177,091,373)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (662,843) 649,909,999
==============================================================================================
Net increase in net assets resulting from operations 292,816,893 476,315,442
==============================================================================================
Distributions to shareholders from net investment income:
Class A (4,234,798) --
----------------------------------------------------------------------------------------------
Class R (2,682) --
----------------------------------------------------------------------------------------------
Institutional Class (14,410) --
==============================================================================================
Decrease in net assets resulting from distributions (4,251,890) --
----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (343,025,821) (380,938,708)
----------------------------------------------------------------------------------------------
Class B (360,933,716) (215,082,650)
----------------------------------------------------------------------------------------------
Class C (39,355,393) (29,277,194)
----------------------------------------------------------------------------------------------
Class R 642,358 1,521,693
----------------------------------------------------------------------------------------------
Institutional Class 1,074,851 339,875
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (741,597,721) (623,436,984)
==============================================================================================
Net increase (decrease) in net assets (453,032,718) (147,121,542)
==============================================================================================
NET ASSETS:
Beginning of year 3,326,279,144 3,473,400,686
==============================================================================================
End of year (including undistributed net investment income
of $5,696,221 and $1,365,253, respectively) $2,873,246,426 $3,326,279,144
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-66
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-67
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.
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $44,820. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $267,010 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
FS-68
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, 2004, AIM was paid $585,397 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $8,357,015 for Class A, Class B, Class C and Class R shares and $1,847 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $5,883,153, $10,549,491, $1,572,686 and $11,195, 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, 2004, AIM Distributors advised the Fund that it retained $234,197 in front-end sales commissions from the sale of Class A shares and $3,448, $59,959, $6,679 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 98,974,452 $487,207,080 $ (503,122,539) $ -- $ 83,058,993 $1,032,599 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 98,974,452 487,207,080 (503,122,539) -- 83,058,993 1,017,734 --
===================================================================================================================================
Subtotal $197,948,904 $974,414,160 $(1,006,245,078) $ -- $166,117,986 $2,050,333 $ --
===================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 22,552,000 $ 341,863,851 $ (364,415,851) $ -- $ -- $ 21,732 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 46,453,174 (19,116,895) -- 27,336,279 3,283 --
===================================================================================================================================
Subtotal $ 22,552,000 $ 388,317,025 $ (383,532,746) $ -- $ 27,336,279 $ 25,015 $ --
===================================================================================================================================
Total $220,500,904 $1,362,731,185 $(1,389,777,824) $ -- $193,454,265 $2,075,348 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-69
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $43,476,128 and $115,762,500, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $48,299, which resulted in a reduction of the Fund's total expenses of $48,299.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $15,947 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $26,097,344 were on loan to brokers. The loans were secured by cash collateral of $27,336,279 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $25,015 for securities lending transactions.
FS-70
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
----------------------------------------------------------------------------------
Distributions paid from ordinary income $4,251,890 $ --
__________________________________________________________________________________
==================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed ordinary income $ 8,592,013
----------------------------------------------------------------------------
Unrealized appreciation -- investments 264,884,884
----------------------------------------------------------------------------
Temporary book/tax difference (394,478)
----------------------------------------------------------------------------
Capital loss carryforward (620,512,272)
----------------------------------------------------------------------------
Shares of beneficial interest 3,220,676,279
============================================================================
Total net assets $2,873,246,426
____________________________________________________________________________
============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $282,887,750 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2009 $488,443,372
-----------------------------------------------------------------------------
October 31, 2011 132,068,900
=============================================================================
Total capital loss carryforward $620,512,272
_____________________________________________________________________________
=============================================================================
* Capital loss carryforward as of the date listed above 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 year ended October 31, 2004 was $1,066,339,251 and $1,695,085,970, 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 $ 376,858,000 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (111,973,116) =============================================================================== Net unrealized appreciation of investment securities $ 264,884,884 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $2,639,038,890. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency transactions, on October 31, 2004, undistributed net investment income was increased by $47,518 and undistributed net realized gain (loss) was decreased by $47,518. This reclassification had no effect on the net assets of the Fund.
FS-71
NOTE 12--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 certain 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(A)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,951,437 $ 94,832,462 16,680,459 $ 167,057,570
--------------------------------------------------------------------------------------------------------------------------
Class B 3,877,677 44,222,154 8,128,480 78,572,729
--------------------------------------------------------------------------------------------------------------------------
Class C 1,217,568 13,934,813 2,035,003 19,657,080
--------------------------------------------------------------------------------------------------------------------------
Class R 95,004 1,120,376 182,932 1,841,485
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 515,765 6,344,104 53,551 570,090
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 345,517 3,966,625 -- --
--------------------------------------------------------------------------------------------------------------------------
Class R 234 2,681 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 714 8,400 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 12,968,092 155,893,419 3,640,846 37,843,518
--------------------------------------------------------------------------------------------------------------------------
Class B (13,548,346) (155,893,419) (3,789,510) (37,843,518)
==========================================================================================================================
Reacquired:
Class A (50,261,476) (597,718,327) (58,788,618) (585,839,796)
--------------------------------------------------------------------------------------------------------------------------
Class B (21,841,949) (249,262,451) (26,845,101) (255,811,861)
--------------------------------------------------------------------------------------------------------------------------
Class C (4,652,957) (53,290,206) (5,102,475) (48,934,274)
--------------------------------------------------------------------------------------------------------------------------
Class R (40,399) (480,699) (29,999) (319,792)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (434,182) (5,277,653) (22,226) (230,215)
==========================================================================================================================
(63,807,301) $(741,597,721) (63,856,658) $(623,436,984)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 13.20% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell the Fund Shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-72
NOTE 13--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,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.04(a) 0.01(b) (0.03) (0.04)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.00 1.51 (0.90) (6.70) 2.30
=================================================================================================================================
Total from investment operations 1.06 1.55 (0.89) (6.73) 2.26
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.02) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.02) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.58% 16.20% (8.51)% (38.75)% 13.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,843,623 $2,008,702 $2,096,866 $3,159,304 $5,801,869
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(d) 1.30% 1.22% 1.16% 1.06%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.27%(d) 1.30% 1.22% 1.17% 1.08%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.54%(d) 0.39% 0.09%(b) (0.24)% (0.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $1,961,051,091.
FS-73
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.03)(a) (0.08)(b) (0.13) (0.17)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 1.46 (0.86) (6.53) 2.27
=================================================================================================================================
Total from investment operations 0.94 1.43 (0.94) (6.66) 2.10
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.81% 15.48% (9.23)% (39.14)% 12.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $885,500 $1,149,943 $1,204,617 $1,719,470 $3,088,611
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.96%(d) 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.97%(d) 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.16%)(d) (0.31)% (0.61%)(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $1,054,949,073.
FS-74
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.03)(a) (0.08)(b) (0.13) (0.17)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 1.46 (0.86) (6.55) 2.28
=========================================================================================================================
Total from investment operations 0.94 1.43 (0.94) (6.68) 2.11
=========================================================================================================================
Less distributions from net realized gains -- -- -- (0.88) (1.35)
=========================================================================================================================
Net asset value, end of period $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 8.79% 15.43% (9.21)% (39.14)% 12.78%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,305 $163,859 $170,444 $248,533 $412,872
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.96%(d) 2.00% 1.92% 1.86% 1.80%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.97%(d) 2.00% 1.92% 1.87% 1.82%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.16)%(d) (0.31)% (0.61)%(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $157,268,602.
FS-75
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.08 $ 9.56 $ 10.94
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.02(a) 0.00
====================================================================================================
Net gains (losses) on securities (both realized and
unrealized) 1.00 1.50 (1.38)
====================================================================================================
Total from investment operations 1.04 1.52 (1.38)
====================================================================================================
Less dividends from net investment income (0.02) -- --
====================================================================================================
Net asset value, end of period $12.10 $11.08 $ 9.56
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 9.35% 15.90% (12.61)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534 $1,714 $ 16
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.46%(c)(d) 1.50% 1.42%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets 0.34%(c) 0.19% (0.11)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 36% 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 values may differ from the net asset value and the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,239,072.
(d) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements ratio of expenses to average net assets
was 1.47%
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-76
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
--------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.45 $ 9.80 $10.67 $ 18.33 $17.33
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13(a) 0.09(a) 0.06(b) 0.04 0.52
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.03 1.56 (0.93) (6.82) 1.83
================================================================================================================
Total from investment operations 1.16 1.65 (0.87) (6.78) 2.35
================================================================================================================
Less distributions:
Dividends from net investment income (0.08) -- -- -- --
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.88) (1.35)
================================================================================================================
Total distributions (0.08) -- -- (0.88) (1.35)
================================================================================================================
Net asset value, end of period $12.53 $11.45 $ 9.80 $ 10.67 $18.33
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) 10.21% 16.84% (8.15)% (38.46)% 14.02%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,285 $2,061 $1,457 $ 1,648 $3,234
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.74%(d) 0.79% 0.79% 0.68% 0.66%
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.75%(d) 0.79% 0.83% 0.69% 0.68%
================================================================================================================
Ratio of net investment income to average net assets 1.06%(d) 0.90% 0.52%(b) 0.25% 0.20%
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 36% 28% 103% 78% 80%
________________________________________________________________________________________________________________
================================================================================================================
|
(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 the returns for
shareholder transactions.
(d) Ratios are based on average daily net assets of $4,378,524.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and
FS-77
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
FS-78
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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-79
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-81
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.49%
ADVERTISING-1.02%
Lamar Advertising Co.-Class A(a)(b) 1,609,800 $ 66,677,916
===========================================================================
AEROSPACE & DEFENSE-0.64%
Honeywell International Inc. 1,250,000 42,100,000
===========================================================================
AIR FREIGHT & LOGISTICS-1.13%
Expeditors International of Washington,
Inc.(b) 500,000 28,550,000
---------------------------------------------------------------------------
FedEx Corp.(b) 500,000 45,560,000
===========================================================================
74,110,000
===========================================================================
AIRLINES-0.53%
Southwest Airlines Co.(b) 2,193,800 34,596,226
===========================================================================
APPAREL RETAIL-0.37%
TJX Cos., Inc. (The) 1,000,000 23,980,000
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.71%
Coach, Inc.(a) 1,000,000 46,630,000
===========================================================================
APPLICATION SOFTWARE-1.08%
Autodesk, Inc.(b) 1,350,000 71,212,500
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.22%
Investors Financial Services Corp.(b) 380,000 14,626,200
===========================================================================
BIOTECHNOLOGY-1.98%
Amgen Inc.(a) 744,700 42,298,960
---------------------------------------------------------------------------
Biogen Idec Inc.(a)(b) 600,000 34,896,000
---------------------------------------------------------------------------
Gilead Sciences, Inc.(a)(b) 1,527,600 52,900,788
===========================================================================
130,095,748
===========================================================================
BROADCASTING & CABLE TV-1.99%
Clear Channel Communications, Inc.(b) 2,112,800 70,567,520
---------------------------------------------------------------------------
Univision Communications Inc.-Class A(a)(b) 1,944,400 60,198,624
===========================================================================
130,766,144
===========================================================================
COMMUNICATIONS EQUIPMENT-6.27%
Avaya Inc.(a)(b) 1,500,000 21,600,000
---------------------------------------------------------------------------
Cisco Systems, Inc.(a) 7,500,000 144,075,000
---------------------------------------------------------------------------
Comverse Technology, Inc.(a)(b) 2,500,000 51,600,000
---------------------------------------------------------------------------
Corning Inc.(a)(b) 2,200,000 25,190,000
---------------------------------------------------------------------------
Juniper Networks, Inc.(a)(b) 2,000,000 53,220,000
---------------------------------------------------------------------------
Motorola, Inc.(b) 1,473,900 25,439,514
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Nokia Oyi-ADR (Finland)(b) 2,500,000 $ 38,550,000
---------------------------------------------------------------------------
QUALCOMM Inc. 1,250,000 52,262,500
===========================================================================
411,937,014
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.68%
Best Buy Co., Inc.(b) 750,000 44,415,000
===========================================================================
COMPUTER HARDWARE-2.80%
Apple Computer, Inc.(a)(b) 1,000,000 52,530,000
---------------------------------------------------------------------------
Dell Inc.(a)(b) 3,750,000 131,475,000
===========================================================================
184,005,000
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-2.19%
Caterpillar Inc.(b) 750,000 60,405,000
---------------------------------------------------------------------------
Deere & Co. 1,400,000 83,692,000
===========================================================================
144,097,000
===========================================================================
CONSUMER FINANCE-3.63%
American Express Co.(b) 1,250,000 66,337,500
---------------------------------------------------------------------------
Capital One Financial Corp.(b) 500,000 36,880,000
---------------------------------------------------------------------------
MBNA Corp.(b) 3,500,000 89,705,000
---------------------------------------------------------------------------
SLM Corp.(b) 1,000,000 45,260,000
===========================================================================
238,182,500
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.84%
Affiliated Computer Services, Inc.-Class
A(a)(b) 500,000 27,275,000
---------------------------------------------------------------------------
Automatic Data Processing, Inc. 1,000,000 43,390,000
---------------------------------------------------------------------------
Fiserv, Inc.(a)(b) 2,250,000 79,965,000
---------------------------------------------------------------------------
Paychex, Inc.(b) 1,100,000 36,073,400
===========================================================================
186,703,400
===========================================================================
DEPARTMENT STORES-0.26%
J.C. Penney Co., Inc.(b) 500,000 17,295,000
===========================================================================
DIVERSIFIED BANKS-0.68%
Bank of America Corp.(b) 1,000,000 44,790,000
===========================================================================
DIVERSIFIED CHEMICALS-1.37%
Dow Chemical Co. (The)(b) 650,000 29,211,000
---------------------------------------------------------------------------
E. I. du Pont de Nemours & Co. 750,000 32,152,500
---------------------------------------------------------------------------
Eastman Chemical Co.(b) 600,000 28,482,000
===========================================================================
89,845,500
===========================================================================
|
FS-82
MARKET
SHARES VALUE
---------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-1.00%
Apollo Group, Inc.-Class A(a)(b) 500,000 $ 33,000,000
---------------------------------------------------------------------------
Cintas Corp. 750,000 32,355,000
===========================================================================
65,355,000
===========================================================================
DIVERSIFIED METALS & MINING-0.53%
Phelps Dodge Corp.(b) 400,000 35,016,000
===========================================================================
DRUG RETAIL-0.55%
Walgreen Co.(b) 1,000,000 35,890,000
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.63%
Rockwell Automation, Inc.(b) 1,000,000 41,690,000
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.59%
Agilent Technologies, Inc.(a)(b) 1,550,000 38,843,000
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.36%
Molex Inc. 802,400 23,726,968
===========================================================================
EMPLOYMENT SERVICES-1.62%
Robert Half International Inc. 4,000,000 106,120,000
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.46%
Monsanto Co. 700,000 29,925,000
===========================================================================
FOOD RETAIL-0.43%
Whole Foods Market, Inc.(b) 350,000 28,500,500
===========================================================================
FOOTWEAR-0.43%
NIKE, Inc.-Class B 350,000 28,458,500
===========================================================================
GOLD-0.67%
Newmont Mining Corp. 471,600 22,410,432
---------------------------------------------------------------------------
Placer Dome Inc. (Canada) 1,003,900 21,332,875
===========================================================================
43,743,307
===========================================================================
HEALTH CARE EQUIPMENT-6.78%
Bard (C.R.), Inc. 652,100 37,039,280
---------------------------------------------------------------------------
Becton, Dickinson & Co. 1,034,200 54,295,500
---------------------------------------------------------------------------
Biomet, Inc.(b) 3,535,175 165,021,969
---------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(b) 566,500 32,494,440
---------------------------------------------------------------------------
Medtronic, Inc.(b) 815,700 41,690,427
---------------------------------------------------------------------------
St. Jude Medical, Inc.(a)(b) 352,700 27,006,239
---------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)(b) 834,400 33,501,160
---------------------------------------------------------------------------
Waters Corp.(a)(b) 410,200 16,937,158
---------------------------------------------------------------------------
Zimmer Holdings, Inc.(a)(b) 475,600 36,901,804
===========================================================================
444,887,977
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
HEALTH CARE SERVICES-1.11%
Caremark Rx, Inc.(a)(b) 2,427,881 $ 72,763,594
===========================================================================
HEALTH CARE SUPPLIES-0.73%
Alcon, Inc. (Switzerland)(b) 677,400 48,230,880
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.48%
Carnival Corp. (Panama)(b) 750,000 37,920,000
---------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Liberia)(b) 500,000 23,300,000
---------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(b) 750,000 35,797,500
===========================================================================
97,017,500
===========================================================================
HOUSEHOLD PRODUCTS-0.72%
Procter & Gamble Co. (The)(b) 918,800 47,024,184
===========================================================================
HYPERMARKETS & SUPER CENTERS-1.03%
Wal-Mart Stores, Inc.(b) 1,250,000 67,400,000
===========================================================================
INDUSTRIAL CONGLOMERATES-1.72%
3M Co.(b) 290,000 22,495,300
---------------------------------------------------------------------------
General Electric Co. 1,500,000 51,180,000
---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)(b) 1,250,000 38,937,500
===========================================================================
112,612,800
===========================================================================
INDUSTRIAL GASES-0.87%
Air Products & Chemicals, Inc. 600,000 31,908,000
---------------------------------------------------------------------------
Praxair, Inc. 600,000 25,320,000
===========================================================================
57,228,000
===========================================================================
INDUSTRIAL MACHINERY-3.63%
Danaher Corp.(b) 1,000,000 55,130,000
---------------------------------------------------------------------------
Eaton Corp.(b) 500,000 31,975,000
---------------------------------------------------------------------------
Illinois Tool Works Inc.(b) 363,300 33,525,324
---------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 1,100,000 75,284,000
---------------------------------------------------------------------------
Parker Hannifin Corp.(b) 600,000 42,378,000
===========================================================================
238,292,324
===========================================================================
INTEGRATED OIL & GAS-1.37%
ChevronTexaco Corp. 307,000 16,289,420
---------------------------------------------------------------------------
Exxon Mobil Corp. 1,500,000 73,830,000
===========================================================================
90,119,420
===========================================================================
INTERNET RETAIL-1.19%
eBay Inc.(a)(b) 800,000 78,088,000
===========================================================================
INTERNET SOFTWARE & SERVICES-2.52%
Google Inc.-Class A(a)(b) 250,413 47,755,011
---------------------------------------------------------------------------
Yahoo! Inc.(a)(b) 3,250,000 117,617,500
===========================================================================
165,372,511
===========================================================================
|
FS-83
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-0.37%
Goldman Sachs Group, Inc. (The)(b) 250,000 $ 24,595,000
===========================================================================
IT CONSULTING & OTHER SERVICES-0.37%
Accenture Ltd.-Class A (Bermuda)(a)(b) 1,000,000 24,210,000
===========================================================================
LIFE & HEALTH INSURANCE-0.40%
AFLAC Inc.(b) 725,450 26,029,146
===========================================================================
MANAGED HEALTH CARE-1.34%
Aetna Inc.(b) 346,500 32,917,500
---------------------------------------------------------------------------
UnitedHealth Group Inc.(b) 463,100 33,528,440
---------------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 222,300 21,709,818
===========================================================================
88,155,758
===========================================================================
MOTORCYCLE MANUFACTURERS-0.31%
Harley-Davidson, Inc.(b) 350,000 20,149,500
===========================================================================
MOVIES & ENTERTAINMENT-1.08%
DreamWorks Animation SKG, Inc.-Class A(a) 117,200 4,576,660
---------------------------------------------------------------------------
Viacom Inc.-Class B(b) 1,811,464 66,100,321
===========================================================================
70,676,981
===========================================================================
MULTI-LINE INSURANCE-0.89%
American International Group, Inc.(b) 500,000 30,355,000
---------------------------------------------------------------------------
Genworth Financial Inc.-Class A(b) 1,180,000 28,154,800
===========================================================================
58,509,800
===========================================================================
OIL & GAS DRILLING-0.57%
ENSCO International Inc.(b) 1,219,000 37,240,450
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.45%
BJ Services Co.(b) 869,600 44,349,600
---------------------------------------------------------------------------
Halliburton Co.(b) 500,000 18,520,000
---------------------------------------------------------------------------
Weatherford International Ltd.
(Bermuda)(a)(b) 625,000 32,662,500
===========================================================================
95,532,100
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.58%
Apache Corp.(b) 500,000 25,350,000
---------------------------------------------------------------------------
Devon Energy Corp. 700,000 51,779,000
---------------------------------------------------------------------------
XTO Energy, Inc.(b) 800,000 26,704,000
===========================================================================
103,833,000
===========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-0.44%
Valero Energy Corp.(b) 670,000 28,789,900
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.17%
Citigroup Inc.(b) 1,906,900 84,609,153
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
JPMorgan Chase & Co.(b) 1,500,000 $ 57,900,000
===========================================================================
142,509,153
===========================================================================
PACKAGED FOODS & MEATS-0.89%
Hershey Foods Corp.(b) 500,000 25,345,000
---------------------------------------------------------------------------
Kellogg Co. 765,900 32,933,700
===========================================================================
58,278,700
===========================================================================
PERSONAL PRODUCTS-1.02%
Avon Products, Inc. 600,000 23,730,000
---------------------------------------------------------------------------
Gillette Co. (The)(b) 1,042,000 43,222,160
===========================================================================
66,952,160
===========================================================================
PHARMACEUTICALS-5.68%
Johnson & Johnson 1,696,100 99,018,318
---------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(b) 1,333,500 54,233,445
---------------------------------------------------------------------------
Pfizer Inc. 4,250,000 123,037,500
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(b) 3,709,700 96,452,200
===========================================================================
372,741,463
===========================================================================
PUBLISHING-0.50%
Gannett Co., Inc.(b) 398,400 33,047,280
===========================================================================
REGIONAL BANKS-0.45%
Commerce Bancorp, Inc.(b) 500,000 29,620,000
===========================================================================
RESTAURANTS-0.44%
McDonald's Corp.(b) 1,000,000 29,150,000
===========================================================================
SEMICONDUCTOR EQUIPMENT-0.74%
Applied Materials, Inc.(a)(b) 1,583,600 25,495,960
---------------------------------------------------------------------------
KLA-Tencor Corp.(a)(b) 500,000 22,765,000
===========================================================================
48,260,960
===========================================================================
SEMICONDUCTORS-6.21%
Analog Devices, Inc.(b) 2,250,000 90,585,000
---------------------------------------------------------------------------
Freescale Semiconductor Inc.-Class A(a)(b) 3,000,000 46,620,000
---------------------------------------------------------------------------
Linear Technology Corp. 1,600,000 60,608,000
---------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a)(b) 750,000 21,427,500
---------------------------------------------------------------------------
Maxim Integrated Products, Inc.(b) 806,985 35,499,270
---------------------------------------------------------------------------
Microchip Technology Inc. 5,068,952 153,335,798
===========================================================================
408,075,568
===========================================================================
SPECIALTY CHEMICALS-0.80%
Ecolab Inc.(b) 800,000 27,080,000
---------------------------------------------------------------------------
Rohm & Haas Co.(b) 600,000 25,434,000
===========================================================================
52,514,000
===========================================================================
SPECIALTY STORES-3.36%
Bed Bath & Beyond Inc.(a)(b) 2,000,000 81,580,000
---------------------------------------------------------------------------
Staples, Inc.(b) 3,500,000 104,090,000
---------------------------------------------------------------------------
|
FS-84
MARKET
SHARES VALUE
---------------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Williams-Sonoma, Inc.(a)(b) 917,800 $ 35,032,426
===========================================================================
220,702,426
===========================================================================
STEEL-0.75%
Nucor Corp.(b) 600,000 25,338,000
---------------------------------------------------------------------------
United States Steel Corp.(b) 651,000 23,904,720
===========================================================================
49,242,720
===========================================================================
SYSTEMS SOFTWARE-5.04%
Adobe Systems Inc.(b) 600,000 33,618,000
---------------------------------------------------------------------------
Microsoft Corp. 6,000,000 167,940,000
---------------------------------------------------------------------------
Oracle Corp.(a) 4,438,800 56,195,208
---------------------------------------------------------------------------
Symantec Corp.(a)(b) 800,000 45,552,000
---------------------------------------------------------------------------
VERITAS Software Corp.(a)(b) 1,263,800 27,651,944
===========================================================================
330,957,152
===========================================================================
TECHNOLOGY DISTRIBUTORS-1.31%
CDW Corp.(b) 1,391,300 86,302,339
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.52%
Nextel Communications, Inc.-Class A(a)(b) 1,297,900 34,381,371
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,083,616,766) 6,532,827,540
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
MONEY MARKET FUNDS-0.64%
Liquid Assets Portfolio-Institutional
Class(c) 21,040,807 $ 21,040,807
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 21,040,807 21,040,807
===========================================================================
Total Money Market Funds (Cost
$42,081,614) 42,081,614
===========================================================================
TOTAL INVESTMENTS-100.13% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$5,125,698,380) 6,574,909,154
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-14.83%
Liquid Assets Portfolio-Institutional
Class(c)(d) 969,136,004 969,136,004
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(c)(d) 4,938,485 4,938,485
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $974,074,489) 974,074,489
===========================================================================
TOTAL INVESTMENTS-114.96% (Cost
$6,099,772,869) 7,548,983,643
===========================================================================
OTHER ASSETS LESS LIABILITIES-(14.96%) (982,334,057)
===========================================================================
NET ASSETS-100.00% $6,566,649,586
___________________________________________________________________________
===========================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-85
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$5,083,616,766)* $ 6,532,827,540
------------------------------------------------------------
Investments in affiliated money market
funds (cost $1,016,156,103) 1,016,156,103
============================================================
Total investments (cost $6,099,772,869) 7,548,983,643
============================================================
Foreign currencies, at value (cost $1,505) 1,543
------------------------------------------------------------
Receivables for:
Investments sold 36,103,535
------------------------------------------------------------
Fund shares sold 5,247,741
------------------------------------------------------------
Dividends 3,608,701
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 478,198
------------------------------------------------------------
Other assets 73,560
============================================================
Total assets 7,594,496,921
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 24,512,996
------------------------------------------------------------
Fund shares reacquired 22,456,741
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 1,036,780
------------------------------------------------------------
Collateral upon return of securities
loaned 974,074,489
------------------------------------------------------------
Accrued distribution fees 1,956,560
------------------------------------------------------------
Accrued trustees' fees 6,750
------------------------------------------------------------
Accrued transfer agent fees 2,947,479
------------------------------------------------------------
Accrued operating expenses 855,540
============================================================
Total liabilities 1,027,847,335
============================================================
Net assets applicable to shares outstanding $ 6,566,649,586
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 7,288,266,146
------------------------------------------------------------
Undistributed net investment income (loss) (907,378)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (2,169,919,994)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,449,210,812
============================================================
$ 6,566,649,586
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 5,616,072,058
____________________________________________________________
============================================================
Class B $ 617,004,804
____________________________________________________________
============================================================
Class C $ 162,706,560
____________________________________________________________
============================================================
Class R $ 6,202,267
____________________________________________________________
============================================================
Institutional Class $ 164,663,897
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 264,001,060
____________________________________________________________
============================================================
Class B 30,930,529
____________________________________________________________
============================================================
Class C 8,158,834
____________________________________________________________
============================================================
Class R 291,974
____________________________________________________________
============================================================
Institutional Class 7,157,074
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.27
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.27 divided by
94.50%) $ 22.51
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.95
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.94
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.24
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 23.01
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $954,954,771 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-86
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $414,846) $ 48,034,675
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $138,487)* 1,652,388
===========================================================================
Total investment income 49,687,063
===========================================================================
EXPENSES:
Advisory fees 46,243,987
---------------------------------------------------------------------------
Administrative services fees 710,711
---------------------------------------------------------------------------
Custodian fees 525,253
---------------------------------------------------------------------------
Distribution fees:
Class A 19,016,041
---------------------------------------------------------------------------
Class B 6,702,181
---------------------------------------------------------------------------
Class C 1,845,072
---------------------------------------------------------------------------
Class R 24,911
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 21,734,849
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 81,066
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 151,416
---------------------------------------------------------------------------
Other 2,985,841
===========================================================================
Total expenses 100,021,328
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (1,322,281)
===========================================================================
Net expenses 98,699,047
===========================================================================
Net investment income (loss) (49,011,984)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 750,565,101
---------------------------------------------------------------------------
Foreign currencies (1,170,065)
---------------------------------------------------------------------------
Option contracts written 804,191
===========================================================================
750,199,227
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (467,700,274)
---------------------------------------------------------------------------
Foreign currencies 38
===========================================================================
(467,700,236)
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 282,498,991
===========================================================================
Net increase in net assets resulting from operations $ 233,487,007
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-87
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (49,011,984) $ (54,584,186)
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 750,199,227 (454,745,158)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, and foreign currencies and option
contracts (467,700,236) 1,834,190,965
================================================================================================
Net increase in net assets resulting from operations 233,487,007 1,324,861,621
================================================================================================
Share transactions-net:
Class A (1,414,942,300) (1,112,282,235)
------------------------------------------------------------------------------------------------
Class B (88,166,720) (46,666,906)
------------------------------------------------------------------------------------------------
Class C (35,344,446) (22,091,083)
------------------------------------------------------------------------------------------------
Class R 3,284,897 2,235,274
------------------------------------------------------------------------------------------------
Institutional Class 4,128,631 5,433,008
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,531,039,938) (1,173,371,942)
================================================================================================
Net increase (decrease) in net assets (1,297,552,931) 151,489,679
================================================================================================
NET ASSETS:
Beginning of year 7,864,202,517 7,712,712,838
================================================================================================
End of year (including undistributed net investment income
(loss) of $(907,378) and $(844,799), respectively) $ 6,566,649,586 $ 7,864,202,517
________________________________________________________________________________________________
================================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued
FS-88
by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the
FS-89
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.
G. 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.
H. 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.
I. 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.
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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $623,391. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $587,335 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $710,711 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $21,734,849 for Class A, Class B, Class C and Class R shares and $81,066 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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
FS-90
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, 2004, the Class A, Class B, Class C and Class R shares paid $19,016,041, $6,702,181, $1,845,072 and $24,911, 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, 2004, AIM Distributors advised the Fund that it retained $743,284 in front-end sales commissions from the sale of Class A shares and $19,335, $84,327, $11,693 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 95,933,174 $1,169,096,235 $(1,243,988,602) $ -- $21,040,807 $ 766,132 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 95,933,174 1,169,096,235 (1,243,988,602) -- 21,040,807 747,769 --
===================================================================================================================================
Subtotal $191,866,348 $2,338,192,470 $(2,487,977,204) $ -- $42,081,614 $1,513,901 $ --
===================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $155,180,095 $3,731,967,251 $(2,918,011,342) $ -- $ 969,136,004 $ 132,031 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 24,938,485 -- (20,000,000) -- 4,938,485 6,456 --
====================================================================================================================================
Subtotal $180,118,580 $3,731,967,251 $(2,938,011,342) $ -- $ 974,074,489 $ 138,487 $ --
====================================================================================================================================
Total $371,984,928 $6,070,159,721 $(5,425,988,546) $ -- $1,016,156,103 $1,652,388 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $114,504,134 and $56,171,339, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $109,966 and credits in custodian fees of $1,589 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $111,555.
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NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $31,034 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $954,954,771 were on loan to brokers. The loans were secured by cash collateral of $974,074,489 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $138,487 for securities lending transactions.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------------
Beginning of year -- $ --
------------------------------------------------------------------------------------
Written 7,250 867,152
------------------------------------------------------------------------------------
Closed (3,925) (613,840)
------------------------------------------------------------------------------------
Expired (3,325) (253,312)
====================================================================================
End of year -- $ --
____________________________________________________________________________________
====================================================================================
|
FS-92
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 1,443,574,764
-----------------------------------------------------------------------------
Temporary book/tax differences (907,378)
-----------------------------------------------------------------------------
Capital loss carryforward (2,164,283,946)
-----------------------------------------------------------------------------
Shares of beneficial interest 7,288,266,146
=============================================================================
Total net assets $ 6,566,649,586
_____________________________________________________________________________
=============================================================================
|
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 losses on wash sales. The tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation on foreign currencies of $38.
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $745,543,129 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
----------------------------------------------------------------------------
October 31, 2009 $ 478,530,901
----------------------------------------------------------------------------
October 31, 2010 1,223,985,487
----------------------------------------------------------------------------
October 31, 2011 461,767,558
============================================================================
Total capital loss carryforward $2,164,283,946
____________________________________________________________________________
============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $3,585,815,574 and $5,051,191,698, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,643,458,910 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (199,884,184) ============================================================================== Net unrealized appreciation of investment securities $1,443,574,726 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $6,105,408,917. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2004, undistributed net
investment income was increased by $48,949,405, undistributed net realized gain
(loss) was increased by $1,170,065 and shares of beneficial interest decreased
by $50,119,470. This reclassification had no effect on the net assets of the
Fund.
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NOTE 13--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 certain 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(a)
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2004 2003
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 21,730,966 $ 462,412,977 40,892,692 $ 728,901,495
-------------------------------------------------------------------------------------------------------------------------------
Class B 2,742,938 54,987,929 4,399,643 74,587,779
-------------------------------------------------------------------------------------------------------------------------------
Class C 1,295,928 26,018,679 1,764,643 29,858,199
-------------------------------------------------------------------------------------------------------------------------------
Class R 215,406 4,599,852 163,302 2,916,332
-------------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,641,747 36,786,966 1,117,656 21,391,286
===============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 403,007 8,647,784 325,830 5,894,532
-------------------------------------------------------------------------------------------------------------------------------
Class B (428,243) (8,647,784) (344,006) (5,894,532)
===============================================================================================================================
Reacquired:
Class A (89,250,664) (1,886,003,061) (104,213,879) (1,847,078,262)
-------------------------------------------------------------------------------------------------------------------------------
Class B (6,761,489) (134,506,865) (6,899,964) (115,360,153)
-------------------------------------------------------------------------------------------------------------------------------
Class C (3,085,701) (61,363,125) (3,090,330) (51,949,282)
-------------------------------------------------------------------------------------------------------------------------------
Class R (61,955) (1,314,955) (37,857) (681,058)
-------------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,437,940) (32,658,335) (833,861) (15,958,278)
===============================================================================================================================
(72,996,000) $(1,531,039,938) (66,756,131) $(1,173,371,942)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 14% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-94
NOTE 14--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,
---------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.12)(a) (0.15)(a) (0.12) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.79 3.53 (2.37) (16.24) 12.39
=================================================================================================================================
Total from investment operations 0.66 3.41 (2.52) (16.36) 12.13
=================================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.20% 19.83% (12.78)% (43.10)% 36.56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,616,072 $6,825,023 $6,780,055 $9,703,277 $19,268,977
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.27%(c) 1.29% 1.26% 1.14% 1.08%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.29%(c) 1.30% 1.27% 1.17% 1.11%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.59)(c) (0.67)% (0.74)% (0.46)% (0.61)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $6,338,680,161.
CLASS B
----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a) (0.23)(a) (0.27)(a) (0.28) (0.58)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.75 3.33 (2.26) (15.69) 12.14
=============================================================================================================================
Total from investment operations 0.49 3.10 (2.53) (15.97) 11.56
=============================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=============================================================================================================================
Net asset value, end of period $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 2.52% 18.95% (13.39)% (43.49)% 35.51%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $617,005 $688,587 $625,294 $818,343 $1,315,524
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.97%(c) 1.99% 1.96% 1.86% 1.85%
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.99%(c) 2.00% 1.97% 1.89% 1.88%
=============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.29)(c) (1.37)% (1.44)% (1.17)% (1.38)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $670,218,131.
FS-95
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a) (0.23)(a) (0.27)(a) (0.29) (0.59)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.74 3.33 (2.25) (15.68) 12.15
==============================================================================================================================
Total from investment operations 0.48 3.10 (2.52) (15.97) 11.56
==============================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
==============================================================================================================================
Net asset value, end of period $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 2.47% 18.95% (13.35)% (43.51)% 35.52%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $162,707 $193,585 $184,393 $258,786 $434,544
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.97%(c) 1.99% 1.96% 1.86% 1.85%
------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.99%(c) 2.00% 1.97% 1.89% 1.88%
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.29)(c) (1.37)% (1.44)% (1.17)% (1.38)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $184,507,218.
CLASS R
-------------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.17)(a) (0.16)(a) (0.07)(a)
---------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.78 3.53 (2.49)
=========================================================================================================
Total from investment operations 0.61 3.37 (2.56)
=========================================================================================================
Net asset value, end of period $21.24 $20.63 $17.26
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) 2.96% 19.52% (12.92)%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,202 $2,857 $ 226
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.47%(c) 1.49% 1.53%(d)
---------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.49%(c) 1.50% 1.54%(d)
=========================================================================================================
Ratio of net investment income (loss) to average net assets (0.79)(c) (0.87)% (1.01)(d)
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate(e) 50% 47% 57%
_________________________________________________________________________________________________________
=========================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America 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 based on average daily net assets of $4,982,137.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-96
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.03)(a) (0.06) 0.01 (0.09)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.85 3.80 (2.54) (17.14) 12.91
=========================================================================================================================
Total from investment operations 0.84 3.77 (2.60) (17.13) 12.82
=========================================================================================================================
Less Distributions from net realized gains -- -- -- (7.42) (3.28)
=========================================================================================================================
Net asset value, end of period $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 3.79% 20.49% (12.38)% (42.80)% 37.14%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $164,664 $154,150 $122,746 $150,609 $288,097
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.72%(c) 0.75% 0.80% 0.65% 0.65%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.74%(c) 0.76% 0.81% 0.68% 0.68%
=========================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.04)(c) (0.13)% (0.28)% 0.03% (0.18)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values and returns for shareholder transactions.
(c) Ratios are based on average daily net assets of $158,650,215.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-97
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-98
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-99
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-100
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, the results of its operations for the year then ended, the statements of 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 U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-101
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-90.30%
ADVERTISING-0.97%
Omnicom Group Inc. 15,300 $ 1,207,170
=======================================================================
AEROSPACE & DEFENSE-2.06%
Raytheon Co. 50,800 1,853,184
-----------------------------------------------------------------------
United Technologies Corp. 7,700 714,714
=======================================================================
2,567,898
=======================================================================
APPAREL RETAIL-1.90%
Limited Brands 39,600 981,288
-----------------------------------------------------------------------
TJX Cos., Inc. (The) 57,800 1,386,044
=======================================================================
2,367,332
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.67%
V. F. Corp. 38,600 2,077,838
=======================================================================
APPLICATION SOFTWARE-0.53%
SAP A.G.-ADR (Germany) 15,500 661,075
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.19%
Federated Investors, Inc.-Class B 51,000 1,478,490
=======================================================================
AUTO PARTS & EQUIPMENT-0.35%
Johnson Controls, Inc. 7,600 435,860
=======================================================================
BREWERS-1.36%
Anheuser-Busch Cos., Inc. 33,900 1,693,305
=======================================================================
BUILDING PRODUCTS-2.34%
Masco Corp. 85,100 2,915,526
=======================================================================
COMPUTER HARDWARE-2.19%
Hewlett-Packard Co. 83,900 1,565,574
-----------------------------------------------------------------------
International Business Machines Corp. 12,900 1,157,775
=======================================================================
2,723,349
=======================================================================
CONSTRUCTION & ENGINEERING-1.32%
Fluor Corp. 35,500 1,648,620
=======================================================================
CONSTRUCTION MATERIALS-0.48%
Lafarge North America Inc. 12,100 592,900
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.05%
Automatic Data Processing, Inc. 31,600 1,371,124
-----------------------------------------------------------------------
First Data Corp. 28,500 1,176,480
=======================================================================
2,547,604
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
DISTRIBUTORS-0.86%
Genuine Parts Co. 26,900 $ 1,073,041
=======================================================================
DIVERSIFIED BANKS-3.11%
Bank of America Corp. 47,200 2,114,088
-----------------------------------------------------------------------
U.S. Bancorp 28,900 826,829
-----------------------------------------------------------------------
Wachovia Corp. 19,000 934,990
=======================================================================
3,875,907
=======================================================================
DIVERSIFIED CHEMICALS-2.48%
Dow Chemical Co. (The) 26,800 1,204,392
-----------------------------------------------------------------------
PPG Industries, Inc. 29,500 1,880,625
=======================================================================
3,085,017
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.51%
H&R Block, Inc. 18,800 893,940
-----------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 46,700 980,700
=======================================================================
1,874,640
=======================================================================
ELECTRIC UTILITIES-3.07%
Entergy Corp. 17,400 1,137,264
-----------------------------------------------------------------------
Exelon Corp. 56,300 2,230,606
-----------------------------------------------------------------------
Wisconsin Energy Corp. 14,000 456,960
=======================================================================
3,824,830
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.83%
Cooper Industries, Ltd.-Class A (Bermuda) 19,600 1,252,440
-----------------------------------------------------------------------
Emerson Electric Co. 35,400 2,267,370
=======================================================================
3,519,810
=======================================================================
FOOTWEAR-0.72%
NIKE, Inc.-Class B 11,000 894,410
=======================================================================
HEALTH CARE EQUIPMENT-2.16%
Baxter International Inc. 62,600 1,925,576
-----------------------------------------------------------------------
Becton, Dickinson & Co. 14,500 761,250
=======================================================================
2,686,826
=======================================================================
HOME IMPROVEMENT RETAIL-1.21%
Home Depot, Inc. (The) 36,800 1,511,744
=======================================================================
HOUSEHOLD APPLIANCES-0.94%
Snap-on Inc. 39,800 1,169,324
=======================================================================
HOUSEHOLD PRODUCTS-2.30%
Colgate-Palmolive Co. 50,900 2,271,158
-----------------------------------------------------------------------
Kimberly-Clark Corp. 9,900 590,733
=======================================================================
2,861,891
=======================================================================
|
FS-102
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INDUSTRIAL MACHINERY-3.46%
Illinois Tool Works Inc. 9,100 $ 839,748
-----------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 28,800 1,971,072
-----------------------------------------------------------------------
Pentair, Inc. 40,200 1,502,676
=======================================================================
4,313,496
=======================================================================
INSURANCE BROKERS-1.14%
Marsh & McLennan Cos., Inc. 51,200 1,416,192
=======================================================================
INTEGRATED OIL & GAS-4.43%
ChevronTexaco Corp. 11,200 594,272
-----------------------------------------------------------------------
ConocoPhillips 11,700 986,427
-----------------------------------------------------------------------
Eni S.p.A. (Italy)(a) 30,100 690,704
-----------------------------------------------------------------------
Exxon Mobil Corp. 16,000 787,520
-----------------------------------------------------------------------
Occidental Petroleum Corp. 26,100 1,457,163
-----------------------------------------------------------------------
Total S.A. (France)(a) 4,800 1,004,810
=======================================================================
5,520,896
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.83%
SBC Communications Inc. 40,900 1,033,134
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.74%
Morgan Stanley 42,400 2,166,216
=======================================================================
LIFE & HEALTH INSURANCE-0.83%
Prudential Financial, Inc. 22,300 1,036,281
=======================================================================
MULTI-LINE INSURANCE-1.10%
Hartford Financial Services Group, Inc. (The) 23,500 1,374,280
=======================================================================
MULTI-UTILITIES & UNREGULATED POWER-2.93%
Dominion Resources, Inc. 28,700 1,845,984
-----------------------------------------------------------------------
Public Service Enterprise Group Inc. 42,200 1,797,298
=======================================================================
3,643,282
=======================================================================
OFFICE SERVICES & SUPPLIES-0.81%
Pitney Bowes Inc. 23,000 1,006,250
=======================================================================
OIL & GAS DRILLING-1.04%
GlobalSantaFe Corp. (Cayman Islands) 44,000 1,298,000
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.64%
Citigroup Inc. 46,100 2,045,457
=======================================================================
PACKAGED FOODS & MEATS-3.94%
General Mills, Inc. 45,500 2,013,375
-----------------------------------------------------------------------
Hershey Foods Corp. 14,400 729,936
-----------------------------------------------------------------------
Kellogg Co. 20,000 860,000
-----------------------------------------------------------------------
Sara Lee Corp. 55,900 1,301,352
=======================================================================
4,904,663
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PAPER PACKAGING-0.84%
Bemis Co., Inc. 15,200 $ 402,344
-----------------------------------------------------------------------
Sonoco Products Co. 24,300 647,595
=======================================================================
1,049,939
=======================================================================
PERSONAL PRODUCTS-0.69%
Avon Products, Inc. 21,600 854,280
=======================================================================
PHARMACEUTICALS-10.24%
Abbott Laboratories 55,100 2,348,913
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 52,600 1,232,418
-----------------------------------------------------------------------
Johnson & Johnson 41,400 2,416,932
-----------------------------------------------------------------------
Lilly (Eli) & Co. 35,200 1,932,832
-----------------------------------------------------------------------
Merck & Co. Inc. 13,800 432,078
-----------------------------------------------------------------------
Pfizer Inc. 65,200 1,887,540
-----------------------------------------------------------------------
Wyeth 63,200 2,505,880
=======================================================================
12,756,593
=======================================================================
PROPERTY & CASUALTY INSURANCE-3.43%
Chubb Corp. (The) 8,700 627,531
-----------------------------------------------------------------------
MBIA Inc. 27,200 1,573,792
-----------------------------------------------------------------------
SAFECO Corp. 9,300 430,032
-----------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 48,400 1,643,664
=======================================================================
4,275,019
=======================================================================
PUBLISHING-0.99%
Gannett Co., Inc. 14,900 1,235,955
=======================================================================
REGIONAL BANKS-2.17%
Cullen/Frost Bankers, Inc. 10,800 529,200
-----------------------------------------------------------------------
KeyCorp 17,000 571,030
-----------------------------------------------------------------------
North Fork Bancorp., Inc. 36,400 1,605,240
=======================================================================
2,705,470
=======================================================================
RESTAURANTS-1.45%
Outback Steakhouse, Inc. 45,700 1,809,263
=======================================================================
SEMICONDUCTORS-1.49%
Linear Technology Corp. 25,000 947,000
-----------------------------------------------------------------------
Texas Instruments Inc. 37,400 914,430
=======================================================================
1,861,430
=======================================================================
SOFT DRINKS-1.25%
PepsiCo, Inc. 31,300 1,551,854
=======================================================================
SYSTEMS SOFTWARE-1.71%
Microsoft Corp. 76,100 2,130,039
=======================================================================
THRIFTS & MORTGAGE FINANCE-1.21%
Fannie Mae 13,600 954,040
-----------------------------------------------------------------------
MGIC Investment Corp. 8,500 546,635
=======================================================================
1,500,675
=======================================================================
|
FS-103
MARKET
SHARES VALUE
-----------------------------------------------------------------------
TOBACCO-1.34%
Altria Group, Inc. 34,400 $ 1,667,024
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $103,200,562) 112,450,095
=======================================================================
PRINCIPAL
AMOUNT
NOTES-0.36%
AEROSPACE & DEFENSE-0.07%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06(b) $ 75,000 82,638
=======================================================================
BROADCASTING & CABLE TV-0.08%
TCI Communications, Inc., Medium Term Notes,
8.35%, 02/15/05(b) 100,000 101,597
=======================================================================
ELECTRIC UTILITIES-0.13%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05(b) 160,000 167,573
=======================================================================
|
-----------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
OTHER DIVERSIFIED FINANCIAL SERVICES-0.08%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%,
01/30/06(b) $ 100,000 $ 100,407
=======================================================================
Total Notes (Cost $451,848) 452,215
=======================================================================
U.S. TREASURY BILLS-0.40%
1.62%, 12/16/04 (Cost $498,986)(c) 500,000(d) 498,986
=======================================================================
SHARES
MONEY MARKET FUNDS-13.44%
Liquid Assets Portfolio-Institutional
Class(e) 8,365,886 8,365,886
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 8,365,886 8,365,886
=======================================================================
Total Money Market Funds (Cost
$16,731,772) 16,731,772
=======================================================================
TOTAL INVESTMENTS-104.50% (Cost $120,883,168) 130,133,068
=======================================================================
OTHER ASSETS LESS LIABILITIES-(4.50%) (5,603,883)
=======================================================================
NET ASSETS-100.00% $124,529,185
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Sr. - Senior Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at October 31, 2004 was
$1,695,514, which represented 1.30% of the Fund's Total Investments. See
Note 1A.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate market value of these securities at October
31, 2004 was $452,215, which represented 0.35% of the Fund's Total
Investments. See Note 1A.
(c) Security traded on a discount basis. Unless otherwise indicated, the
interest rate shown represents the discount rate at the time of purchase by
the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1I and Note 9.
(e) 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-104
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$104,151,396) $113,401,296
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $16,731,772) 16,731,772
===========================================================
Total investments (cost $120,883,168) 130,133,068
===========================================================
Receivables for:
Investments sold 303,590
-----------------------------------------------------------
Variation margin 2,700
-----------------------------------------------------------
Fund shares sold 1,185,428
-----------------------------------------------------------
Dividends and interest 182,194
-----------------------------------------------------------
Amount due from advisor 9,911
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 8,846
-----------------------------------------------------------
Other assets 32,175
===========================================================
Total assets 131,857,912
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 7,008,815
-----------------------------------------------------------
Fund shares reacquired 164,368
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 9,560
-----------------------------------------------------------
Accrued distribution fees 64,638
-----------------------------------------------------------
Accrued trustees' fees 864
-----------------------------------------------------------
Accrued transfer agent fees 45,135
-----------------------------------------------------------
Accrued operating expenses 35,347
===========================================================
Total liabilities 7,328,727
===========================================================
Net assets applicable to shares outstanding $124,529,185
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $112,989,604
-----------------------------------------------------------
Undistributed net investment income (8,903)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
futures contracts and option contracts 2,289,194
-----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 9,259,290
===========================================================
$124,529,185
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 63,513,256
___________________________________________________________
===========================================================
Class B $ 45,699,620
___________________________________________________________
===========================================================
Class C $ 15,316,309
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 5,531,730
___________________________________________________________
===========================================================
Class B 4,014,872
___________________________________________________________
===========================================================
Class C 1,347,153
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.48
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.48 divided by
94.50%) $ 12.15
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.38
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.37
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-105
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $7,650) $1,718,885
------------------------------------------------------------------------
Dividends from affiliated money market funds 78,001
------------------------------------------------------------------------
Interest 18,670
========================================================================
Total investment income 1,815,556
========================================================================
EXPENSES:
Advisory fees 600,345
------------------------------------------------------------------------
Administrative services fees 50,000
------------------------------------------------------------------------
Custodian fees 22,370
------------------------------------------------------------------------
Distribution fees:
Class A 134,282
------------------------------------------------------------------------
Class B 318,360
------------------------------------------------------------------------
Class C 98,436
------------------------------------------------------------------------
Transfer agent fees 248,184
------------------------------------------------------------------------
Trustees' fees and retirement benefits 13,241
------------------------------------------------------------------------
Other 148,681
========================================================================
Total expenses 1,633,899
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (561,093)
========================================================================
Net expenses 1,072,806
========================================================================
Net investment income 742,750
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain from:
Investment securities 3,140,049
------------------------------------------------------------------------
Foreign currencies 2,121
------------------------------------------------------------------------
Futures contracts 46,724
------------------------------------------------------------------------
Option contracts written 21,415
========================================================================
3,210,309
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 4,343,728
------------------------------------------------------------------------
Foreign currencies (14)
------------------------------------------------------------------------
Futures contracts 9,390
========================================================================
4,353,104
========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 7,563,413
========================================================================
Net increase in net assets resulting from operations $8,306,163
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-106
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 742,750 $ 85,307
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts 3,210,309 (463,512)
----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and futures contracts 4,353,104 6,127,078
========================================================================================
Net increase in net assets resulting from operations 8,306,163 5,748,873
========================================================================================
Distributions to shareholders from net investment income:
Class A (500,393) (67,755)
----------------------------------------------------------------------------------------
Class B (204,810) (14,134)
----------------------------------------------------------------------------------------
Class C (63,792) (3,436)
========================================================================================
Decrease in net assets resulting from distributions (768,995) (85,325)
========================================================================================
Share transactions-net:
Class A 37,536,817 11,899,583
----------------------------------------------------------------------------------------
Class B 21,106,883 12,028,596
----------------------------------------------------------------------------------------
Class C 8,543,492 4,163,744
========================================================================================
Net increase in net assets resulting from share
transactions 67,187,192 28,091,923
========================================================================================
Net increase in net assets 74,724,360 33,755,471
========================================================================================
NET ASSETS:
Beginning of year 49,804,825 16,049,354
========================================================================================
End of year (including undistributed net investment
income of $(8,903) and $(3,386), respectively) $124,529,185 $49,804,825
________________________________________________________________________________________
========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued
FS-107
by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
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 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. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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-108
G. 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.
H. 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.
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. 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.
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. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.00%, 1.65% and 1.65% of average daily net assets, respectively. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.50%, 2.15% and 2.15% of average daily net assets, respectively, through October 31, 2005. 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), or items designated as such 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. 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. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $531,230.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $28,553 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $248,184. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B and Class C shares paid $134,282, $318,360 and $98,436, respectively.
FS-109
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, 2004, AIM Distributors advised the Fund that it retained $64,410 in front-end sales commissions from the sale of Class A shares and $300, $8,410 and $1,776 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") 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. The table below shows the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,615,482 $24,141,052 $(17,390,648) $ -- $ 8,365,886 $39,277 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,615,482 24,141,052 (17,390,648) -- 8,365,886 38,724 --
==================================================================================================================================
Total $3,230,964 $48,282,104 $(34,781,296) $ -- $16,731,772 $78,001 $ --
==================================================================================================================================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $102,143 and $94,900, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $1,198 and credits in custodian fees of $112 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $1,310.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $4,484 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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
FS-110
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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------------
Written 688 51,842
-------------------------------------------------------------------------------------
Closed (473) (40,673)
-------------------------------------------------------------------------------------
Exercised (215) (11,169)
=====================================================================================
End of year -- $ --
_____________________________________________________________________________________
=====================================================================================
|
NOTE 9--FUTURES CONTRACTS
On October 31, 2004, $77,000 principal amount of U.S. Treasury obligations was pledged as collateral to cover margin requirements for open futures contracts.
OPEN FUTURES CONTRACTS AT PERIOD END
-----------------------------------------------------------------------------------------------------------------------
NO. OF MONTH/ MARKET UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
-----------------------------------------------------------------------------------------------------------------------
S&P 500 Futures 20 Dec-04/Long $1,130,300 $9,390
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003
---------------------------------------------------------------------------------
Distributions paid from ordinary income $768,995 $85,325
_________________________________________________________________________________
=================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed ordinary income $ 1,363,869
----------------------------------------------------------------------------
Undistributed long-term gain 1,100,008
----------------------------------------------------------------------------
Unrealized appreciation -- investments 9,084,607
----------------------------------------------------------------------------
Temporary book/tax differences (8,903)
----------------------------------------------------------------------------
Shares of beneficial interest 112,989,604
============================================================================
Total net assets $124,529,185
____________________________________________________________________________
============================================================================
|
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 losses on wash sales and the realization of gains on certain futures contracts.
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 trustee deferral of compensation and retirement plan expenses.
FS-111
The Fund utilized $411,417 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund did not have a capital loss carryforward as of October 31, 2004.
NOTE 11--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, 2004 was $80,661,385 and $22,212,633, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $11,614,974 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,530,367) =============================================================================== Net unrealized appreciation of investment securities $ 9,084,607 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $121,048,461. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of distributions and foreign currencies transactions, on October 31, 2004, undistributed net investment income was increased by $20,728, undistributed net realized gain was decreased by $250,728 and shares of beneficial interest increased by $230,000. This reclassification had no effect on the net assets of the Fund.
NOTE 13--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 certain 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.
CHANGE IN SHARES OUTSTANDING(a)
--------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2004 2003
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,322,865 $ 48,449,001 2,036,155 $18,695,942
--------------------------------------------------------------------------------------------------------------------
Class B 2,496,183 27,796,432 1,811,612 16,607,284
--------------------------------------------------------------------------------------------------------------------
Class C 891,143 9,870,802 599,285 5,518,092
====================================================================================================================
Issued as reinvestment of dividends:
Class A 41,472 465,571 6,293 61,880
--------------------------------------------------------------------------------------------------------------------
Class B 16,701 185,244 1,275 12,449
--------------------------------------------------------------------------------------------------------------------
Class C 5,270 58,491 324 3,166
====================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 186,137 2,093,587 71,889 675,552
--------------------------------------------------------------------------------------------------------------------
Class B (187,728) (2,093,587) (72,485) (675,552)
====================================================================================================================
Reacquired:
Class A (1,198,931) (13,471,342) (834,757) (7,533,791)
--------------------------------------------------------------------------------------------------------------------
Class B (432,094) (4,781,206) (439,212) (3,915,585)
--------------------------------------------------------------------------------------------------------------------
Class C (125,008) (1,385,801) (152,851) (1,357,514)
====================================================================================================================
6,016,010 $ 67,187,192 3,027,528 $28,091,923
____________________________________________________________________________________________________________________
====================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 8% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distributions, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-112
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.26 $ 8.70 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.14 0.06(a) (0.03)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.23 1.54 (1.27)
========================================================================================================
Total from investment operations 1.37 1.60 (1.30)
========================================================================================================
Less dividends from net investment income (0.15) (0.04) --
========================================================================================================
Net asset value, end of period $ 11.48 $ 10.26 $ 8.70
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 13.36% 18.39% (13.00)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $63,513 $22,375 $ 7,834
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(c) 1.51% 1.75%(d)
--------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.70%(c) 2.12% 4.26%(d)
========================================================================================================
Ratio of net investment income (loss) to average net assets 1.27%(c) 0.65% (0.34)%(d)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $38,366,366.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-113
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.17 $ 8.65 $ 10.00
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.00(a) (0.08)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.21 1.53 (1.27)
========================================================================================================
Total from investment operations 1.28 1.53 (1.35)
========================================================================================================
Less dividends from net investment income (0.07) (0.01) --
========================================================================================================
Net asset value, end of period $ 11.38 $ 10.17 $ 8.65
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 12.63% 17.67% (13.50)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $45,700 $21,582 $ 7,100
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 2.16% 2.40%(d)
--------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.35%(c) 2.77% 4.91%(d)
========================================================================================================
Ratio of net investment income (loss) to average net assets 0.62%(c) 0.00% (0.99)%(d)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $31,836,043.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-114
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------
DECEMBER 31, 2001
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
-------------------- OCTOBER 31,
2004 2003 2002
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.16 $ 8.65 $ 10.00
----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.00(a) (0.08)(a)
----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.21 1.52 (1.27)
==========================================================================================================
Total from investment operations 1.28 1.52 (1.35)
==========================================================================================================
Less dividends from net investment income (0.07) (0.01) --
==========================================================================================================
Net asset value, end of period $ 11.37 $10.16 $ 8.65
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) 12.64% 17.55% (13.50)%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,316 $5,848 $ 1,116
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 2.16% 2.40%(d)
----------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.35%(c) 2.77% 4.91%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets 0.62%(c) 0.00% (0.99)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $9,843,547.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered
FS-115
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-116
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-117
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-118
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-119
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.23%
ADVERTISING-5.13%
Interpublic Group of Cos., Inc. (The)(a) 580,200 $ 7,113,252
-----------------------------------------------------------------------
Omnicom Group Inc. 141,600 11,172,240
=======================================================================
18,285,492
=======================================================================
AEROSPACE & DEFENSE-1.80%
Honeywell International Inc. 190,300 6,409,304
=======================================================================
ALUMINUM-1.62%
Alcoa Inc. 177,500 5,768,750
=======================================================================
APPAREL RETAIL-1.71%
Gap, Inc. (The) 304,700 6,087,906
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.47%
Bank of New York Co., Inc. (The) 270,600 8,783,676
=======================================================================
BUILDING PRODUCTS-2.33%
Masco Corp. 242,200 8,297,772
=======================================================================
COMMUNICATIONS EQUIPMENT-1.06%
Motorola, Inc. 219,200 3,783,392
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.85%
Deere & Co. 50,800 3,036,824
=======================================================================
CONSUMER ELECTRONICS-3.19%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 197,970 4,715,645
-----------------------------------------------------------------------
Sony Corp.-ADR (Japan) 190,700 6,645,895
=======================================================================
11,361,540
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.69%
Ceridian Corp.(a) 300,700 5,187,075
-----------------------------------------------------------------------
First Data Corp. 278,700 11,504,736
=======================================================================
16,691,811
=======================================================================
DEPARTMENT STORES-1.25%
May Department Stores Co. (The) 170,800 4,451,048
=======================================================================
DIVERSIFIED CHEMICALS-0.71%
Dow Chemical Co. (The) 56,600 2,543,604
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.60%
Cendant Corp. 449,600 9,257,264
=======================================================================
ENVIRONMENTAL SERVICES-3.11%
Waste Management, Inc. 388,550 11,065,904
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
FOOD RETAIL-3.04%
Kroger Co. (The)(a) 416,600 $ 6,294,826
-----------------------------------------------------------------------
Safeway Inc.(a) 248,800 4,538,112
=======================================================================
10,832,938
=======================================================================
GENERAL MERCHANDISE STORES-2.57%
Target Corp. 183,100 9,158,662
=======================================================================
HEALTH CARE DISTRIBUTORS-4.92%
Cardinal Health, Inc. 239,600 11,201,300
-----------------------------------------------------------------------
McKesson Corp. 237,100 6,321,086
=======================================================================
17,522,386
=======================================================================
HEALTH CARE EQUIPMENT-1.47%
Baxter International Inc. 170,800 5,253,808
=======================================================================
HEALTH CARE FACILITIES-1.80%
HCA, Inc. 174,400 6,405,712
=======================================================================
INDUSTRIAL CONGLOMERATES-6.25%
General Electric Co. 232,500 7,932,900
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 459,800 14,322,770
=======================================================================
22,255,670
=======================================================================
INDUSTRIAL MACHINERY-2.47%
Illinois Tool Works Inc. 95,515 8,814,124
=======================================================================
INSURANCE BROKERS-1.18%
Aon Corp. 206,600 4,216,706
=======================================================================
INVESTMENT BANKING & BROKERAGE-4.26%
Merrill Lynch & Co., Inc. 127,800 6,893,532
-----------------------------------------------------------------------
Morgan Stanley 162,000 8,276,580
=======================================================================
15,170,112
=======================================================================
MANAGED HEALTH CARE-2.21%
Anthem, Inc.(a)(b) 98,000 7,879,200
=======================================================================
MOVIES & ENTERTAINMENT-2.60%
Walt Disney Co. (The) 367,100 9,258,262
=======================================================================
MULTI-LINE INSURANCE-1.41%
Hartford Financial Services Group, Inc. (The) 85,600 5,005,888
=======================================================================
OIL & GAS DRILLING-2.09%
Transocean Inc. (Cayman Islands)(a) 211,377 7,451,039
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.74%
Halliburton Co. 265,100 9,819,304
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 112,100 7,055,574
=======================================================================
16,874,878
=======================================================================
|
FS-120
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-6.51%
Citigroup Inc. 241,619 $ 10,720,635
-----------------------------------------------------------------------
JPMorgan Chase & Co. 323,356 12,481,542
=======================================================================
23,202,177
=======================================================================
PACKAGED FOODS & MEATS-1.65%
Kraft Foods Inc.-Class A 176,300 5,872,553
=======================================================================
PHARMACEUTICALS-7.62%
Pfizer Inc. 276,900 8,016,255
-----------------------------------------------------------------------
Sanofi-Aventis S.A. (France)(b)(c) 164,452 12,065,161
-----------------------------------------------------------------------
Wyeth 178,300 7,069,595
=======================================================================
27,151,011
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.22%
ACE Ltd. (Cayman Islands) 207,800 7,908,868
=======================================================================
SYSTEMS SOFTWARE-3.27%
Computer Associates International, Inc. 419,900 11,635,429
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.43%
Fannie Mae 174,300 12,227,145
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $308,322,173) 349,920,855
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MONEY MARKET FUNDS-2.13%
Liquid Assets Portfolio-Institutional
Class(d) 3,790,466 $ 3,790,466
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 3,790,466 3,790,466
=======================================================================
Total Money Market Funds (Cost
$7,580,932) 7,580,932
=======================================================================
TOTAL INVESTMENTS-100.36% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $315,903,105) 357,501,787
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-2.02%
STIC Prime Portfolio-Institutional
Class(d)(e) 7,196,450 7,196,450
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $7,196,450) 7,196,450
=======================================================================
TOTAL INVESTMENTS-102.38% (Cost $323,099,555) 364,698,237
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.38%) (8,492,777)
=======================================================================
NET ASSETS-100.00% $356,205,460
_______________________________________________________________________
=======================================================================
|
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
security lending transactions at October 31, 2004.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
market value of this security at October 31, 2004 represented 3.31% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-121
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$308,322,173)* $349,920,855
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $14,777,382) 14,777,382
===========================================================
Total investments (cost $323,099,555) 364,698,237
___________________________________________________________
===========================================================
Receivables for:
Fund shares sold 581,284
-----------------------------------------------------------
Dividends 503,581
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 55,403
-----------------------------------------------------------
Other assets 58,511
===========================================================
Total assets 365,897,016
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,403,301
-----------------------------------------------------------
Fund shares reacquired 758,866
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 68,796
-----------------------------------------------------------
Collateral upon return of securities loaned 7,196,450
-----------------------------------------------------------
Accrued distribution fees 164,794
-----------------------------------------------------------
Accrued trustees' fees 1,433
-----------------------------------------------------------
Accrued transfer agent fees 58,660
-----------------------------------------------------------
Accrued operating expenses 39,256
===========================================================
Total liabilities 9,691,556
===========================================================
Net assets applicable to shares outstanding $356,205,460
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $335,213,046
-----------------------------------------------------------
Undistributed net investment income (loss) (57,053)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (20,549,215)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 41,598,682
===========================================================
$356,205,460
___________________________________________________________
===========================================================
NET ASSETS:
Class A $150,190,493
___________________________________________________________
===========================================================
Class B $ 84,895,719
___________________________________________________________
===========================================================
Class C $ 30,835,140
___________________________________________________________
===========================================================
Class R $ 990,992
___________________________________________________________
===========================================================
Investor Class $ 70,548,023
___________________________________________________________
===========================================================
Institutional Class $ 18,745,093
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,155,745
___________________________________________________________
===========================================================
Class B 7,064,497
___________________________________________________________
===========================================================
Class C 2,566,055
___________________________________________________________
===========================================================
Class R 80,535
___________________________________________________________
===========================================================
Investor Class 5,704,142
___________________________________________________________
===========================================================
Institutional Class 1,513,815
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 12.36
-----------------------------------------------------------
Offering price per share:
(Net asset value of $12.36 divided by
94.50%) $ 13.08
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.02
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.02
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 12.31
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 12.37
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 12.38
___________________________________________________________
===========================================================
|
* At October 31, 2004, securities with an aggregate market value of $6,877,673 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-122
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $71,703) $ 4,901,739
-------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $17,393)* 154,542
=========================================================================
Total investment income 5,056,281
=========================================================================
EXPENSES:
Advisory fees 2,109,274
-------------------------------------------------------------------------
Administrative services fees 125,883
-------------------------------------------------------------------------
Custodian fees 43,391
-------------------------------------------------------------------------
Distribution fees:
Class A 525,588
-------------------------------------------------------------------------
Class B 893,755
-------------------------------------------------------------------------
Class C 314,386
-------------------------------------------------------------------------
Class R 3,976
-------------------------------------------------------------------------
Investor Class 188,897
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor 868,093
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 3,536
-------------------------------------------------------------------------
Trustees' fees and retirement benefits 18,698
-------------------------------------------------------------------------
Other 327,822
=========================================================================
Total expenses 5,423,299
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (48,743)
=========================================================================
Net expenses 5,374,556
=========================================================================
Net investment income (loss) (318,275)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 12,491,108
-------------------------------------------------------------------------
Foreign currencies 9,419
=========================================================================
12,500,527
=========================================================================
Change in net unrealized appreciation of investment
securities 13,417,119
=========================================================================
Net gain from investment securities and foreign currencies 25,917,646
=========================================================================
Net increase in net assets resulting from operations $25,599,371
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-123
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (318,275) $ (639,955)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 12,500,527 (9,793,824)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 13,417,119 51,420,584
==========================================================================================
Net increase in net assets resulting from operations 25,599,371 40,986,805
==========================================================================================
Share transactions-net:
Class A 18,535,871 5,382,960
------------------------------------------------------------------------------------------
Class B (1,304,921) 2,113,303
------------------------------------------------------------------------------------------
Class C 2,160,392 (14,173)
------------------------------------------------------------------------------------------
Class R 365,393 537,385
------------------------------------------------------------------------------------------
Investor Class 62,887,146 177,572
------------------------------------------------------------------------------------------
Institutional Class 18,632,135 --
==========================================================================================
Net increase in net assets resulting from share
transactions 101,276,016 8,197,047
==========================================================================================
Net increase in net assets 126,875,387 49,183,852
==========================================================================================
NET ASSETS:
Beginning of year 229,330,073 180,146,221
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(57,053) and $(25,218), respectively) $356,205,460 $229,330,073
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-124
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-125
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $2,312.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $41,164 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $125,883 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the
FS-126
Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $868,093 for Class A, Class B, Class C, Class R and Investor Class shares and $3,536 for Institutional Class. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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, 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $525,588, $893,755, $314,386, $3,976, $188,897, 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, 2004, AIM Distributors advised the Fund that it retained $78,339 in front-end sales commissions from the sale of Class A shares and $1,584, $11,543, $4,072 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,921,637 $ 39,445,160 $ (37,576,331) $ -- $ 3,790,466 $ 69,486 $ --
------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,921,637 39,445,160 (37,576,331) -- 3,790,466 67,663 --
==============================================================================================================================
Subtotal $3,843,274 $ 78,890,320 $ (75,152,662) $ -- $ 7,580,932 $137,149 $ --
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $3,248,000 $ 74,751,501 $ (77,999,501) $ -- $ -- $ 13,457 $ --
------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 26,802,341 (19,605,891) -- 7,196,450 3,936 --
==============================================================================================================================
Subtotal $3,248,000 $101,553,842 $ (97,605,392) $ -- $ 7,196,450 $ 17,393 $ --
==============================================================================================================================
Total $7,091,274 $180,444,162 $(172,758,054) $ -- $14,777,382 $154,542 $ --
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-127
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $2,159,448 and $4,625,830, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $5,264 and credits in custodian fees of $3 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $5,267.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $5,344 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-128
At October 31, 2004, securities with an aggregate value of $6,877,673 were on loan to brokers. The loans were secured by cash collateral of $7,196,450, received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $17,393 for securities lending transactions.
NOTE 9--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, 2004 and October 31, 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
--------------------------------------------------------------------------
Unrealized appreciation -- investments $ 39,701,181
--------------------------------------------------------------------------
Temporary book/tax differences (57,053)
--------------------------------------------------------------------------
Capital loss carryforward (18,651,714)
--------------------------------------------------------------------------
Shares of beneficial interest 335,213,046
==========================================================================
Total net assets $356,205,460
__________________________________________________________________________
==========================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $18,651,714 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund utilized $12,094,867 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2010 $ 9,120,472
-----------------------------------------------------------------------------
October 31, 2011 9,531,242
=============================================================================
Total capital loss carryforward $18,651,714
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Value Equity Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $108,851,727 and $96,576,124, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 55,037,043 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (15,335,862) ============================================================================== Net unrealized appreciation of investment securities $ 39,701,181 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $324,997,056. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions, on October 31, 2004, undistributed net investment income (loss) was increased by $318,190, undistributed net realized gain (loss) was decreased by $9,419 and shares of beneficial interest decreased by $308,771. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Value Equity Fund into the Fund, undistributed net
FS-129
investment income (loss) was decreased by $31,750, undistributed net realized gain (loss) was decreased by $6,270,695, and shares of beneficial interest increased by $6,302,445. This reclassification had no effect on the net assets of the Fund.
NOTE 12--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 certain 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(A)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,797,896 $ 59,721,792 5,695,229 $ 56,588,456
----------------------------------------------------------------------------------------------------------------------
Class B 1,918,978 23,316,127 2,611,379 25,467,901
----------------------------------------------------------------------------------------------------------------------
Class C 753,705 9,128,932 936,198 9,069,047
----------------------------------------------------------------------------------------------------------------------
Class R 54,757 677,970 59,714 632,113
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 1,838,069 22,849,380 30,507 346,714
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) 1,526,455 18,788,116 -- --
======================================================================================================================
Issued in connection with acquisitions:(d)
Class A 23,582 268,604 -- --
----------------------------------------------------------------------------------------------------------------------
Class B 31,404 350,200 -- --
----------------------------------------------------------------------------------------------------------------------
Class C 100,704 1,122,781 -- --
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 7,662,600 87,273,020 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 467,293 5,834,860 315,247 3,158,288
----------------------------------------------------------------------------------------------------------------------
Class B (478,951) (5,834,860) (321,047) (3,158,288)
======================================================================================================================
Reacquired:
Class A (3,841,386) (47,289,385) (5,558,986) (54,363,784)
----------------------------------------------------------------------------------------------------------------------
Class B (1,581,802) (19,136,388) (2,170,734) (20,196,310)
----------------------------------------------------------------------------------------------------------------------
Class C (671,051) (8,091,321) (955,066) (9,083,220)
----------------------------------------------------------------------------------------------------------------------
Class R (25,935) (312,577) (8,863) (94,728)
----------------------------------------------------------------------------------------------------------------------
Investor Class(b) (3,812,184) (47,235,254) (14,850) (169,142)
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) (12,640) (155,981) -- --
======================================================================================================================
8,751,494 $101,276,016 618,728 $ 8,197,047
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 13% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder are also
owned beneficially. 5% of the outstanding shares of the Fund are owned by
affiliated mutual funds. Affiliated mutual funds are mutual funds that are
advised by AIM.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) 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 on 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-130
NOTE 13--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,
--------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $ 9.20 $ 10.94 $ 12.05 $ 9.40
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.00)(a) 0.01(a) 0.02(a) 0.07(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 2.19 (1.75) (1.07) 2.88
============================================================================================================================
Total from investment operations 0.97 2.19 (1.74) (1.05) 2.95
============================================================================================================================
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 $ 12.36 $ 11.39 $ 9.20 $ 10.94 $12.05
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 8.52% 23.80% (15.90)% (8.74)% 32.21%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $150,190 $121,980 $94,387 $68,676 $5,888
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.33%(c) 1.42% 1.38% 1.27% 1.25%
----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.35%(c) 1.42% 1.38% 1.36% 8.21%
============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.11%(c) (0.01)% 0.11% 0.17% 0.62%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $150,168,025.
FS-131
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-------------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------------------------------------- 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) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment operations 0.87 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 $ 12.02 $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.80% 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $84,896 $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.98%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.54)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 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 assets values may differ from the net 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 $89,375,514.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-132
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------------
AUGUST 1, 2000
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) 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) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment operations 0.87 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 $ 12.02 $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.80% 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,835 $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.98%(c) 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.00%(c) 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.54)%(c) (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 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 assets values may differ from the net 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 $31,438,601.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-133
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
------------------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
-------------------------- 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)(a) (0.02)(a) (0.00)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.96 2.18 (2.40)
==============================================================================================================
Total from investment operations 0.95 2.16 (2.40)
==============================================================================================================
Net asset value, end of period $12.31 $11.36 $ 9.20
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 8.36% 23.48% (20.69)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 991 $ 588 $ 8
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 1.48%(c)(d) 1.57% 1.54%(e)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.04)%(c) (0.16)% (0.05)%(e)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(f) 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $795,090.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.50% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
INVESTOR CLASS
-----------------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.39 $10.98
-------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.00)(a)
-------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.95 0.41
=======================================================================================================
Total from investment operations 0.98 0.41
=======================================================================================================
Net asset value, end of period $ 12.37 $11.39
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 8.60% 3.73%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,548 $ 178
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets: 1.24%(c)(d) 1.25%(e)
=======================================================================================================
Ratio of net investment income to average net assets 0.20%(c) 0.16%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 32% 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 assets values may differ from the net value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $75,558,943.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.25% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-134
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.62
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)
-----------------------------------------------------------------------------------
Net losses on securities (both realized and unrealized) (0.28)
===================================================================================
Total from investment operations (0.24)
===================================================================================
Net asset value, end of period $ 12.38
___________________________________________________________________________________
===================================================================================
Total return(b) (1.90)%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,745
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets: 0.80%(c)(d)
===================================================================================
Ratio of net investment income to average net assets 0.64%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(e) 32%
___________________________________________________________________________________
===================================================================================
|
(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 assets values may differ from the net 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
$8,327,922.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.81% for the year ended October 31, 2004.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the
FS-135
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-136
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-137
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-138
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-139
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.91%
AEROSPACE & DEFENSE-3.89%
Boeing Co. (The) 127,000 $ 6,337,300
------------------------------------------------------------------------
General Dynamics Corp. 75,000 7,659,000
------------------------------------------------------------------------
Northrop Grumman Corp. 90,000 4,657,500
------------------------------------------------------------------------
Rockwell Collins, Inc. 140,000 4,965,800
------------------------------------------------------------------------
United Technologies Corp. 56,200 5,216,484
========================================================================
28,836,084
========================================================================
AIR FREIGHT & LOGISTICS-0.68%
FedEx Corp. 55,000 5,011,600
========================================================================
APPAREL RETAIL-1.13%
Limited Brands 337,000 8,350,860
========================================================================
APPLICATION SOFTWARE-0.94%
Autodesk, Inc. 132,000 6,963,000
========================================================================
BIOTECHNOLOGY-0.61%
Genentech, Inc.(a) 99,000 4,507,470
========================================================================
BUILDING PRODUCTS-2.14%
American Standard Cos. Inc.(a) 175,000 6,399,750
------------------------------------------------------------------------
Masco Corp. 275,000 9,421,500
========================================================================
15,821,250
========================================================================
COMMUNICATIONS EQUIPMENT-4.98%
Cisco Systems, Inc.(a) 696,440 13,378,612
------------------------------------------------------------------------
Motorola, Inc. 417,000 7,197,420
------------------------------------------------------------------------
QUALCOMM Inc. 390,000 16,305,900
========================================================================
36,881,932
========================================================================
COMPUTER HARDWARE-2.26%
Dell Inc.(a) 476,600 16,709,596
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.61%
Lexmark International, Inc.-Class A(a) 54,000 4,487,940
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
PACCAR Inc. 70,000 4,851,700
========================================================================
CONSUMER ELECTRONICS-2.29%
Harman International Industries, Inc. 141,000 16,945,380
========================================================================
CONSUMER FINANCE-2.21%
American Express Co. 89,300 4,739,151
------------------------------------------------------------------------
MBNA Corp. 190,000 4,869,700
------------------------------------------------------------------------
SLM Corp. 150,000 6,789,000
========================================================================
16,397,851
========================================================================
DEPARTMENT STORES-1.82%
J.C. Penney Co., Inc. 158,000 5,465,220
------------------------------------------------------------------------
Nordstrom, Inc. 186,000 8,031,480
========================================================================
13,496,700
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-0.60%
Cendant Corp. 217,000 $ 4,468,030
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.07%
Rockwell Automation, Inc. 191,000 7,962,790
========================================================================
FOOTWEAR-1.99%
NIKE, Inc.-Class B 181,000 14,717,110
========================================================================
HEALTH CARE EQUIPMENT-3.93%
Bard (C.R.), Inc. 100,000 5,680,000
------------------------------------------------------------------------
Becton, Dickinson & Co. 259,000 13,597,500
------------------------------------------------------------------------
Medtronic, Inc. 95,000 4,855,450
------------------------------------------------------------------------
Waters Corp.(a) 120,000 4,954,800
========================================================================
29,087,750
========================================================================
HEALTH CARE SERVICES-1.71%
IMS Health Inc. 206,600 4,375,788
------------------------------------------------------------------------
Quest Diagnostics Inc. 95,000 8,316,300
========================================================================
12,692,088
========================================================================
HEALTH CARE SUPPLIES-1.88%
Alcon, Inc. (Switzerland) 195,700 13,933,840
========================================================================
HOME IMPROVEMENT RETAIL-1.25%
Home Depot, Inc. (The) 225,000 9,243,000
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.60%
Marriott International, Inc.-Class A 81,000 4,413,690
========================================================================
HOUSEHOLD APPLIANCES-0.91%
Black & Decker Corp. (The) 84,000 6,743,520
========================================================================
HOUSEHOLD PRODUCTS-2.60%
Procter & Gamble Co. (The) 377,000 19,294,860
========================================================================
HOUSEWARES & SPECIALTIES-1.01%
Fortune Brands, Inc. 103,000 7,500,460
========================================================================
HYPERMARKETS & SUPER CENTERS-2.34%
Costco Wholesale Corp. 361,000 17,306,340
========================================================================
INDUSTRIAL CONGLOMERATES-3.43%
3M Co. 202,000 15,669,140
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 313,000 9,749,950
========================================================================
25,419,090
========================================================================
INDUSTRIAL MACHINERY-2.81%
Danaher Corp.(b) 104,000 5,733,520
------------------------------------------------------------------------
Eaton Corp. 116,000 7,418,200
------------------------------------------------------------------------
Illinois Tool Works Inc. 83,000 7,659,240
========================================================================
20,810,960
========================================================================
|
FS-140
MARKET
SHARES VALUE
------------------------------------------------------------------------
INTEGRATED OIL & GAS-3.34%
BP PLC-ADR (United Kingdom) 143,000 $ 8,329,750
------------------------------------------------------------------------
ChevronTexaco Corp. 155,000 8,224,300
------------------------------------------------------------------------
ConocoPhillips 97,000 8,178,070
========================================================================
24,732,120
========================================================================
INTERNET RETAIL-1.57%
eBay Inc.(a) 119,000 11,615,590
========================================================================
INTERNET SOFTWARE & SERVICES-2.19%
Yahoo! Inc.(a) 448,200 16,220,358
========================================================================
IT CONSULTING & OTHER SERVICES-1.77%
Accenture Ltd.-Class A (Bermuda)(a) 541,000 13,097,610
========================================================================
MANAGED HEALTH CARE-2.18%
UnitedHealth Group Inc. 223,000 16,145,200
========================================================================
MOTORCYCLE MANUFACTURERS-1.97%
Harley-Davidson, Inc. 254,000 14,622,780
========================================================================
OFFICE ELECTRONICS-0.91%
Xerox Corp.(a)(b) 455,000 6,720,350
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.71%
Citigroup Inc. 119,221 5,289,836
========================================================================
PERSONAL PRODUCTS-6.21%
Avon Products, Inc. 349,800 13,834,590
------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 230,000 9,878,500
------------------------------------------------------------------------
Gillette Co. (The) 537,000 22,274,760
========================================================================
45,987,850
========================================================================
PHARMACEUTICALS-3.87%
Johnson & Johnson 491,000 28,664,580
========================================================================
PROPERTY & CASUALTY INSURANCE-0.82%
Allstate Corp. (The) 126,000 6,059,340
========================================================================
RESTAURANTS-4.96%
McDonald's Corp. 487,000 14,196,050
------------------------------------------------------------------------
Starbucks Corp.(a) 149,000 7,879,120
------------------------------------------------------------------------
Yum! Brands, Inc. 337,000 14,659,500
========================================================================
36,734,670
========================================================================
SEMICONDUCTORS-0.96%
Analog Devices, Inc. 95,300 3,836,778
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Intel Corp. 149,000 $ 3,316,740
========================================================================
7,153,518
========================================================================
SOFT DRINKS-1.71%
PepsiCo, Inc. 256,000 12,692,480
========================================================================
SPECIALTY STORES-2.49%
Staples, Inc. 620,000 18,438,800
========================================================================
STEEL-0.60%
Nucor Corp. 105,000 4,434,150
========================================================================
SYSTEMS SOFTWARE-6.80%
Adobe Systems Inc. 194,000 10,869,820
------------------------------------------------------------------------
Microsoft Corp. 429,280 12,015,547
------------------------------------------------------------------------
Oracle Corp.(a) 389,000 4,924,740
------------------------------------------------------------------------
Symantec Corp.(a) 396,000 22,548,240
========================================================================
50,358,347
========================================================================
THRIFTS & MORTGAGE FINANCE-1.68%
Countrywide Financial Corp. 389,000 12,420,770
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.83%
W.W. Grainger, Inc. 105,000 6,151,950
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $621,566,204) 710,395,190
========================================================================
MONEY MARKET FUNDS-3.85%
Liquid Assets Portfolio-Institutional
Class(c) 14,259,968 14,259,968
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 14,259,968 14,259,968
========================================================================
Total Money Market Funds (Cost
$28,519,936) 28,519,936
========================================================================
TOTAL INVESTMENTS-99.76% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $650,086,140) 738,915,126
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.66%
Liquid Assets Portfolio-Institutional
Class(c)(d) 4,905,700 4,905,700
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $4,905,700) 4,905,700
========================================================================
TOTAL INVESTMENTS-100.42% (Cost $654,991,840) 743,820,826
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.42%) (3,115,847)
========================================================================
NET ASSETS-100.00% $740,704,979
________________________________________________________________________
========================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-141
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$621,566,204)* $ 710,395,190
------------------------------------------------------------
Investments in affiliated money market
funds (cost $33,425,636) 33,425,636
============================================================
Total investments (cost $654,991,840) 743,820,826
============================================================
Receivables for:
Investments sold 2,182,403
------------------------------------------------------------
Fund shares sold 1,017,641
------------------------------------------------------------
Dividends 483,016
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 154,151
------------------------------------------------------------
Other assets 69,573
============================================================
Total assets 747,727,610
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,389,536
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 191,745
------------------------------------------------------------
Collateral upon return of securities
loaned 4,905,700
------------------------------------------------------------
Accrued distribution fees 262,952
------------------------------------------------------------
Accrued trustees' fees 1,728
------------------------------------------------------------
Accrued transfer agent fees 270,970
============================================================
Total liabilities 7,022,631
============================================================
Net assets applicable to shares outstanding $ 740,704,979
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,293,726,418
------------------------------------------------------------
Undistributed net investment income (loss) (131,109)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (1,641,719,316)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 88,828,986
============================================================
$ 740,704,979
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 177,497,860
____________________________________________________________
============================================================
Class B $ 112,930,837
____________________________________________________________
============================================================
Class C $ 48,420,471
____________________________________________________________
============================================================
Class R $ 2,761,191
____________________________________________________________
============================================================
Investor Class $ 376,904,848
____________________________________________________________
============================================================
Institutional Class $ 22,189,772
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 19,384,974
____________________________________________________________
============================================================
Class B 12,797,591
____________________________________________________________
============================================================
Class C 5,484,462
____________________________________________________________
============================================================
Class R 302,503
____________________________________________________________
============================================================
Investor Class 40,986,060
____________________________________________________________
============================================================
Institutional Class 2,417,583
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.16 divided by
94.50%) $ 9.69
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.82
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.83
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 9.20
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.18
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $4,820,915 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-142
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $49,547) $ 4,445,838
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $24,288)* 225,252
==========================================================================
Total investment income 4,671,090
==========================================================================
EXPENSES:
Advisory fees 5,663,512
--------------------------------------------------------------------------
Administrative services fees 218,708
--------------------------------------------------------------------------
Custodian fees 53,205
--------------------------------------------------------------------------
Distribution fees:
Class A 606,542
--------------------------------------------------------------------------
Class B 1,205,821
--------------------------------------------------------------------------
Class C 499,243
--------------------------------------------------------------------------
Class R 12,219
--------------------------------------------------------------------------
Investor Class 888,532
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 2,635,697
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 3,478
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 25,808
--------------------------------------------------------------------------
Other 442,622
==========================================================================
Total expenses 12,255,387
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (978,085)
==========================================================================
Net expenses 11,277,302
==========================================================================
Net investment income (loss) (6,606,212)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 98,241,139
--------------------------------------------------------------------------
Foreign currencies (27,375)
==========================================================================
98,213,764
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (67,692,327)
--------------------------------------------------------------------------
Foreign currencies (11)
==========================================================================
(67,692,338)
==========================================================================
Net gain from investment securities and foreign currencies 30,521,426
==========================================================================
Net increase in net assets resulting from operations $ 23,915,214
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-143
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (6,606,212) $ (3,634,169)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and foreign currencies 98,213,764 (11,557,152)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (67,692,338) 66,632,928
==========================================================================================
Net increase in net assets resulting from operations 23,915,214 51,441,607
==========================================================================================
Share transactions-net:
Class A 18,678,547 24,813,254
------------------------------------------------------------------------------------------
Class B (12,082,083) (2,160,788)
------------------------------------------------------------------------------------------
Class C 3,097,603 594,530
------------------------------------------------------------------------------------------
Class R 574,491 1,830,726
------------------------------------------------------------------------------------------
Investor Class 361,821,129 173,236
------------------------------------------------------------------------------------------
Institutional Class 22,063,157 --
==========================================================================================
Net increase in net assets resulting from share
transactions 394,152,844 25,250,958
==========================================================================================
Net increase in net assets 418,068,058 76,692,565
==========================================================================================
NET ASSETS:
Beginning of year 322,636,921 245,944,356
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(131,109) and $(32,869), respectively). $740,704,979 $322,636,921
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-144
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-145
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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 affiliated money market funds with cash
FS-146
collateral from securities loaned by the fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $3,368.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $59,549 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $218,708 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $2,635,697 for Class A, Class B, Class C, Class R and Investor Class shares and $3,478 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 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 year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $606,542, $1,205,821, $499,243, $12,219 and $888,532. AIM reimbursed $902,390 of Investor Class expenses related to an overpayment of Rule 12b-1 fees of the INVESCO Growth Fund (a fund acquired by the Fund in a merger on November 3, 2003) paid to INVESCO Distributors, Inc., the prior distributor of INVESCO Growth Fund and an AIM affiliate.
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, 2004, AIM Distributors advised the Fund that it retained $83,801 in front-end sales commissions from the sale of Class A shares and $890, $12,380, $4,895 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,325,601 $147,601,547 $(138,667,180) $ -- $14,259,968 $100,940 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 5,325,601 147,601,547 (138,667,180) -- 14,259,968 100,024 --
==================================================================================================================================
Subtotal $10,651,202 $295,203,094 $(277,334,360) $ -- $28,519,936 $200,964 $ --
==================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,969,563 $311,892,022 $(312,955,885) $ -- $ 4,905,700 $ 24,288 $ --
==================================================================================================================================
Total $16,620,765 $607,095,116 $(590,290,245) $ -- $33,425,636 $225,252 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
FS-147
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $10,034,447 and $17,960,639, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $12,205 and credits in custodian fees of $573 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $12,778.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $6,385 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $4,820,915 were on loan to brokers. The loans were secured by cash collateral of $4,905,700 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $24,288 for securities lending transactions.
FS-148
NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 81,823,318
-----------------------------------------------------------------------------
Temporary book/tax differences (131,109)
-----------------------------------------------------------------------------
Capital loss carryforward (1,634,713,648)
-----------------------------------------------------------------------------
Shares of Beneficial Interest 2,293,726,418
=============================================================================
Total net assets $ 740,704,979
_____________________________________________________________________________
=============================================================================
|
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 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,546,950,857 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund utilized $83,728,510 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------------------
October 31, 2009 $1,067,082,723
-----------------------------------------------------------------------------------------
October 31, 2010 532,535,321
-----------------------------------------------------------------------------------------
October 31, 2011 35,095,604
=========================================================================================
Total capital loss carryforward $1,634,713,648
_________________________________________________________________________________________
=========================================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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 year ended October 31, 2004 was $904,935,222 and $600,186,187, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $90,270,070 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,446,752) =============================================================================== Net unrealized appreciation of investment securities $81,823,318 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $661,997,508. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions on October 31, 2004, undistributed net investment income (loss) was increased by $6,616,586, undistributed net realized gain (loss) was increased by $27,375 and shares of beneficial interest decreased by $6,643,961. This reclassification had no effect on the net assets of the Fund. Further, as a result of tax deferrals acquired in the reorganization of INVESCO Growth Fund into the Fund, undistributed net investment income (loss) was decreased by $108,614, undistributed net realized gain (loss) was decreased by $1,337,791,398 and shares of beneficial interest increased by $1,337,900,012. These reclassifications had no effect on the net assets of the Fund.
FS-149
NOTE 12--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 certain 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(A)
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2004 2003
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,225,450 $ 57,170,463 9,469,394 $ 73,883,856
------------------------------------------------------------------------------------------------------------------------
Class B 2,516,228 22,341,073 4,041,264 29,817,268
------------------------------------------------------------------------------------------------------------------------
Class C 2,041,593 18,173,950 2,208,427 16,412,874
------------------------------------------------------------------------------------------------------------------------
Class R 111,709 1,022,930 278,067 2,156,076
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 4,268,368 39,323,955 20,194 178,134
------------------------------------------------------------------------------------------------------------------------
Institutional Class(c) 2,436,212 22,232,973 -- --
========================================================================================================================
Issued in connection with acquisitions:(d)
Class A 445,760 3,960,921 -- --
------------------------------------------------------------------------------------------------------------------------
Class B 24,464 210,855 -- --
------------------------------------------------------------------------------------------------------------------------
Class C 426,258 3,668,554 -- --
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) 50,546,207 449,143,077 -- --
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 472,810 4,373,299 325,063 2,536,902
------------------------------------------------------------------------------------------------------------------------
Class B (489,052) (4,373,299) (334,300) (2,536,902)
========================================================================================================================
Reacquired:
Class A (5,108,536) (46,826,136) (6,726,902) (51,607,504)
------------------------------------------------------------------------------------------------------------------------
Class B (3,420,244) (30,260,712) (3,989,440) (29,441,154)
------------------------------------------------------------------------------------------------------------------------
Class C (2,120,502) (18,744,901) (2,147,493) (15,818,344)
------------------------------------------------------------------------------------------------------------------------
Class R (48,964) (448,439) (39,568) (325,350)
------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (13,848,145) (126,645,903) (564) (4,898)
------------------------------------------------------------------------------------------------------------------------
Institutional Class(c) (18,629) (169,816) -- --
========================================================================================================================
44,460,987 $ 394,152,844 3,104,142 $ 25,250,958
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 10% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder is also
owned beneficially.
(b) Investor Class shares commenced sales on September 30, 2003.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) As of the opening of business on November 3, 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 on 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-150
NOTE 13--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,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 7.37 $ 8.82 $ 17.74 $ 11.29
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.36 1.59 (1.36) (8.84) 6.60
===========================================================================================================================
Total from investment operations 0.28 1.51 (1.45) (8.92) 6.45
===========================================================================================================================
Net asset value, end of period $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 3.15% 20.49% (16.44)% (50.28)% 57.13%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $177,498 $154,052 $105,320 $138,269 $225,255
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 1.54%(c)(d) 1.82% 1.70% 1.57% 1.58%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.92)%(c) (1.01)% (1.01)% (0.72)% (0.82)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $173,297,774.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.61 $ 7.20 $ 8.67 $ 17.54 $ 11.25
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.35 1.53 (1.33) (8.71) 6.56
===========================================================================================================================
Total from investment operations 0.21 1.41 (1.47) (8.87) 6.29
===========================================================================================================================
Net asset value, end of period $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 2.44% 19.58% (16.96)% (50.57)% 55.91%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $112,931 $122,011 $104,040 $144,747 $210,224
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.19%(c)(d) 2.47% 2.35% 2.23% 2.24%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.57)%(c) (1.66)% (1.66)% (1.39)% (1.48)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $120,582,108.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.20%.
FS-151
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.62 $ 7.21 $ 8.67 $ 17.55 $ 11.25
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.35 1.53 (1.32) (8.72) 6.57
======================================================================================================================
Total from investment operations 0.21 1.41 (1.46) (8.88) 6.30
======================================================================================================================
Net asset value, end of period $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.44% 19.56% (16.84)% (50.60)% 56.00%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $48,420 $44,272 $36,575 $57,865 $79,392
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 2.19%(c)(d) 2.47% 2.35% 2.23% 2.24%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.57)%(c) (1.66)% (1.66)% (1.39)% (1.48)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 111% 123% 111% 124% 113%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(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 the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $49,924,256.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.20%.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.09)(a) (0.04)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.36 1.59 (0.99)
====================================================================================================
Total from investment operations 0.26 1.50 (1.03)
====================================================================================================
Net asset value, end of period $ 9.13 $ 8.87 $ 7.37
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 2.93% 20.35% (12.26)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,761 $2,127 $ 9
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.69%(c)(d) 1.97% 1.85%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (1.07)%(c) (1.16)% (1.16)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 111% 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,443,827.
(d) After fee waivers and /or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.70%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-152
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS
---------------------------------
SEPTEMBER 30, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2004 2003
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.88 $ 8.24
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)(b) (0.01)(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.37 0.65
=================================================================================================
Total from investment operations 0.32 0.64
=================================================================================================
Net asset value, end of period $ 9.20 $ 8.88
_________________________________________________________________________________________________
=================================================================================================
Total return(c) 3.60%(b) 7.77%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $376,905 $ 174
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets 1.19%(b)(d)(e) 1.56%(f)
=================================================================================================
Ratio of net investment income (loss) to average net assets (0.57)%(d) (0.75)%(f)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(g) 111% 123%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) The advisor reimbursed Investor Class expenses related to an overpayment
of Rule 12b-1 fees of the INVESCO Growth fund paid to INVESCO
Distributors, Inc., the prior distributor of INVESCO Growth Fund. Had
the advisor not reimbursed these expenses the net investment income per
share, the ratio of expenses to average net assets, the ratio of net
investment income to average net assets and the total return would have
been (0.07), 1.41%, (0.79) and 3.27%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are based on average daily net assets of $403,878,080.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.42%.
(f) Annualized.
(g) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.13
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a)
-----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.06
===================================================================================
Total from investment operations 0.05
===================================================================================
Net asset value, end of period $ 9.18
___________________________________________________________________________________
===================================================================================
Total return(b) 0.55%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,190
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.92%(c)
-----------------------------------------------------------------------------------
With fee waivers and/or expense reimbursements 0.93%(c)
===================================================================================
Ratio of net investment income (loss) to average net assets (0.30)%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(d) 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$9,909,449.
(d) Not annualized for periods less than one year.
FS-153
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-154
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-155
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-156
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-157
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.10%
ADVERTISING-0.73%
Omnicom Group Inc. 18,000 $ 1,420,200
=====================================================================
AEROSPACE & DEFENSE-0.68%
L-3 Communications Holdings, Inc. 20,000 1,318,600
=====================================================================
AIR FREIGHT & LOGISTICS-0.64%
Robinson (C.H.) Worldwide, Inc. 23,000 1,240,620
=====================================================================
APPAREL RETAIL-2.24%
Chico's FAS, Inc.(a) 44,000 1,761,320
---------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 55,000 1,289,200
---------------------------------------------------------------------
Urban Outfitters, Inc.(a) 32,000 1,312,000
=====================================================================
4,362,520
=====================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.96%
Coach, Inc.(a) 40,000 1,865,200
=====================================================================
APPLICATION SOFTWARE-2.70%
Amdocs Ltd. (United Kingdom)(a) 85,200 2,142,780
---------------------------------------------------------------------
Intuit Inc.(a) 40,000 1,814,400
---------------------------------------------------------------------
Mercury Interactive Corp.(a) 30,000 1,302,900
=====================================================================
5,260,080
=====================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.46%
Calamos Asset Management, Inc.-Class A(a) 60,700 1,183,650
---------------------------------------------------------------------
Franklin Resources, Inc. 18,000 1,091,160
---------------------------------------------------------------------
Investors Financial Services Corp.(b) 55,000 2,116,950
---------------------------------------------------------------------
Legg Mason, Inc. 37,000 2,357,270
=====================================================================
6,749,030
=====================================================================
AUTO PARTS & EQUIPMENT-0.55%
Autoliv, Inc. 25,000 1,068,750
=====================================================================
BIOTECHNOLOGY-3.87%
Cephalon, Inc.(a) 21,000 1,001,070
---------------------------------------------------------------------
Charles River Laboratories International,
Inc.(a) 22,000 1,029,380
---------------------------------------------------------------------
Gen-Probe Inc.(a) 32,000 1,121,280
---------------------------------------------------------------------
Gilead Sciences, Inc.(a) 35,000 1,212,050
---------------------------------------------------------------------
Invitrogen Corp.(a) 17,200 995,880
---------------------------------------------------------------------
Martek Biosciences Corp.(a) 26,000 1,223,456
---------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 15,000 974,700
=====================================================================
7,557,816
=====================================================================
BROADCASTING & CABLE TV-1.22%
Univision Communications Inc.-Class A(a) 77,000 2,383,920
=====================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
BUILDING PRODUCTS-1.02%
Masco Corp. 58,000 $ 1,987,080
=====================================================================
CASINOS & GAMING-0.52%
Station Casinos, Inc. 20,000 1,019,000
=====================================================================
COMMUNICATIONS EQUIPMENT-4.94%
Avaya Inc.(a) 140,000 2,016,000
---------------------------------------------------------------------
Comverse Technology, Inc.(a) 100,000 2,064,000
---------------------------------------------------------------------
Juniper Networks, Inc.(a) 40,300 1,072,383
---------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 21,000 1,852,200
---------------------------------------------------------------------
Scientific-Atlanta, Inc. 52,400 1,435,236
---------------------------------------------------------------------
UTStarcom, Inc.(a)(b) 70,000 1,198,400
=====================================================================
9,638,219
=====================================================================
COMPUTER & ELECTRONICS RETAIL-0.76%
Best Buy Co., Inc. 25,000 1,480,500
=====================================================================
COMPUTER HARDWARE-0.82%
PalmOne, Inc.(a)(b) 55,000 1,593,350
=====================================================================
COMPUTER STORAGE & PERIPHERALS-1.16%
Emulex Corp.(a) 92,000 966,920
---------------------------------------------------------------------
QLogic Corp.(a) 40,000 1,300,000
=====================================================================
2,266,920
=====================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.65%
Cummins Inc.(b) 18,000 1,261,440
=====================================================================
CONSUMER FINANCE-0.82%
First Marblehead Corp. (The)(a) 30,000 1,608,000
=====================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.52%
Affiliated Computer Services, Inc.-Class A(a) 20,000 1,091,000
---------------------------------------------------------------------
Alliance Data Systems Corp.(a) 50,000 2,114,000
---------------------------------------------------------------------
DST Systems, Inc.(a) 30,000 1,345,500
---------------------------------------------------------------------
Fiserv, Inc.(a) 65,000 2,310,100
=====================================================================
6,860,600
=====================================================================
DEPARTMENT STORES-1.70%
Kohl's Corp.(a) 39,900 2,025,324
---------------------------------------------------------------------
Nordstrom, Inc. 30,000 1,295,400
=====================================================================
3,320,724
=====================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.35%
Apollo Group, Inc.-Class A(a) 18,000 1,188,000
---------------------------------------------------------------------
Career Education Corp.(a) 35,000 1,097,950
---------------------------------------------------------------------
Cintas Corp. 30,000 1,294,200
---------------------------------------------------------------------
|
FS-158
MARKET
SHARES VALUE
---------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Corporate Executive Board Co. (The) 32,000 $ 2,036,800
---------------------------------------------------------------------
Corrections Corp. of America(a) 48,800 1,695,800
---------------------------------------------------------------------
ITT Educational Services, Inc.(a) 31,000 1,178,310
=====================================================================
8,491,060
=====================================================================
DRUG RETAIL-0.60%
Shoppers Drug Mart Corp. (Canada)(a) 38,300 1,165,133
=====================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.25%
Agilent Technologies, Inc.(a) 97,000 2,430,820
=====================================================================
ELECTRONIC MANUFACTURING SERVICES-0.54%
Benchmark Electronics, Inc.(a) 31,000 1,053,070
=====================================================================
EMPLOYMENT SERVICES-1.69%
Manpower Inc. 42,000 1,900,500
---------------------------------------------------------------------
Monster Worldwide Inc.(a) 50,000 1,402,500
=====================================================================
3,303,000
=====================================================================
ENVIRONMENTAL SERVICES-0.65%
Stericycle, Inc.(a) 28,000 1,269,240
=====================================================================
GENERAL MERCHANDISE STORES-1.79%
Dollar Tree Stores, Inc.(a) 70,000 2,023,000
---------------------------------------------------------------------
Family Dollar Stores, Inc. 50,000 1,477,500
=====================================================================
3,500,500
=====================================================================
HEALTH CARE DISTRIBUTORS-0.80%
Schein (Henry), Inc.(a) 24,800 1,568,104
=====================================================================
HEALTH CARE EQUIPMENT-4.81%
Biomet, Inc. 22,000 1,026,960
---------------------------------------------------------------------
Fisher Scientific International Inc.(a) 25,000 1,434,000
---------------------------------------------------------------------
INAMED Corp.(a) 26,000 1,381,900
---------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 27,000 1,345,410
---------------------------------------------------------------------
PerkinElmer, Inc. 80,000 1,643,200
---------------------------------------------------------------------
Waters Corp.(a) 24,000 990,960
---------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 20,000 1,551,800
=====================================================================
9,374,230
=====================================================================
HEALTH CARE FACILITIES-1.24%
Community Health Systems Inc.(a) 90,000 2,413,800
=====================================================================
HEALTH CARE SERVICES-2.08%
Caremark Rx, Inc.(a) 65,000 1,948,050
---------------------------------------------------------------------
Express Scripts, Inc.(a) 33,000 2,112,000
=====================================================================
4,060,050
=====================================================================
HEALTH CARE SUPPLIES-0.50%
Cooper Cos., Inc. (The) 14,000 984,900
=====================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
HOME FURNISHINGS-0.52%
Mohawk Industries, Inc.(a) 12,000 $ 1,020,960
=====================================================================
HOMEBUILDING-0.93%
Pulte Homes, Inc. 33,000 1,811,040
=====================================================================
HOTELS, RESORTS & CRUISE LINES-1.33%
Kerzner International Ltd. (Bahamas)(a) 19,000 963,680
---------------------------------------------------------------------
Marriott International, Inc.-Class A 30,000 1,634,700
=====================================================================
2,598,380
=====================================================================
HOUSEWARES & SPECIALTIES-0.96%
Jarden Corp.(a) 53,500 1,878,920
=====================================================================
INDUSTRIAL MACHINERY-0.75%
Eaton Corp. 23,000 1,470,850
=====================================================================
INSURANCE BROKERS-1.08%
Willis Group Holdings Ltd. (Bermuda) 58,700 2,110,265
=====================================================================
INTEGRATED OIL & GAS-0.86%
Murphy Oil Corp. 21,000 1,680,420
=====================================================================
INTERNET SOFTWARE & SERVICES-1.28%
Ask Jeeves, Inc.(a) 45,000 1,160,100
---------------------------------------------------------------------
SINA Corp. (Cayman Islands)(a) 40,000 1,340,000
=====================================================================
2,500,100
=====================================================================
IT CONSULTING & OTHER SERVICES-1.13%
Cognizant Technology Solutions Corp.-Class
A(a) 65,000 2,210,000
=====================================================================
LEISURE PRODUCTS-1.51%
Brunswick Corp. 35,000 1,642,200
---------------------------------------------------------------------
Marvel Enterprises, Inc.(a) 85,000 1,309,000
=====================================================================
2,951,200
=====================================================================
MANAGED HEALTH CARE-2.29%
Aetna Inc. 19,000 1,805,000
---------------------------------------------------------------------
Anthem, Inc.(a) 33,000 2,653,200
=====================================================================
4,458,200
=====================================================================
MULTI-LINE INSURANCE-0.66%
Quanta Capital Holdings Ltd. (Bermuda)(a) 144,200 1,297,800
=====================================================================
OIL & GAS DRILLING-1.73%
Noble Corp. (Cayman Islands)(a) 25,000 1,142,000
---------------------------------------------------------------------
Patterson-UTI Energy, Inc. 63,000 1,211,490
---------------------------------------------------------------------
Pride International, Inc.(a) 55,000 1,016,400
=====================================================================
3,369,890
=====================================================================
OIL & GAS EQUIPMENT & SERVICES-0.50%
Varco International, Inc.(a) 35,000 968,800
=====================================================================
|
FS-159
MARKET
SHARES VALUE
---------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-1.73%
Ultra Petroleum Corp. (Canada)(a) 35,000 $ 1,701,000
---------------------------------------------------------------------
XTO Energy Inc. 50,000 1,669,000
=====================================================================
3,370,000
=====================================================================
PHARMACEUTICALS-4.14%
Barr Pharmaceuticals Inc.(a) 35,000 1,317,750
---------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 36,000 1,285,200
---------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(b) 40,000 1,626,800
---------------------------------------------------------------------
MGI Pharma, Inc.(a) 50,000 1,333,500
---------------------------------------------------------------------
Sepracor Inc.(a) 24,000 1,102,320
---------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 50,000 1,420,000
=====================================================================
8,085,570
=====================================================================
PUBLISHING-0.70%
Getty Images, Inc.(a)(b) 23,000 1,359,990
=====================================================================
REAL ESTATE-0.92%
New Century Financial Corp. 32,500 1,792,375
=====================================================================
REGIONAL BANKS-0.61%
Commerce Bancorp, Inc. 20,000 1,184,800
=====================================================================
REINSURANCE-0.77%
Everest Re Group, Ltd. (Bermuda) 19,000 1,508,030
=====================================================================
RESTAURANTS-0.65%
Brinker International, Inc.(a) 39,000 1,259,700
=====================================================================
SEMICONDUCTOR EQUIPMENT-0.99%
Novellus Systems, Inc.(a) 74,800 1,938,068
=====================================================================
SEMICONDUCTORS-3.07%
ATI Technologies Inc. (Canada)(a) 70,000 1,263,500
---------------------------------------------------------------------
Broadcom Corp.-Class A(a) 45,000 1,217,250
---------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 75,000 2,142,750
---------------------------------------------------------------------
Microchip Technology Inc. 45,000 1,361,250
=====================================================================
5,984,750
=====================================================================
SPECIALTY CHEMICALS-0.57%
Ecolab Inc. 33,000 1,117,050
=====================================================================
SPECIALTY STORES-3.64%
Advance Auto Parts, Inc.(a) 45,000 1,760,400
---------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 50,000 2,039,500
---------------------------------------------------------------------
Staples, Inc. 60,000 1,784,400
---------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,526,800
=====================================================================
7,111,100
=====================================================================
SYSTEMS SOFTWARE-3.10%
Computer Associates International, Inc. 50,000 1,385,500
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Novell, Inc.(a) 175,000 $ 1,258,250
---------------------------------------------------------------------
Red Hat, Inc.(a)(b) 80,000 1,027,200
---------------------------------------------------------------------
Symantec Corp.(a) 16,600 945,204
---------------------------------------------------------------------
VERITAS Software Corp.(a) 65,000 1,422,200
=====================================================================
6,038,354
=====================================================================
TECHNOLOGY DISTRIBUTORS-1.02%
CDW Corp. 32,000 1,984,960
=====================================================================
THRIFTS & MORTGAGE FINANCE-1.53%
Doral Financial Corp. (Puerto Rico) 40,000 1,679,200
---------------------------------------------------------------------
W Holding Co., Inc. (Puerto Rico) 65,000 1,299,350
=====================================================================
2,978,550
=====================================================================
TRADING COMPANIES & DISTRIBUTORS-1.38%
Fastenal Co. 21,000 1,159,830
---------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class A 45,000 1,536,300
=====================================================================
2,696,130
=====================================================================
TRUCKING-1.11%
Sirva Inc.(a) 90,000 2,160,000
=====================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.38%
AO VimpelCom-ADR (Russia)(a) 11,000 1,254,000
---------------------------------------------------------------------
Nextel Partners, Inc.-Class A(a) 100,000 1,684,000
---------------------------------------------------------------------
NII Holdings Inc.(a)(b) 38,000 1,682,260
---------------------------------------------------------------------
SpectraSite, Inc.(a) 38,500 1,975,050
=====================================================================
6,595,310
=====================================================================
Total Common Stocks & Other Equity
Interests (Cost $164,645,208) 191,368,038
=====================================================================
|
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
OPTIONS PURCHASED-0.01%
PUTS-0.01%
XTO Energy Inc. (Oil & Gas Exploration &
Production) (Cost $70,660) 500 $30 Nov-04 8,750
===============================================================================================
|
SHARES
MONEY MARKET FUNDS-1.86%
Liquid Assets Portfolio-Institutional
Class(c) 1,818,420 1,818,420
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 1,818,420 1,818,420
=======================================================================
Total Money Market Funds (Cost
$3,636,840) 3,636,840
=======================================================================
TOTAL INVESTMENTS-99.97% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $168,352,708) 195,013,628
=======================================================================
|
FS-160
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.48%
STIC Prime Portfolio-Institutional
Class(c)(d) 6,790,375 $ 6,790,375
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $6,790,375) 6,790,375
=======================================================================
TOTAL INVESTMENTS-103.45% (Cost $175,143,083) 201,804,003
=======================================================================
OTHER ASSETS LESS LIABILITIES-(3.45%) (6,732,117)
=======================================================================
NET ASSETS-100.00% $195,071,886
_______________________________________________________________________
=======================================================================
|
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
security lending transactions at October 31, 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-161
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$164,715,868)* $ 191,376,788
------------------------------------------------------------
Investments in affiliated money market funds
(cost $10,427,215) 10,427,215
============================================================
Total investments (cost $175,143,083) 201,804,003
============================================================
Receivables for:
Investments sold 5,998,273
------------------------------------------------------------
Fund shares sold 140,843
------------------------------------------------------------
Dividends 23,987
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 27,100
------------------------------------------------------------
Other assets 33,155
============================================================
Total assets 208,027,361
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,257,491
------------------------------------------------------------
Fund shares reacquired 663,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 32,411
------------------------------------------------------------
Collateral upon return of securities loaned 6,790,375
------------------------------------------------------------
Accrued distribution fees 104,705
------------------------------------------------------------
Accrued trustees' fees 941
------------------------------------------------------------
Accrued transfer agent fees 26,248
------------------------------------------------------------
Accrued operating expenses 79,804
============================================================
Total liabilities 12,955,475
============================================================
Net assets applicable to shares outstanding $ 195,071,886
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 307,591,806
------------------------------------------------------------
Undistributed net investment income (loss) (29,371)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (139,144,919)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 26,654,370
============================================================
$ 195,071,886
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 99,261,624
____________________________________________________________
============================================================
Class B $ 70,420,726
____________________________________________________________
============================================================
Class C $ 24,503,049
____________________________________________________________
============================================================
Class R $ 876,607
____________________________________________________________
============================================================
Institutional Class $ 9,880
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,934,912
____________________________________________________________
============================================================
Class B 8,033,455
____________________________________________________________
============================================================
Class C 2,794,530
============================================================
Class R 97,064
____________________________________________________________
============================================================
Institutional Class 1,085
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.08
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.08 divided by
94.50%) $ 9.61
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.77
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.77
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.03
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.11
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $6,544,219 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-162
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,918) $ 683,992
-------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $63,247)* 153,142
=========================================================================
Total investment income 837,134
=========================================================================
EXPENSES:
Advisory fees 1,780,749
-------------------------------------------------------------------------
Administrative services fees 86,224
-------------------------------------------------------------------------
Custodian fees 61,905
-------------------------------------------------------------------------
Distribution fees:
Class A 394,349
-------------------------------------------------------------------------
Class B 802,204
-------------------------------------------------------------------------
Class C 291,132
-------------------------------------------------------------------------
Class R 2,920
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 912,181
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 9
-------------------------------------------------------------------------
Trustees' fees and retirement benefits 16,001
-------------------------------------------------------------------------
Other 281,545
=========================================================================
Total expenses 4,629,219
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (42,438)
=========================================================================
Net expenses 4,586,781
=========================================================================
Net investment income (loss) (3,749,647)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from investment securities 9,151,671
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (2,975,847)
-------------------------------------------------------------------------
Foreign currencies (6,549)
=========================================================================
(2,982,396)
=========================================================================
Net gain from investment securities 6,169,275
=========================================================================
Net increase in net assets resulting from operations $ 2,419,628
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-163
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (3,749,647) $ (2,955,493)
------------------------------------------------------------------------------------------
Net realized gain from investment securities 9,151,671 14,307,340
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (2,982,396) 42,907,455
==========================================================================================
Net increase in net assets resulting from operations 2,419,628 54,259,302
==========================================================================================
Share transactions-net:
Class A (10,422,993) 18,339,848
------------------------------------------------------------------------------------------
Class B (11,811,705) 1,788,121
------------------------------------------------------------------------------------------
Class C (4,684,464) 5,771,210
------------------------------------------------------------------------------------------
Class R 676,095 197,900
------------------------------------------------------------------------------------------
Institutional Class 10,000 --
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (26,233,067) 26,097,079
==========================================================================================
Net increase (decrease) in net assets (23,813,439) 80,356,381
==========================================================================================
NET ASSETS:
Beginning of year 218,885,325 138,528,944
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(29,371) and $(24,611), respectively) $195,071,886 $218,885,325
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-164
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-165
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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-166
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. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 2.00%, 2.65%, 2.65%, 2.15% and 1.65% of average daily net assets, 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), or items designated as such 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. 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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $2,147.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $36,467 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $86,224 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $912,181 for Class A, Class B, Class C and Class R shares and $9 for Institutional Class shares and reimbursed fees for the Institutional Class shares of $4. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $394,349 $802,204, $291,132 and $2,920, 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, 2004, AIM Distributors advised the Fund that it retained $77,275 in front-end sales commissions from the sale of Class A shares and $120, $12,045, $4,411 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-167
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 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) 10/31/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 6,039,656 $ 60,161,675 $(64,382,911) $ -- $1,818,420 $45,344 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 6,039,656 60,161,675 (64,382,911) -- 1,818,420 44,551 --
===========================================================================================================================
Subtotal $12,079,312 $120,323,350 $(128,765,822) $ -- $3,636,840 $89,895 $ --
===========================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,593,500 $ 86,506,068 $ (88,099,568) $ -- $ -- $58,446 $ --
---------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 19,094,475 (12,304,100) -- 6,790,375 4,801 --
===========================================================================================================================
Subtotal $ 1,593,500 $105,600,543 $(100,403,668) $ -- $ 6,790,375 $63,247 $ --
===========================================================================================================================
Total $13,672,812 $225,923,893 $(229,169,490) $ -- $10,427,215 $153,142 $ --
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $2,622,166 and $702,736, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $3,820 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $3,820.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $5,035 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.
FS-168
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $6,544,219 were on loan to brokers. The loans were secured by cash collateral of $6,790,375 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $63,247 for securities lending transactions.
NOTE 9--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
---------------------------------------------------------------------------
Unrealized appreciation -- investments $ 25,453,299
---------------------------------------------------------------------------
Temporary book/tax differences (29,371)
---------------------------------------------------------------------------
Capital loss carryforward (137,943,848)
---------------------------------------------------------------------------
Shares of beneficial interest 307,591,806
===========================================================================
Total net assets $ 195,071,886
___________________________________________________________________________
===========================================================================
|
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 losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(6,550).
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-169
The Fund utilized $8,876,974 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2008 $ 407,338
-----------------------------------------------------------------------------
October 31, 2009 86,724,292
-----------------------------------------------------------------------------
October 31, 2010 50,812,218
=============================================================================
Total capital loss carryforward $137,943,848
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above 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 year ended October 31, 2004 was $358,096,030 and $382,393,967, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $29,338,178 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (3,878,329) =============================================================================== Net unrealized appreciation of investment securities $25,459,849 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $176,344,154. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $3,744,887 and shares of beneficial interest decreased by $3,744,887. This reclassification had no effect on the net assets of the Fund.
FS-170
NOTE 12--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 certain 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(a)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,366,280 $ 31,467,821 7,664,279 $ 58,252,871
----------------------------------------------------------------------------------------------------------------------
Class B 1,689,471 15,326,444 3,281,689 24,068,217
----------------------------------------------------------------------------------------------------------------------
Class C 1,055,967 9,613,286 1,644,878 12,124,964
----------------------------------------------------------------------------------------------------------------------
Class R 79,652 742,690 25,518 209,495
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 1,085 10,000 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 287,382 2,711,609 189,563 1,431,485
----------------------------------------------------------------------------------------------------------------------
Class B (296,604) (2,711,609) (194,530) (1,431,485)
======================================================================================================================
Reacquired:
Class A (4,869,016) (44,602,423) (5,404,259) (41,344,508)
----------------------------------------------------------------------------------------------------------------------
Class B (2,730,826) (24,426,540) (2,879,424) (20,848,611)
----------------------------------------------------------------------------------------------------------------------
Class C (1,595,627) (14,297,750) (872,689) (6,353,754)
----------------------------------------------------------------------------------------------------------------------
Class R (7,765) (66,595) (1,487) (11,595)
======================================================================================================================
(3,020,001) $(26,233,067) 3,453,538 $ 26,097,079
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 10% of the outstanding shares of
the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM/or AIM affiliates including but not
limited to services such as, securities brokerage, distribution, third
party record keeping and account servicing. The Trust has no knowledge
as to whether all or any portion of the shares owned of record by this
shareholder is also owned beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
FS-171
NOTE 13--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,
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) (0.13)(a) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.29 2.49 (1.91) (5.69) 4.50
=================================================================================================================================
Total from investment operations 0.16 2.38 (2.04) (5.80) 4.38
=================================================================================================================================
Net asset value, end of period $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.79% 36.39% (23.78)% (40.33)% 43.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $99,262 $108,436 $63,463 $94,457 $114,913
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.74%(c)(d) 1.90% 1.83% 1.65% 1.63%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.36)%(c) (1.42)% (1.49)% (1.06)% (0.76)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $112,671,098.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.76%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-172
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------------
NOVEMBER 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------------------- 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) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 2.43 (1.87) (5.62) 4.47
=================================================================================================================================
Total from investment operations 0.09 2.28 (2.05) (5.80) 4.25
=================================================================================================================================
Net asset value, end of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.04% 35.63% (24.26)% (40.70)% 42.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,421 $81,298 $58,654 $81,905 $103,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.39%(c)(d) 2.55% 2.48% 2.32% 2.32%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (2.01)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $80,220,450.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.41%.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
--------------------------------------------------------------------------
NOVEMBER 1, 1999
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------------------- 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) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 2.43 (1.87) (5.63) 4.48
=================================================================================================================================
Total from investment operations 0.09 2.28 (2.05) (5.81) 4.26
=================================================================================================================================
Net asset value, end of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.04% 35.63% (24.26)% (40.74)% 42.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,503 $28,928 $16,404 $23,971 $29,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.39%(c)(d) 2.55% 2.48% 2.32% 2.32%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (2.01)%(c) (2.07)% (2.14)% (1.73)% (1.45)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders 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 $29,113,161.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.41%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-173
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-----------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.14)(a) (0.13)(a) (0.05)(a)
-------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 2.48 (2.14)
=======================================================================================================
Total from investment operations 0.14 2.35 (2.19)
=======================================================================================================
Net asset value, end of period $9.03 $ 8.89 $ 6.54
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 1.57% 35.93% (25.09)%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 877 $ 224 $ 7
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets 1.89%(c)(d) 2.05% 1.98%(e)
=======================================================================================================
Ratio of net investment income (loss) to average net assets (1.51)%(c) (1.57)% (1.64)%(e)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(f) 167% 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
shareholders transactions. Not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $584,032.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.91%.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.22
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a)
-----------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.07)
===================================================================================
Total from investment operations (0.11)
===================================================================================
Net asset value, end of period $ 9.11
___________________________________________________________________________________
===================================================================================
Total return(b) (1.19)%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets 1.20%(c)(d)
===================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(e) 167%
___________________________________________________________________________________
===================================================================================
|
(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
shareholders transactions. Not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of $9,671.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.28% (annualized).
(e) Not annualized for periods less than one year.
FS-174
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant
FS-175
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee
FS-176
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-177
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 four 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 the period ended 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 the standards of the Public Company Accounting Oversight Board (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, 2004, 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Houston, Texas -s- ERNST & YOUNG LLP December 15, 2004
FS-178
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.24%
AEROSPACE & DEFENSE-2.24%
Boeing Co. (The) 350,000 $ 17,465,000
--------------------------------------------------------------------------
General Dynamics Corp. 150,000 15,318,000
--------------------------------------------------------------------------
Honeywell International Inc. 600,000 20,208,000
==========================================================================
52,991,000
==========================================================================
AIR FREIGHT & LOGISTICS-0.58%
FedEx Corp. 150,000 13,668,000
==========================================================================
APPAREL RETAIL-1.65%
Chico's FAS, Inc.(a)(b) 400,000 16,012,000
--------------------------------------------------------------------------
Gap, Inc. (The) 1,150,000 22,977,000
==========================================================================
38,989,000
==========================================================================
APPLICATION SOFTWARE-1.76%
Amdocs Ltd. (United Kingdom)(a) 1,200,000 30,180,000
--------------------------------------------------------------------------
Intuit Inc.(a) 250,000 11,340,000
==========================================================================
41,520,000
==========================================================================
BIOTECHNOLOGY-3.13%
Biogen Idec Inc.(a) 400,000 23,264,000
--------------------------------------------------------------------------
Genentech, Inc.(a) 600,000 27,318,000
--------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 675,000 23,375,250
==========================================================================
73,957,250
==========================================================================
BROADCASTING & CABLE TV-0.79%
Univision Communications Inc.-Class A(a) 600,000 18,576,000
==========================================================================
COMMUNICATIONS EQUIPMENT-6.69%
Avaya Inc.(a) 475,000 6,840,000
--------------------------------------------------------------------------
Cisco Systems, Inc.(a) 2,500,000 48,025,000
--------------------------------------------------------------------------
Motorola, Inc. 2,000,000 34,520,000
--------------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 23,130,000
--------------------------------------------------------------------------
QUALCOMM Inc. 400,000 16,724,000
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 325,000 28,665,000
==========================================================================
157,904,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.75%
Best Buy Co., Inc. 300,000 17,766,000
==========================================================================
COMPUTER HARDWARE-4.47%
Apple Computer, Inc.(a) 675,000 35,457,750
--------------------------------------------------------------------------
Dell Inc.(a) 1,500,000 52,590,000
--------------------------------------------------------------------------
PalmOne, Inc.(a)(c) 600,000 17,382,000
==========================================================================
105,429,750
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS-1.06%
Lexmark International, Inc.-Class A(a) 300,000 $ 24,933,000
==========================================================================
CONSUMER FINANCE-2.27%
American Express Co. 550,000 29,188,500
--------------------------------------------------------------------------
MBNA Corp. 950,000 24,348,500
==========================================================================
53,537,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.66%
Alliance Data Systems Corp.(a) 62,100 2,625,588
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 300,000 13,017,000
==========================================================================
15,642,588
==========================================================================
DEPARTMENT STORES-3.83%
J.C. Penney Co., Inc. 650,000 22,483,500
--------------------------------------------------------------------------
Kohl's Corp.(a) 1,000,000 50,760,000
--------------------------------------------------------------------------
Nordstrom, Inc. 400,000 17,272,000
==========================================================================
90,515,500
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.67%
Apollo Group, Inc.-Class A(a) 175,000 11,550,000
--------------------------------------------------------------------------
Cendant Corp. 2,500,000 51,475,000
==========================================================================
63,025,000
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.41%
Rockwell Automation, Inc. 800,000 33,352,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.70%
Agilent Technologies, Inc.(a) 1,600,000 40,096,000
==========================================================================
FOOTWEAR-1.03%
NIKE, Inc.-Class B 300,000 24,393,000
==========================================================================
GENERAL MERCHANDISE STORES-2.01%
Target Corp. 950,000 47,519,000
==========================================================================
HEALTH CARE EQUIPMENT-1.51%
Bard (C.R.), Inc. 300,000 17,040,000
--------------------------------------------------------------------------
Waters Corp.(a) 450,000 18,580,500
==========================================================================
35,620,500
==========================================================================
HEALTH CARE SERVICES-1.37%
Caremark Rx, Inc.(a) 550,000 16,483,500
--------------------------------------------------------------------------
IMS Health Inc. 750,000 15,885,000
==========================================================================
32,368,500
==========================================================================
|
FS-179
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE SUPPLIES-1.06%
Alcon, Inc. (Switzerland) 350,000 $ 24,920,000
==========================================================================
HOME IMPROVEMENT RETAIL-0.87%
Home Depot, Inc. (The) 500,000 20,540,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.01%
Starwood Hotels & Resorts Worldwide, Inc. 500,000 23,865,000
==========================================================================
HOUSEHOLD PRODUCTS-1.73%
Procter & Gamble Co. (The) 800,000 40,944,000
==========================================================================
HOUSEWARES & SPECIALTIES-1.08%
Fortune Brands, Inc. 350,000 25,487,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-1.22%
Costco Wholesale Corp. 600,000 28,764,000
==========================================================================
INDUSTRIAL CONGLOMERATES-4.45%
3M Co. 150,000 11,635,500
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 3,000,000 93,450,000
==========================================================================
105,085,500
==========================================================================
INDUSTRIAL MACHINERY-2.81%
Danaher Corp. 600,000 33,078,000
--------------------------------------------------------------------------
Eaton Corp. 200,000 12,790,000
--------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda) 300,000 20,532,000
==========================================================================
66,400,000
==========================================================================
INTEGRATED OIL & GAS-1.33%
BP PLC-ADR (United Kingdom) 175,000 10,193,750
--------------------------------------------------------------------------
ChevronTexaco Corp. 200,000 10,612,000
--------------------------------------------------------------------------
ConocoPhillips 125,000 10,538,750
==========================================================================
31,344,500
==========================================================================
INTERNET RETAIL-1.88%
Amazon.com, Inc.(a) 300,000 10,239,000
--------------------------------------------------------------------------
eBay Inc.(a) 350,000 34,163,500
==========================================================================
44,402,500
==========================================================================
INTERNET SOFTWARE & SERVICES-3.49%
Google Inc.-Class A(a)(c) 100,000 19,070,500
--------------------------------------------------------------------------
Yahoo! Inc.(a) 1,750,000 63,332,500
==========================================================================
82,403,000
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.85%
Goldman Sachs Group, Inc. (The) 400,000 39,352,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 300,000 24,645,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 26,970,000
==========================================================================
90,967,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MANAGED HEALTH CARE-3.90%
Aetna Inc. 600,000 $ 57,000,000
--------------------------------------------------------------------------
UnitedHealth Group Inc. 485,000 35,114,000
==========================================================================
92,114,000
==========================================================================
MOTORCYCLE MANUFACTURERS-0.73%
Harley-Davidson, Inc. 300,000 17,271,000
==========================================================================
MOVIES & ENTERTAINMENT-0.86%
Walt Disney Co. (The) 800,000 20,176,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.65%
Varco International, Inc.(a) 550,000 15,224,000
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.67%
Citigroup Inc. 550,000 24,403,500
--------------------------------------------------------------------------
JPMorgan Chase & Co. 1,000,000 38,600,000
==========================================================================
63,003,500
==========================================================================
PERSONAL PRODUCTS-3.62%
Avon Products, Inc. 450,000 17,797,500
--------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 900,000 38,655,000
--------------------------------------------------------------------------
Gillette Co. (The) 700,000 29,036,000
==========================================================================
85,488,500
==========================================================================
PHARMACEUTICALS-6.35%
Johnson & Johnson 800,000 46,704,000
--------------------------------------------------------------------------
Lilly (Eli) & Co. 250,000 13,727,500
--------------------------------------------------------------------------
Pfizer Inc. 1,200,000 34,740,000
--------------------------------------------------------------------------
Sepracor Inc.(a)(c) 500,000 22,965,000
--------------------------------------------------------------------------
Wyeth 800,000 31,720,000
==========================================================================
149,856,500
==========================================================================
PROPERTY & CASUALTY INSURANCE-0.61%
Allstate Corp. (The) 300,000 14,427,000
==========================================================================
RESTAURANTS-2.34%
McDonald's Corp. 1,000,000 29,150,000
--------------------------------------------------------------------------
Yum! Brands, Inc. 600,000 26,100,000
==========================================================================
55,250,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.65%
Novellus Systems, Inc.(a) 1,500,000 38,865,000
==========================================================================
SEMICONDUCTORS-2.69%
Analog Devices, Inc. 900,000 36,234,000
--------------------------------------------------------------------------
Microchip Technology Inc. 900,000 27,225,000
==========================================================================
63,459,000
==========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 400,000 19,832,000
==========================================================================
|
FS-180
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.57%
Ecolab Inc. 400,000 $ 13,540,000
==========================================================================
SYSTEMS SOFTWARE-3.81%
Microsoft Corp. 850,000 23,791,500
--------------------------------------------------------------------------
Oracle Corp.(a) 1,600,000 20,256,000
--------------------------------------------------------------------------
Symantec Corp.(a) 500,000 28,470,000
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 800,000 17,504,000
==========================================================================
90,021,500
==========================================================================
THRIFTS & MORTGAGE FINANCE-0.59%
Fannie Mae 200,000 14,030,000
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,847,833,159) 2,319,483,588
==========================================================================
MONEY MARKET FUNDS-0.55%
Liquid Assets Portfolio-Institutional
Class(d) 6,546,085 6,546,085
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 6,546,085 $ 6,546,085
==========================================================================
Total Money Market Funds (Cost
$13,092,170) 13,092,170
==========================================================================
TOTAL INVESTMENTS-98.79% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,860,925,329) 2,332,575,758
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.74%
STIC Prime Portfolio-Institutional
Class(d)(e) 40,952,850 40,952,850
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $40,952,850) 40,952,850
==========================================================================
TOTAL INVESTMENTS-100.53% (Cost
$1,901,878,179) 2,373,528,608
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.53%) (12,485,091)
==========================================================================
NET ASSETS-100.00% $2,361,043,517
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 1H
and Note 9.
(c) All or a portion of this security has been pledged as collateral for
security lending transactions at October 31, 2004.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-181
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
ASSETS:
Investments, at market value (cost
$1,847,833,159)* $ 2,319,483,588
------------------------------------------------------------
Investments in affiliated money market
funds (cost $54,045,020) 54,045,020
============================================================
Total investments (cost $1,901,878,179) 2,373,528,608
============================================================
Receivables for:
Investments sold 50,411,057
------------------------------------------------------------
Fund shares sold 448,667
------------------------------------------------------------
Dividends 1,592,101
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 269,768
------------------------------------------------------------
Other assets 104,007
============================================================
Total assets 2,426,354,208
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 15,055,134
------------------------------------------------------------
Fund shares reacquired 5,956,291
------------------------------------------------------------
Options written, at market value
(premiums received $421,040) 397,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 534,825
------------------------------------------------------------
Collateral upon return of securities
loaned 40,952,850
------------------------------------------------------------
Accrued distribution fees 865,367
------------------------------------------------------------
Accrued trustees' fees 3,163
------------------------------------------------------------
Accrued transfer agent fees 963,599
------------------------------------------------------------
Accrued operating expenses 581,962
============================================================
Total liabilities 65,310,691
============================================================
Net assets applicable to shares outstanding $ 2,361,043,517
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,229,262,118
------------------------------------------------------------
Undistributed net investment income (loss) (484,385)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (3,339,408,185)
------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 471,673,969
============================================================
$ 2,361,043,517
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,844,930,443
____________________________________________________________
============================================================
Class B $ 434,572,230
____________________________________________________________
============================================================
Class C $ 78,330,084
____________________________________________________________
============================================================
Class R $ 1,448,080
____________________________________________________________
============================================================
Institutional Class $ 1,762,680
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 153,486,063
____________________________________________________________
============================================================
Class B 39,386,838
____________________________________________________________
============================================================
Class C 7,092,782
____________________________________________________________
============================================================
Class R 121,135
____________________________________________________________
============================================================
Institutional Class 138,489
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.02
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.02 divided by
94.50%) $ 12.72
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.03
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.04
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 11.95
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.73
____________________________________________________________
============================================================
|
* At October 31, 2004, securities with an aggregate market value of $39,055,836 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-182
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $168,938) $ 18,735,081
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
security lending income of $91,112)* 336,832
===========================================================================
Total investment income 19,071,913
===========================================================================
EXPENSES:
Advisory fees 17,028,857
---------------------------------------------------------------------------
Administrative services fees 533,540
---------------------------------------------------------------------------
Custodian fees 272,422
---------------------------------------------------------------------------
Distribution fees:
Class A 6,122,534
---------------------------------------------------------------------------
Class B 5,114,549
---------------------------------------------------------------------------
Class C 873,155
---------------------------------------------------------------------------
Class R 5,355
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 9,316,175
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,931
---------------------------------------------------------------------------
Trustees' fees and retirement benefits 61,515
---------------------------------------------------------------------------
Other 1,785,513
===========================================================================
Total expenses 41,115,546
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (276,057)
===========================================================================
Net expenses 40,839,489
===========================================================================
Net investment income (loss) (21,767,576)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 236,255,290
---------------------------------------------------------------------------
Foreign currencies 24
===========================================================================
236,255,314
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,844,681)
---------------------------------------------------------------------------
Foreign currencies (7)
---------------------------------------------------------------------------
Option contracts written 23,540
===========================================================================
(114,821,148)
===========================================================================
Net gain from investment securities, foreign currencies and
option contracts 121,434,166
===========================================================================
Net increase in net assets resulting from operations $ 99,666,590
___________________________________________________________________________
===========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-183
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (21,767,576) $ (22,244,366)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and options contracts 236,255,314 (152,819,227)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (114,821,148) 703,701,978
==============================================================================================
Net increase in net assets resulting from operations 99,666,590 528,638,385
==============================================================================================
Share transactions-net:
Class A (395,056,301) (354,029,189)
----------------------------------------------------------------------------------------------
Class B (138,803,397) (78,758,321)
----------------------------------------------------------------------------------------------
Class C (15,793,039) (11,803,823)
----------------------------------------------------------------------------------------------
Class R 1,126,374 190,176
----------------------------------------------------------------------------------------------
Institutional Class (547,138) (83,682)
==============================================================================================
Net increase (decrease) in net assets resulting from share
transactions (549,073,501) (444,484,839)
==============================================================================================
Net increase (decrease) in net assets (449,406,911) 84,153,546
==============================================================================================
NET ASSETS:
Beginning of year 2,810,450,428 2,726,296,882
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(484,385) and $(462,775), respectively) $2,361,043,517 $2,810,450,428
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-184
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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, employees 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
FS-185
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.
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 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 and other shareholder recordkeeping 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.
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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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-186
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 (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 at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $5,987. 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.
For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $227,266 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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, 2004, AIM was paid $533,540 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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $9,316,175 for Class A, Class B, Class C and Class R shares and $1,931 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $6,122,534, $5,114,549, $873,155 and $5,355, 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, 2004, AIM Distributors advised the Fund that it retained $252,306 in front-end sales commissions from the sale of Class A shares and $1,900, $55,846, $6,948 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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004.
FS-187
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) 10/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $36,428,079 $ 401,226,654 $ (431,108,648) $ -- $ 6,546,085 $124,213 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 36,428,079 401,226,654 (431,108,648) -- 6,546,085 121,507 --
==================================================================================================================================
Subtotal $72,856,158 $ 802,453,308 $ (862,217,296) $ -- $13,092,170 $245,720 $ --
==================================================================================================================================
|
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) 10/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $38,996,800 $ 574,759,331 $ (613,756,131) $ -- $ -- $ 79,923 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class -- 125,196,850 (84,244,000) -- 40,952,850 $ 11,189 --
==================================================================================================================================
Subtotal $38,996,800 $ 699,956,181 $ (698,000,131) $ -- $40,952,850 $ 91,112 $ --
==================================================================================================================================
Total $111,852,958 $1,502,409,489 $(1,560,217,427) $ -- $54,045,020 $336,832 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of income rebate paid to security lending counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $79,267,272 and $21,738,445, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $42,804 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $42,804.
NOTE 6--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. Those Trustees who defer 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. 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 year ended October 31, 2004, the Fund paid legal fees of $13,966 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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.
FS-188
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 year ended October 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 October 31, 2004, securities with an aggregate value of $39,055,836 were on loan to brokers. The loans were secured by cash collateral of $40,952,850 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $91,112 for securities lending transactions.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------------------
Beginning of year -- $ --
-----------------------------------------------------------------------------------
Written 3,000 421,040
===================================================================================
End of year 3,000 $421,040
___________________________________________________________________________________
===================================================================================
|
OPEN OPTIONS WRITTEN AT PERIOD END
-----------------------------------------------------------------------------------------------------------------------------
OCTOBER 31, 2004
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET UNREALIZED
CALLS MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
-----------------------------------------------------------------------------------------------------------------------------
Chico's FAS, Inc. Nov-04 $40.0 3,000 $421,040 $397,500 $23,540
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
FS-189
NOTE 10--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, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004
-----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 450,268,418
-----------------------------------------------------------------------------
Temporary book/tax differences (484,385)
-----------------------------------------------------------------------------
Capital loss carryforward (3,318,002,634)
-----------------------------------------------------------------------------
Shares of beneficial interest 5,229,262,118
=============================================================================
Total net assets $ 2,361,043,517
_____________________________________________________________________________
=============================================================================
|
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 difference is attributable primarily to the tax deferral of losses on wash sales and the deferral of losses on certain straddles. The tax-basis unrealized appreciation on investments amount includes appreciation on option contracts of $23,539.
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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $200,737,719 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------------------------
October 31, 2009 $2,358,363,619
------------------------------------------------------------------------------
October 31, 2010 763,027,747
------------------------------------------------------------------------------
October 31, 2011 196,611,268
==============================================================================
Total capital loss carryforward $3,318,002,634
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2004 was $1,931,481,698 and $2,445,456,487, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $466,806,274 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (16,561,395) ============================================================================== Net unrealized appreciation of investment securities $450,244,879 ______________________________________________________________________________ ============================================================================== |
Cost of investments for tax purposes is $1,923,283,729.
NOTE 12--RECLASSIFICATIONS OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2004, undistributed net
investment income increased by $21,745,966, undistributed net realized gain
(loss) was decreased by $25 and shares of beneficial interest decreased by
$21,745,941. This reclassification had no effect on the net assets of the Fund.
FS-190
NOTE 13--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 certain 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(A)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,161,430 $ 74,474,713 10,192,956 $ 102,256,843
--------------------------------------------------------------------------------------------------------------------------
Class B 2,836,554 31,535,843 5,051,931 47,044,808
--------------------------------------------------------------------------------------------------------------------------
Class C 1,109,204 12,390,482 1,715,252 15,941,057
--------------------------------------------------------------------------------------------------------------------------
Class R 139,257 1,669,192 23,136 234,973
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 13,498 172,948 16,638 177,847
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 4,502,782 54,704,748 1,369,192 14,331,798
--------------------------------------------------------------------------------------------------------------------------
Class B (4,888,349) (54,704,748) (1,477,850) (14,331,798)
==========================================================================================================================
Reacquired:
Class A (43,655,916) (524,235,762) (47,251,093) (470,617,830)
--------------------------------------------------------------------------------------------------------------------------
Class B (10,449,964) (115,634,492) (12,154,199) (111,471,331)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,535,106) (28,183,521) (2,990,841) (27,744,880)
--------------------------------------------------------------------------------------------------------------------------
Class R (45,049) (542,818) (4,184) (44,797)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (56,324) (720,086) (25,361) (261,529)
==========================================================================================================================
(46,867,983) $(549,073,501) (45,534,423) $(444,484,839)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 17% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-191
NOTE 14--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,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.07) (0.07)(a) (0.10) (0.14)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.51 2.19 (3.11) (11.87) 3.18
============================================================================================================================
Total from investment operations 0.43 2.12 (3.18) (11.97) 3.04
============================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
============================================================================================================================
Net asset value, end of period $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 3.71% 22.39% (25.14)% (47.38)% 10.61%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,844,930 $2,160,823 $2,104,660 $4,001,552 $8,948,781
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.39%(c) 1.47% 1.33% 1.21% 1.03%
----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.40%(c) 1.47% 1.33% 1.22% 1.07%
============================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.67)%(c) (0.68)% (0.64)% (0.56)% (0.45)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $2,040,844,523.
CLASS B
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.14) (0.15)(a) (0.21) (0.36)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.47 2.03 (2.89) (11.21) 3.08
==========================================================================================================================
Total from investment operations 0.32 1.89 (3.04) (11.42) 2.72
==========================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
==========================================================================================================================
Net asset value, end of period $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 2.99% 21.43% (25.63)% (47.75)% 9.76%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $434,572 $555,779 $533,224 $922,476 $1,927,514
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.09%(c) 2.17% 2.04% 1.92% 1.78%
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(c) 2.17% 2.04% 1.93% 1.82%
==========================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.37)%(c) (1.38)% (1.34)% (1.27)% (1.20)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $511,454,890.
FS-192
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.14) (0.15)(a) (0.21) (0.36)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.47 2.03 (2.89) (11.23) 3.10
======================================================================================================================
Total from investment operations 0.32 1.89 (3.04) (11.44) 2.74
======================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
======================================================================================================================
Net asset value, end of period $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.99% 21.40% (25.61)% (47.77)% 9.83%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $78,330 $91,325 $86,455 $150,604 $301,590
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.09%(c) 2.17% 2.04% 1.92% 1.78%
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(c) 2.17% 2.04% 1.93% 1.82%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.38)% (1.34)% (1.27)% (1.20)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $87,315,520.
CLASS R
--------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- 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) (0.10)(a) (0.06) (0.03)(a)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.49 2.15 (1.86)
====================================================================================================
Total from investment operations 0.39 2.09 (1.89)
====================================================================================================
Net asset value, end of period $ 11.95 $11.56 $ 9.47
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 3.37% 22.07% (16.64)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,448 $ 311 $ 76
====================================================================================================
Ratio of expenses to average net assets 1.59%(c)(d) 1.67% 1.53%(e)
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.87)%(c) (0.88)% (0.84)%(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate 74% 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 based on average daily net assets of $1,071,094.
(d) After fee waivers and/or expense reimbursements. Ratio of expense to
average net asset prior to fee waivers and/or expense reimbursements is
1.60%.
(e) Annualized.
FS-193
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
--------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.20 $ 9.91 $13.16 $29.00 $ 28.96
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.00 (0.01)(a) (0.01) (0.06)(a)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.54 2.29 (3.24) (12.29) 3.29
================================================================================================================
Total from investment operations 0.53 2.29 (3.25) (12.30) 3.23
================================================================================================================
Less distributions from net realized gains -- -- -- (3.54) (3.19)
================================================================================================================
Net asset value, end of period $12.73 $12.20 $ 9.91 $13.16 $ 29.00
________________________________________________________________________________________________________________
================================================================================================================
Total return(b) 4.34% 23.11% (24.70)% (47.11)% 11.07%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,763 $2,213 $1,883 $7,667 $18,634
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.84%(c) 0.78% 0.82% 0.69% 0.64%
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.85%(c) 0.78% 0.82% 0.70% 0.68%
================================================================================================================
Ratio of net investment income (loss) to average net assets (0.12)%(c) 0.01% (0.12)% (0.04)% (0.04)%
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 74% 111% 217% 240% 145%
________________________________________________________________________________________________________________
================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,931,035.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
The mutual fund industry as a whole is currently subject to regulatory inquiries 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders.
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
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 issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
As a result of the matters discussed below, investors in the AIM 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.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing.
FS-194
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid.
The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC.
Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs.
None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders.
Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party.
In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years.
On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year.
As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds.
At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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
FS-195
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. 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 NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, 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. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or 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 Federal 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.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes
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 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
FS-196
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-197
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.65%
ADVERTISING-1.51%
Lamar Advertising Co.-Class A(a) 700,000 $ 26,166,000
==========================================================================
AEROSPACE & DEFENSE-0.72%
L-3 Communications Holdings, Inc. 175,000 12,419,750
==========================================================================
APPAREL RETAIL-1.26%
Aeropostale, Inc.(a) 400,000 11,172,000
--------------------------------------------------------------------------
Hot Topic, Inc.(a) 531,000 10,614,690
==========================================================================
21,786,690
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.71%
Fossil, Inc.(a) 530,000 12,327,800
==========================================================================
APPLICATION SOFTWARE-2.22%
Amdocs Ltd. (United Kingdom)(a) 400,000 10,684,000
--------------------------------------------------------------------------
BEA Systems, Inc.(a) 1,250,000 8,625,000
--------------------------------------------------------------------------
Synopsys, Inc.(a) 579,947 9,534,329
--------------------------------------------------------------------------
TIBCO Software Inc.(a) 1,350,000 9,639,000
==========================================================================
38,482,329
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.84%
Affiliated Managers Group, Inc.(a) 250,000 15,632,500
--------------------------------------------------------------------------
Investors Financial Services Corp. 850,000 35,657,500
--------------------------------------------------------------------------
Nuveen Investments-Class A 443,700 15,081,363
==========================================================================
66,371,363
==========================================================================
BIOTECHNOLOGY-3.75%
Amylin Pharmaceuticals, Inc.(a) 675,000 11,475,000
--------------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 370,000 8,506,300
--------------------------------------------------------------------------
MedImmune, Inc.(a) 500,000 12,685,000
--------------------------------------------------------------------------
Neurocrine Biosciences, Inc.(a) 350,000 12,236,000
--------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 165,000 7,810,275
--------------------------------------------------------------------------
QLT Inc. (Canada)(a)(b) 1,130,000 12,113,600
==========================================================================
64,826,175
==========================================================================
BREWERS-0.71%
Molson Coors Brewing Co.-Class B 200,000 12,350,000
==========================================================================
BROADCASTING & CABLE TV-2.92%
Radio One, Inc.-Class D(a) 1,100,000 14,377,000
--------------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 1,375,000 36,148,750
==========================================================================
50,525,750
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
BUILDING PRODUCTS-1.08%
American Standard Cos. Inc. 300,000 $ 13,413,000
--------------------------------------------------------------------------
York International Corp. 135,000 5,282,550
==========================================================================
18,695,550
==========================================================================
CASINOS & GAMING-1.25%
Aztar Corp.(a) 400,000 10,924,000
--------------------------------------------------------------------------
International Game Technology 400,000 10,756,000
==========================================================================
21,680,000
==========================================================================
COMMUNICATIONS EQUIPMENT-1.00%
Juniper Networks, Inc.(a) 625,000 14,118,750
--------------------------------------------------------------------------
Tekelec(a) 231,169 3,146,210
==========================================================================
17,264,960
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.87%
Best Buy Co., Inc. 300,000 15,102,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-0.97%
Brocade Communications Systems, Inc.(a) 1,500,000 6,540,000
--------------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 625,000 10,262,500
==========================================================================
16,802,500
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.48%
Terex Corp.(a) 224,000 8,373,120
==========================================================================
CONSUMER ELECTRONICS-0.45%
Harman International Industries, Inc. 100,000 7,858,000
==========================================================================
CONSUMER FINANCE-0.62%
SLM Corp. 225,000 10,719,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-7.89%
Affiliated Computer Services, Inc.-Class A(a) 350,000 16,684,500
--------------------------------------------------------------------------
Alliance Data Systems Corp.(a) 1,000,000 40,400,000
--------------------------------------------------------------------------
Fiserv, Inc.(a) 575,000 24,322,500
--------------------------------------------------------------------------
Iron Mountain Inc.(a) 825,000 24,502,500
--------------------------------------------------------------------------
Paychex, Inc. 1,000,000 30,600,000
==========================================================================
136,509,500
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.95%
ARAMARK Corp.-Class B 600,000 14,706,000
--------------------------------------------------------------------------
Career Education Corp.(a) 267,000 8,394,480
--------------------------------------------------------------------------
ChoicePoint Inc.(a) 471,500 18,610,105
--------------------------------------------------------------------------
Cintas Corp. 450,000 17,365,500
--------------------------------------------------------------------------
CoStar Group Inc.(a) 205,000 8,107,750
--------------------------------------------------------------------------
|
FS-198
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-(CONTINUED)
Jackson Hewitt Tax Service Inc. 625,000 $ 11,512,500
--------------------------------------------------------------------------
Sirva Inc.(a) 1,000,000 6,980,000
==========================================================================
85,676,335
==========================================================================
ELECTRIC UTILITIES-0.60%
DPL Inc. 405,000 10,303,200
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.60%
EnerSys(a) 1,100,000 10,373,000
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.56%
Amphenol Corp.-Class A 250,000 9,860,000
--------------------------------------------------------------------------
Cogent Inc.(a) 375,000 8,437,500
--------------------------------------------------------------------------
Tektronix, Inc. 400,000 8,664,000
==========================================================================
26,961,500
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.27%
Molex Inc. 183,800 4,670,358
==========================================================================
GENERAL MERCHANDISE STORES-0.61%
Tuesday Morning Corp.(a) 400,000 10,504,000
==========================================================================
HEALTH CARE EQUIPMENT-7.77%
Biomet, Inc. 500,000 19,345,000
--------------------------------------------------------------------------
Cytyc Corp.(a) 900,000 19,179,000
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 425,000 25,236,500
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 425,000 26,116,250
--------------------------------------------------------------------------
Kyphon Inc.(a) 425,000 11,113,750
--------------------------------------------------------------------------
PerkinElmer, Inc. 500,000 9,250,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 305,000 10,290,700
--------------------------------------------------------------------------
Waters Corp.(a) 350,000 13,870,500
==========================================================================
134,401,700
==========================================================================
HEALTH CARE FACILITIES-0.59%
Triad Hospitals, Inc.(a) 200,000 10,250,000
==========================================================================
HEALTH CARE SERVICES-3.35%
Caremark Rx, Inc.(a) 475,000 19,023,750
--------------------------------------------------------------------------
Cerner Corp.(a)(c) 210,000 12,192,600
--------------------------------------------------------------------------
DaVita, Inc.(a) 450,000 18,135,000
--------------------------------------------------------------------------
Omnicare, Inc. 250,000 8,667,500
==========================================================================
58,018,850
==========================================================================
HEALTH CARE SUPPLIES-1.88%
Advanced Medical Optics, Inc.(a) 435,000 16,086,300
--------------------------------------------------------------------------
Cooper Cos., Inc. (The) 100,000 6,755,000
--------------------------------------------------------------------------
Millipore Corp.(a) 200,000 9,644,000
==========================================================================
32,485,300
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.09%
Royal Caribbean Cruises Ltd. (Liberia) 450,000 18,909,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOUSEHOLD APPLIANCES-1.01%
Blount International, Inc.(a) 1,173,900 $ 17,385,459
==========================================================================
INDUSTRIAL CONGLOMERATES-1.09%
Textron Inc. 250,000 18,837,500
==========================================================================
INDUSTRIAL GASES-0.30%
Airgas, Inc. 239,000 5,238,880
==========================================================================
INDUSTRIAL MACHINERY-1.21%
Dover Corp. 300,000 10,908,000
--------------------------------------------------------------------------
Pentair, Inc. 250,000 9,945,000
==========================================================================
20,853,000
==========================================================================
INTERNET SOFTWARE & SERVICES-0.76%
VeriSign, Inc.(a) 500,000 13,230,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.99%
Acxiom Corp. 500,000 9,500,000
--------------------------------------------------------------------------
Perot Systems Corp.-Class A(a) 600,000 7,578,000
==========================================================================
17,078,000
==========================================================================
METAL & GLASS CONTAINERS-0.53%
Owens-Illinois, Inc.(a) 375,000 9,195,000
==========================================================================
MOVIES & ENTERTAINMENT-0.88%
Regal Entertainment Group-Class A 750,000 15,217,500
==========================================================================
OFFICE SERVICES & SUPPLIES-0.78%
Mine Safety Appliances Co. 380,000 13,566,000
==========================================================================
OIL & GAS DRILLING-1.33%
ENSCO International Inc. 525,000 17,115,000
--------------------------------------------------------------------------
Rowan Cos., Inc. 225,000 5,969,250
==========================================================================
23,084,250
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.49%
BJ Services Co. 175,000 8,531,250
==========================================================================
PAPER PRODUCTS-0.21%
Sappi Ltd.-ADR (South Africa) 371,500 3,707,570
==========================================================================
PHARMACEUTICALS-4.54%
Endo Pharmaceuticals Holdings Inc.(a) 500,000 9,925,000
--------------------------------------------------------------------------
Impax Laboratories, Inc.(a) 400,000 6,508,000
--------------------------------------------------------------------------
IVAX Corp.(a) 937,500 17,718,750
--------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 542,200 15,235,820
--------------------------------------------------------------------------
MGI Pharma, Inc.(a) 720,000 15,876,000
--------------------------------------------------------------------------
Valeant Pharmaceuticals International 636,900 13,215,675
==========================================================================
78,479,245
==========================================================================
PUBLISHING-0.63%
Dow Jones & Co., Inc. 325,000 10,868,000
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.75%
CB Richard Ellis Group, Inc.-Class A(a) 375,000 13,031,250
==========================================================================
|
FS-199
MARKET
SHARES VALUE
--------------------------------------------------------------------------
REGIONAL BANKS-1.91%
Amegy Bancorp., Inc. 800,000 $ 13,280,000
--------------------------------------------------------------------------
North Fork Bancorp., Inc. 700,000 19,705,000
==========================================================================
32,985,000
==========================================================================
RESTAURANTS-1.65%
RARE Hospitality International, Inc.(a) 500,000 13,910,000
--------------------------------------------------------------------------
Ruby Tuesday, Inc. 650,000 14,625,000
==========================================================================
28,535,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-2.23%
KLA-Tencor Corp. 540,600 21,094,212
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 750,000 17,572,500
==========================================================================
38,666,712
==========================================================================
SEMICONDUCTORS-8.51%
Altera Corp.(a) 775,000 16,065,750
--------------------------------------------------------------------------
AMIS Holdings, Inc.(a) 1,124,900 12,666,374
--------------------------------------------------------------------------
ATI Technologies Inc. (Canada)(a) 875,000 12,950,000
--------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 475,000 14,207,250
--------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 850,000 15,529,500
--------------------------------------------------------------------------
Maxim Integrated Products, Inc. 700,000 26,180,000
--------------------------------------------------------------------------
Microchip Technology Inc. 1,000,000 28,480,000
--------------------------------------------------------------------------
Micron Technology, Inc.(a) 875,000 8,496,250
--------------------------------------------------------------------------
Semtech Corp.(a) 750,000 12,667,500
==========================================================================
147,242,624
==========================================================================
SOFT DRINKS-0.73%
Coca-Cola Enterprises Inc. 625,000 12,687,500
==========================================================================
SPECIALIZED FINANCE-0.57%
Chicago Mercantile Exchange Holdings Inc. 50,000 9,776,000
==========================================================================
SPECIALTY CHEMICALS-0.98%
Nalco Holding Co.(a) 393,300 7,079,400
--------------------------------------------------------------------------
Rohm & Haas Co. 225,000 9,823,500
==========================================================================
16,902,900
==========================================================================
SPECIALTY STORES-4.11%
Bed Bath & Beyond Inc.(a) 400,000 14,884,000
--------------------------------------------------------------------------
Linens 'n Things, Inc.(a) 750,000 17,497,500
--------------------------------------------------------------------------
PETCO Animal Supplies, Inc.(a) 550,000 17,215,000
--------------------------------------------------------------------------
Staples, Inc. 1,125,000 21,453,750
==========================================================================
71,050,250
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-1.58%
Internet Security Systems, Inc.(a) 302,100 $ 5,875,845
--------------------------------------------------------------------------
McAfee Inc.(a) 600,000 12,546,000
--------------------------------------------------------------------------
RSA Security Inc.(a) 833,000 8,946,420
==========================================================================
27,368,265
==========================================================================
TECHNOLOGY DISTRIBUTORS-1.42%
CDW Corp. 450,000 24,610,500
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.34%
Independence Community Bank Corp. 400,000 14,272,000
--------------------------------------------------------------------------
New York Community Bancorp, Inc.(b) 500,000 8,850,000
==========================================================================
23,122,000
==========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.60%
WESCO International, Inc.(a) 428,000 10,349,040
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,672,089,105) 1,672,412,425
==========================================================================
MONEY MARKET FUNDS-3.33%
Liquid Assets Portfolio-Institutional
Class(d) 28,814,361 28,814,361
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 28,814,361 28,814,361
==========================================================================
Total Money Market Funds (Cost
$57,628,722) 57,628,722
==========================================================================
TOTAL INVESTMENTS-99.98% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,729,717,827) 1,730,041,147
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.50%
Liquid Assets Portfolio-Institutional
Class(d)(e) 4,312,476 4,312,476
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 4,312,476 4,312,476
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $8,624,952) 8,624,952
==========================================================================
TOTAL INVESTMENTS-100.48% (Cost
$1,738,342,779) 1,738,666,099
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.48%) (8,222,318)
==========================================================================
NET ASSETS-100.00% $1,730,443,781
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) A portion of this security is subject to call options written. See Note 1F
and Note 9.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-200
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,672,089,105)* $1,672,412,425
------------------------------------------------------------
Investments in affiliated money market funds
(cost $66,253,674) 66,253,674
============================================================
Total investments (cost $1,738,342,779) 1,738,666,099
============================================================
Cash 430,787
------------------------------------------------------------
Receivables for:
Investments sold 51,570,142
------------------------------------------------------------
Fund shares sold 645,511
------------------------------------------------------------
Dividends 884,416
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 122,564
------------------------------------------------------------
Other assets 37,058
============================================================
Total assets 1,792,356,577
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 45,868,921
------------------------------------------------------------
Fund shares reacquired 3,945,753
------------------------------------------------------------
Options written, at market value (premiums
received $894,670) 1,039,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 277,955
------------------------------------------------------------
Collateral upon return of securities
loaned 8,624,952
------------------------------------------------------------
Accrued distribution fees 527,070
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,991
------------------------------------------------------------
Accrued transfer agent fees 1,365,362
------------------------------------------------------------
Accrued operating expenses 259,292
============================================================
Total liabilities 61,912,796
============================================================
Net assets applicable to shares outstanding $1,730,443,781
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,042,444,909
------------------------------------------------------------
Undistributed net investment income (loss) (7,810,218)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (304,369,400)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 178,490
============================================================
$1,730,443,781
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,436,493,212
____________________________________________________________
============================================================
Class B $ 225,604,269
____________________________________________________________
============================================================
Class C $ 61,741,279
____________________________________________________________
============================================================
Class R $ 2,893,402
____________________________________________________________
============================================================
Institutional Class $ 3,711,619
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 149,077,981
____________________________________________________________
============================================================
Class B 24,708,549
____________________________________________________________
============================================================
Class C 6,762,746
____________________________________________________________
============================================================
Class R 302,664
____________________________________________________________
============================================================
Institutional Class 378,464
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.64
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.64 divided by
94.50%) $ 10.20
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 9.13
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.56
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.81
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $8,607,138 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-201
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends $ 5,692,958
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $26,928 after rebates of
$1,816,491) 1,329,242
===========================================================================
Total investment income 7,022,200
===========================================================================
EXPENSES:
Advisory fees 6,107,255
---------------------------------------------------------------------------
Administrative services fees 218,543
---------------------------------------------------------------------------
Custodian fees 104,525
---------------------------------------------------------------------------
Distribution fees:
Class A 1,987,892
---------------------------------------------------------------------------
Class B 1,237,604
---------------------------------------------------------------------------
Class C 346,921
---------------------------------------------------------------------------
Class R 7,650
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 4,188,297
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,065
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 43,044
---------------------------------------------------------------------------
Other 395,650
===========================================================================
Total expenses 14,638,446
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (62,902)
===========================================================================
Net expenses 14,575,544
===========================================================================
Net investment income (loss) (7,553,344)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $3,518,942) 284,356,269
---------------------------------------------------------------------------
Option contracts written 2,927,072
===========================================================================
287,283,341
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (266,505,753)
---------------------------------------------------------------------------
Option contracts written 25,372
===========================================================================
(266,480,381)
===========================================================================
Net gain from investment securities and option contracts 20,802,960
===========================================================================
Net increase in net assets resulting from operations $ 13,249,616
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-202
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (7,553,344) $ (21,355,366)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 287,283,341 456,200,097
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (266,480,381) (288,045,284)
==============================================================================================
Net increase in net assets resulting from operations 13,249,616 146,799,447
==============================================================================================
Share transactions-net:
Class A (216,309,735) (469,733,957)
----------------------------------------------------------------------------------------------
Class B (23,412,369) (28,990,427)
----------------------------------------------------------------------------------------------
Class C (9,786,533) (14,524,768)
----------------------------------------------------------------------------------------------
Class R 60,180 1,554,735
----------------------------------------------------------------------------------------------
Institutional Class 3,737,875 (2,730,852)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (245,710,582) (514,425,269)
==============================================================================================
Net increase (decrease) in net assets (232,460,966) (367,625,822)
==============================================================================================
NET ASSETS:
Beginning of period 1,962,904,747 2,330,530,569
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(7,810,218) and $(256,874),
respectively) $1,730,443,781 $1,962,904,747
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-203
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-204
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $150 million 0.80% ---------------------------------------------------------------------- Over $150 million 0.625% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $13,901.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $20,795 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $218,543.
FS-205
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,188,297 for Class A, Class B, Class C and Class R share classes and $1,065 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $1,987,892, $1,237,604, $346,921 and $7,650, 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, 2005, ADI advised the Fund that it retained $92,801 in front-end sales commissions from the sale of Class A shares and $4,696, $43,974, $4,385 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS FROM APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/04 AT COST SALES (DEPRECIATION) 04/30/05 INCOME
-----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $48,442,076 $354,337,510 $(373,965,225) $ -- $28,814,361 $ 645,683
-----------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 48,442,076 354,337,510 (373,965,225) -- 28,814,361 656,631
=======================================================================================================================
Subtotal $96,884,152 $708,675,020 $(747,930,450) $ -- $57,628,722 $1,302,314
_______________________________________________________________________________________________________________________
=======================================================================================================================
REALIZED
FUND GAIN (LOSS)
------------------------
Liquid Assets Portfolio-
Institutional Class $ --
------------------------
STIC Prime
Portfolio-Institutional
Class --
========================
Subtotal $ --
________________________
========================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
PROCEEDS UNREALIZED
MARKET VALUE PURCHASES FROM APPRECIATION MARKET VALUE DIVIDEND
FUND 10/31/04 AT COST SALES (DEPRECIATION) 04/30/05 INCOME*
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $127,900,554 $ 59,176,773 $ (182,764,851) $ -- $ 4,312,476 $ 13,350
--------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 127,900,554 58,845,661 (182,433,739) -- 4,312,476 13,578
__________________________________________________________________________________________________________________________
==========================================================================================================================
Subtotal $255,801,108 $118,022,434 $ (365,198,590) $ -- $ 8,624,952 $ 26,928
==========================================================================================================================
Total $352,685,260 $826,697,454 $(1,113,129,040) $ -- $66,253,674 $1,329,242
__________________________________________________________________________________________________________________________
==========================================================================================================================
REALIZED
FUND GAIN (LOSS)
-------------------------
Liquid Assets
Portfolio-Institutional
Class $ --
-------------------------
STIC Prime Portfolio-
Institutional Class --
_________________________
=========================
Subtotal $ --
=========================
Total $ --
_________________________
=========================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $14,639,624 and sales of $24,480,661, which resulted in net realized gains of $3,518,942.
FS-206
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $28,206.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $5,289 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $8,607,138 were on loan to brokers. The loans were secured by cash collateral of $8,624,952 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $26,928 for securities lending transactions, which are net of rebates.
FS-207
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
--------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------------------------------------------------------------------------------------
Beginning of period 16,109 $ 830,758
--------------------------------------------------------------------------------------
Written 40,896 4,782,450
--------------------------------------------------------------------------------------
Closed (8,000) (730,416)
--------------------------------------------------------------------------------------
Exercised (11,375) (1,036,938)
--------------------------------------------------------------------------------------
Expired (35,530) (2,951,184)
======================================================================================
End of period 2,100 $ 894,670
______________________________________________________________________________________
======================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
-------------------------------------------------------------------------------------------------------------------------------
APRIL 30,
2005 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE DEPRECIATION
-------------------------------------------------------------------------------------------------------------------------------
Cerner Corp. Jun-05 $55 2,100 $894,670 $1,039,500 $(144,830)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2009 $125,040,407
-----------------------------------------------------------------------------
October 31, 2010 463,739,024
=============================================================================
Total capital loss carryforward $588,779,431
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2005 was $1,757,362,997 and $1,974,761,207, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $120,864,846 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (120,799,591) ============================================================================== Net unrealized appreciation of investment securities $ 65,255 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,738,600,844. |
FS-208
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,661,755 $ 56,828,822 19,503,343 $ 183,246,538
--------------------------------------------------------------------------------------------------------------------------
Class B 1,430,698 13,608,333 2,785,031 24,931,760
--------------------------------------------------------------------------------------------------------------------------
Class C 560,427 5,341,131 1,454,243 13,022,624
--------------------------------------------------------------------------------------------------------------------------
Class R 66,443 664,409 233,461 2,175,865
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 466,025 4,770,693 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 192,845 1,939,103 366,882 3,476,875
--------------------------------------------------------------------------------------------------------------------------
Class B (203,182) (1,939,103) (384,365) (3,476,875)
==========================================================================================================================
Reacquired:
Class A (27,322,010) (275,077,660) (69,860,562) (656,457,370)
--------------------------------------------------------------------------------------------------------------------------
Class B (3,676,528) (35,081,599) (5,651,768) (50,445,312)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,585,192) (15,127,664) (3,075,625) (27,547,392)
--------------------------------------------------------------------------------------------------------------------------
Class R (60,437) (604,229) (66,756) (621,130)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (100,702) (1,032,818) (272,069) (2,730,852)
==========================================================================================================================
(24,569,858) $(245,710,582) (54,968,185) $(514,425,269)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are record owners of more than 5% of the outstanding shares of the Fund and in aggregate they own 16% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third part record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
NOTE 13--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Emerging Growth Fund and AIM Libra Fund ("Selling Funds"), a series of AIM Equity Funds and AIM Investment Funds, respectively ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Funds will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Funds, and Selling Funds will cease operations.
The Agreement requires approval of Selling Funds' shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Funds and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
FS-209
NOTE 14--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, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.08)(a) (0.07)(a) (0.09)(a) (0.09)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.06 0.71 1.76 (1.29) (6.34) 11.08
=================================================================================================================================
Total from investment
operations 0.02 0.63 1.69 (1.38) (6.43) 10.95
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.64 $ 9.62 $ 8.99 $ 7.30 $ 8.68 $ 18.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.21% 7.01% 23.15% (15.90)% (40.51)% 47.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,436,493 $1,640,288 $1,983,600 $1,798,318 $2,516,407 $4,444,515
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.41%(c) 1.29%(d) 1.30% 1.32% 1.17% 1.04%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.67)%(c) (0.86)% (0.96)% (1.00)% (0.79)% (0.77)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of
$1,603,492,960.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.30%.
(e) Not annualized for periods less than one year.
CLASS B
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(d) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.05 0.67 1.71 (1.26) (6.20) 11.04
=================================================================================================================================
Total from investment operations (0.02) 0.53 1.58 (1.41) (6.37) 10.75
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.13 $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.12
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.22)% 6.15% 22.44% (16.69)% (40.90)% 46.29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $225,604 $248,425 $262,098 $226,806 $294,303 $374,010
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.16%(c) 2.04%(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.42)%(c) (1.61)% (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of $249,572,126.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
(e) Not annualized for periods less than one year.
FS-210
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11 $ 13.81
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.14)(a) (0.13)(a) (0.15)(a) (0.17)(a) (0.29)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.05 0.67 1.71 (1.26) (6.19) 11.03
=================================================================================================================================
Total from investment operations (0.02) 0.53 1.58 (1.41) (6.36) 10.74
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (3.30) (6.44)
=================================================================================================================================
Net asset value, end of period $ 9.13 $ 9.15 $ 8.62 $ 7.04 $ 8.45 $ 18.11
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.22)% 6.15% 22.44% (16.69)% (40.86)% 46.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 61,741 $ 71,229 $ 81,079 $ 72,676 $ 96,640 $120,591
=================================================================================================================================
Ratio of expenses to average net assets 2.16%(c) 2.04%(d) 2.05% 2.07% 1.94% 1.86%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.42)%(c) (1.61)% (1.71)% (1.75)% (1.55)% (1.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 98% 115% 78% 68% 89% 79%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 based on average daily net assets of $69,959,234.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
(e) Not annualized for periods less than one year.
CLASS R
----------------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.55 $ 8.96 $ 7.29 $ 8.89
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.10)(a) (0.10)(a) (0.04)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.06 0.69 1.77 (1.56)
==============================================================================================================================
Total from investment operations 0.01 0.59 1.67 (1.60)
==============================================================================================================================
Net asset value, end of period $ 9.56 $ 9.55 $ 8.96 $ 7.29
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 0.10% 6.58% 22.91% (18.00)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,893 $ 2,834 $ 1,164 $ 137
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 1.66%(c) 1.54%(d) 1.55% 1.62%(e)
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.92)%(c) (1.11)% (1.21)% (1.30)%(e)
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(f) 98% 115% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,085,426.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-211
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------- OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.76 $ 9.08 $ 7.32 $ 9.53
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.03)(a) (0.03)(a) (0.02)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.05 0.71 1.79 (2.19)
===============================================================================================================================
Total from investment operations 0.05 0.68 1.76 (2.21)
===============================================================================================================================
Net asset value, end of period $ 9.81 $ 9.76 $ 9.08 $ 7.32
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 0.51% 7.49% 24.04% (23.19)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 3,712 $ 128 $ 2,589 $ 138
===============================================================================================================================
Ratio of expenses to average net assets 0.81%(c) 0.72%(d) 0.71% 0.81%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.29)% (0.37)% (0.49)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 98% 115% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,408,044.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.73%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits
FS-212
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-213
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.64%
AEROSPACE & DEFENSE-1.10%
United Technologies Corp. 240,000 $ 24,412,800
==========================================================================
AIR FREIGHT & LOGISTICS-0.86%
FedEx Corp. 225,000 19,113,750
==========================================================================
ALUMINUM-0.50%
Alcoa Inc. 385,000 11,172,700
==========================================================================
APPLICATION SOFTWARE-1.14%
Amdocs Ltd. (United Kingdom)(a) 950,000 25,374,500
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.70%
Franklin Resources, Inc. 225,000 15,453,000
==========================================================================
BIOTECHNOLOGY-2.28%
Amgen Inc.(a) 475,000 27,649,750
--------------------------------------------------------------------------
Genentech, Inc.(a)(b) 325,000 23,055,500
==========================================================================
50,705,250
==========================================================================
COMMUNICATIONS EQUIPMENT-3.67%
Cisco Systems, Inc.(a) 2,500,000 43,200,000
--------------------------------------------------------------------------
QUALCOMM Inc.(c) 1,100,000 38,379,000
==========================================================================
81,579,000
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.79%
Best Buy Co., Inc. 350,000 17,619,000
==========================================================================
COMPUTER HARDWARE-2.77%
Dell Inc.(a) 1,250,000 43,537,500
--------------------------------------------------------------------------
International Business Machines Corp. 235,000 17,949,300
==========================================================================
61,486,800
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.54%
EMC Corp.(a) 2,600,000 34,112,000
==========================================================================
CONSUMER FINANCE-2.42%
American Express Co. 600,000 31,620,000
--------------------------------------------------------------------------
SLM Corp. 465,000 22,152,600
==========================================================================
53,772,600
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.78%
Automatic Data Processing, Inc. 400,000 17,376,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DEPARTMENT STORES-1.58%
J.C. Penney Co., Inc. 365,000 $ 17,304,650
--------------------------------------------------------------------------
Nordstrom, Inc. 350,000 17,790,500
==========================================================================
35,095,150
==========================================================================
DIVERSIFIED BANKS-3.00%
Bank of America Corp. 760,000 34,230,400
--------------------------------------------------------------------------
U.S. Bancorp 410,000 11,439,000
--------------------------------------------------------------------------
Wells Fargo & Co. 350,000 20,979,000
==========================================================================
66,648,400
==========================================================================
DIVERSIFIED CHEMICALS-0.98%
Dow Chemical Co. (The) 475,000 21,816,750
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.69%
Cendant Corp. 770,000 15,330,700
==========================================================================
ELECTRIC UTILITIES-1.03%
FPL Group, Inc. 560,000 22,859,200
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.94%
Cooper Industries, Ltd.-Class A (Bermuda) 160,000 10,185,600
--------------------------------------------------------------------------
Rockwell Automation, Inc. 230,000 10,632,900
==========================================================================
20,818,500
==========================================================================
FOOTWEAR-1.16%
NIKE, Inc.-Class B 335,000 25,731,350
==========================================================================
HEALTH CARE EQUIPMENT-4.20%
Bard (C.R.), Inc. 175,000 12,454,750
--------------------------------------------------------------------------
Becton, Dickinson & Co. 225,000 13,167,000
--------------------------------------------------------------------------
Medtronic, Inc. 470,000 24,769,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 350,000 11,809,000
--------------------------------------------------------------------------
Waters Corp.(a) 375,000 14,861,250
--------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 200,000 16,284,000
==========================================================================
93,345,000
==========================================================================
HEALTH CARE FACILITIES-0.69%
HCA Inc. 275,000 15,356,000
==========================================================================
HEALTH CARE SERVICES-0.54%
Express Scripts, Inc.(a) 134,061 12,017,228
==========================================================================
HOME IMPROVEMENT RETAIL-1.75%
Home Depot, Inc. (The) 1,100,000 38,907,000
==========================================================================
|
FS-214
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HOTELS, RESORTS & CRUISE LINES-1.24%
Carnival Corp. (Panama)(d) 315,000 $ 15,397,200
--------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(d) 225,000 12,226,500
==========================================================================
27,623,700
==========================================================================
HOUSEHOLD PRODUCTS-2.64%
Clorox Co. (The)(c) 200,000 12,660,000
--------------------------------------------------------------------------
Procter & Gamble Co. (The) 850,000 46,027,500
==========================================================================
58,687,500
==========================================================================
HOUSEWARES & SPECIALTIES-0.95%
Fortune Brands, Inc. 250,000 21,145,000
==========================================================================
HYPERMARKETS & SUPER CENTERS-2.75%
Costco Wholesale Corp. 400,000 16,232,000
--------------------------------------------------------------------------
Wal-Mart Stores, Inc. 950,000 44,783,000
==========================================================================
61,015,000
==========================================================================
INDUSTRIAL CONGLOMERATES-5.00%
General Electric Co. 1,940,000 70,228,000
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,300,000 40,703,000
==========================================================================
110,931,000
==========================================================================
INDUSTRIAL GASES-0.53%
Air Products & Chemicals, Inc. 200,000 11,746,000
==========================================================================
INDUSTRIAL MACHINERY-1.03%
Danaher Corp. 453,000 22,935,390
==========================================================================
INTEGRATED OIL & GAS-4.05%
Exxon Mobil Corp. 1,575,000 89,822,250
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.78%
SBC Communications Inc. 725,000 17,255,000
==========================================================================
INTERNET RETAIL-0.43%
eBay Inc.(a) 300,000 9,519,000
==========================================================================
INTERNET SOFTWARE & SERVICES-1.46%
VeriSign, Inc.(a) 575,000 15,214,500
--------------------------------------------------------------------------
Yahoo! Inc.(a) 500,000 17,255,000
==========================================================================
32,469,500
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.38%
Goldman Sachs Group, Inc. (The) 400,000 42,716,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 600,000 32,358,000
==========================================================================
75,074,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.73%
Accenture Ltd.-Class A (Bermuda)(a) 750,000 16,275,000
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MANAGED HEALTH CARE-3.17%
UnitedHealth Group Inc. 475,000 $ 44,892,250
--------------------------------------------------------------------------
WellPoint Inc.(a) 200,000 25,550,000
==========================================================================
70,442,250
==========================================================================
MOVIES & ENTERTAINMENT-1.04%
Walt Disney Co. (The) 875,000 23,100,000
==========================================================================
MULTI-LINE INSURANCE-0.78%
Genworth Financial Inc.-Class A 616,400 17,228,380
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.88%
Dominion Resources, Inc. 260,000 19,604,000
==========================================================================
OIL & GAS DRILLING-1.23%
ENSCO International Inc. 425,000 13,855,000
--------------------------------------------------------------------------
GlobalSantaFe Corp. (Cayman Islands) 400,000 13,440,000
==========================================================================
27,295,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.88%
BJ Services Co. 325,000 15,843,750
--------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 380,000 25,995,800
==========================================================================
41,839,550
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-0.79%
Valero Energy Corp. 255,000 17,475,150
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.27%
Citigroup Inc. 1,300,000 61,048,000
--------------------------------------------------------------------------
JPMorgan Chase & Co. 950,000 33,715,500
==========================================================================
94,763,500
==========================================================================
PERSONAL PRODUCTS-1.28%
Gillette Co. (The) 550,000 28,402,000
==========================================================================
PHARMACEUTICALS-6.90%
Allergan, Inc. 190,000 13,374,100
--------------------------------------------------------------------------
Johnson & Johnson 1,100,000 75,493,000
--------------------------------------------------------------------------
Pfizer Inc. 1,455,000 39,532,350
--------------------------------------------------------------------------
Wyeth 550,000 24,717,000
==========================================================================
153,116,450
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.05%
Allstate Corp. (The) 415,000 23,306,400
==========================================================================
RAILROADS-1.24%
Burlington Northern Santa Fe Corp. 225,000 10,856,250
--------------------------------------------------------------------------
Canadian National Railway Co. (Canada) 290,000 16,590,900
==========================================================================
27,447,150
==========================================================================
|
FS-215
MARKET
SHARES VALUE
--------------------------------------------------------------------------
RESTAURANTS-1.79%
McDonald's Corp. 850,000 $ 24,913,500
--------------------------------------------------------------------------
Starbucks Corp.(a) 300,000 14,856,000
==========================================================================
39,769,500
==========================================================================
SEMICONDUCTOR EQUIPMENT-0.75%
KLA-Tencor Corp.(c) 425,000 16,583,500
==========================================================================
SEMICONDUCTORS-4.37%
Analog Devices, Inc. 475,000 16,202,250
--------------------------------------------------------------------------
Intel Corp. 1,535,000 36,103,200
--------------------------------------------------------------------------
Linear Technology Corp. 450,000 16,083,000
--------------------------------------------------------------------------
Microchip Technology Inc. 300,000 8,544,000
--------------------------------------------------------------------------
Xilinx, Inc.(c) 750,000 20,205,000
==========================================================================
97,137,450
==========================================================================
SOFT DRINKS-0.75%
PepsiCo, Inc. 300,000 16,692,000
==========================================================================
SPECIALTY STORES-1.06%
Bed Bath & Beyond Inc.(a) 360,000 13,395,600
--------------------------------------------------------------------------
Staples, Inc. 525,000 10,011,750
==========================================================================
23,407,350
==========================================================================
STEEL-0.43%
United States Steel Corp. 225,000 9,621,000
==========================================================================
SYSTEMS SOFTWARE-5.08%
Microsoft Corp. 2,300,000 58,190,000
--------------------------------------------------------------------------
Oracle Corp.(a) 3,300,000 38,148,000
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Symantec Corp.(a) 875,000 $ 16,432,500
==========================================================================
112,770,500
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.82%
Vodafone Group PLC-ADR (United Kingdom) 700,000 18,298,000
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,784,461,037) 2,212,900,148
==========================================================================
MONEY MARKET FUNDS-0.06%
Liquid Assets Portfolio-Institutional
Class(e) 728,931 728,931
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 728,931 728,931
==========================================================================
Total Money Market Funds (Cost
$1,457,862) 1,457,862
==========================================================================
TOTAL INVESTMENTS-99.70% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,785,918,899) 2,214,358,010
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-1.25%
STIC Prime Portfolio-Institutional
Class(e)(f) 27,735,550 27,735,550
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $27,735,550) 27,735,550
==========================================================================
TOTAL INVESTMENTS-100.95% (Cost
$1,813,654,449) 2,242,093,560
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.95%) (21,162,361)
==========================================================================
NET ASSETS-100.00% $2,220,931,199
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 1H
and Note 9.
(c) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2005.
(d) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common, preferred or
trust shares of the issuer.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-216
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,784,461,037)* $2,212,900,148
------------------------------------------------------------
Investments in affiliated money market funds
(cost $29,193,412) 29,193,412
============================================================
Total investments (cost $1,813,654,449) 2,242,093,560
============================================================
Receivables for:
Investments sold 15,164,479
------------------------------------------------------------
Fund shares sold 1,042,706
------------------------------------------------------------
Dividends 2,212,152
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 132,704
------------------------------------------------------------
Other assets 80,139
============================================================
Total assets 2,260,725,740
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,375,000
------------------------------------------------------------
Fund shares reacquired 7,325,367
------------------------------------------------------------
Options written, at market value (premiums
received $139,114) 232,500
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 279,087
------------------------------------------------------------
Collateral upon return of securities
loaned 27,735,550
------------------------------------------------------------
Accrued distribution fees 1,203,930
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,909
------------------------------------------------------------
Accrued transfer agent fees 1,377,934
------------------------------------------------------------
Accrued operating expenses 260,264
============================================================
Total liabilities 39,794,541
============================================================
Net assets applicable to shares outstanding $2,220,931,199
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,350,918,043
------------------------------------------------------------
Undistributed net investment income 6,173,924
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (1,564,506,493)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 428,345,725
============================================================
$2,220,931,199
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,084,894,105
____________________________________________________________
============================================================
Class B $ 862,550,699
____________________________________________________________
============================================================
Class C $ 179,232,106
____________________________________________________________
============================================================
Class R $ 6,521,732
____________________________________________________________
============================================================
Investor Class $ 27,844,659
____________________________________________________________
============================================================
Institutional Class $ 59,887,898
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 98,831,301
____________________________________________________________
============================================================
Class B 82,968,000
____________________________________________________________
============================================================
Class C 17,240,922
____________________________________________________________
============================================================
Class R 596,503
____________________________________________________________
============================================================
Investor Class 2,530,825
____________________________________________________________
============================================================
Institutional Class 5,340,504
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.98
------------------------------------------------------------
Offering price per share:
(Net asset value of $10.98 divided by
94.50%) $ 11.62
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 10.40
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 10.40
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 10.93
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 11.00
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 11.21
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $26,790,416 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-217
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $18,373) $ 27,140,718
---------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $7,985 after rebates of
$140,546) 194,118
---------------------------------------------------------------------------
Interest 4,703
===========================================================================
Total investment income 27,339,539
===========================================================================
EXPENSES:
Advisory fees 7,911,958
---------------------------------------------------------------------------
Administrative services fees 259,234
---------------------------------------------------------------------------
Custodian fees 50,615
---------------------------------------------------------------------------
Distribution fees:
Class A 2,069,237
---------------------------------------------------------------------------
Class B 4,910,433
---------------------------------------------------------------------------
Class C 1,025,952
---------------------------------------------------------------------------
Class R 16,350
---------------------------------------------------------------------------
Investor Class 38,481
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 4,370,253
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,297
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 53,798
---------------------------------------------------------------------------
Other 379,535
===========================================================================
Total expenses 21,088,143
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (151,220)
===========================================================================
Net expenses 20,936,923
===========================================================================
Net investment income 6,402,616
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 126,480,417
---------------------------------------------------------------------------
Option contracts written 1,315,993
===========================================================================
127,796,410
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,441,959)
---------------------------------------------------------------------------
Option contracts written (93,386)
===========================================================================
(114,535,345)
===========================================================================
Net gain from investment securities and option contracts 13,261,065
===========================================================================
Net increase in net assets resulting from operations $ 19,663,681
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-218
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 6,402,616 $ (14,677,760)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures
contracts and option contracts 127,796,410 141,551,945
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (114,535,345) (63,358,526)
==============================================================================================
Net increase in net assets resulting from operations 19,663,681 63,515,659
==============================================================================================
Share transactions-net:
Class A (162,427,892) (236,834,043)
----------------------------------------------------------------------------------------------
Class B (176,861,515) (213,672,955)
----------------------------------------------------------------------------------------------
Class C (45,473,256) (73,035,331)
----------------------------------------------------------------------------------------------
Class R 528,612 4,401,189
----------------------------------------------------------------------------------------------
Investor Class (4,551,113) 30,994,771
----------------------------------------------------------------------------------------------
Institutional Class 10,877,834 48,256,952
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (377,907,330) (439,889,417)
==============================================================================================
Net increase (decrease) in net assets (358,243,649) (376,373,758)
==============================================================================================
NET ASSETS:
Beginning of period 2,579,174,848 2,955,548,606
==============================================================================================
End of period (including undistributed net investment
income (loss) of $6,173,924 and $(228,692),
respectively) $2,220,931,199 $2,579,174,848
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-219
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-220
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. COVERED CALL OPTIONS -- The Fund may write and buy call options, including securities index options. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a 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.
A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has
FS-221
given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written.
An option on a securities index gives the holder the right to receive a cash "exercise settlement amount" equal to the difference between the exercise price of the option and the value of the underlying stock index on the exercise date, multiplied by a fixed "index multiplier." A securities index fluctuates with changes in the market values of the securities included in the index. In the purchase of securities index options, the principal risk is that the premium and transaction costs paid by the Fund in purchasing an option will be lost if the changes in the level of the index do not exceed the cost of the option. In writing securities index options, the principal risk is that the Fund could bear a loss on the options that would be only partially offset (or not offset at all) by the increased value or reduced cost of hedged securities. Moreover, in the event the Fund was unable to close an option it had written, it might be unable to sell the securities used as cover.
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 received or made 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------- First $350 million 0.75% --------------------------------------------------------------------- Over $350 million 0.625% _____________________________________________________________________ ===================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------- First $250 million 0.695% --------------------------------------------------------------------- Next $250 million 0.67% --------------------------------------------------------------------- Next $500 million 0.645% --------------------------------------------------------------------- Next $1.5 billion 0.62% --------------------------------------------------------------------- Next $2.5 billion 0.595% --------------------------------------------------------------------- Next $2.5 billion 0.57% --------------------------------------------------------------------- Next $2.5 billion 0.545% --------------------------------------------------------------------- Over $10 billion 0.52% _____________________________________________________________________ ===================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $41,822.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $79,427 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $259,234.
FS-222
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,370,253 for Class A, Class B, Class C, Class R and Investor Class share classes and $2,297 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $2,069,237, $4,910,433, $1,025,952, $16,350 and $38,481, 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, 2005, ADI advised the Fund that it retained $120,144 in front-end sales commissions from the sale of Class A shares and $1,482, $165,460, $9,526 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 7,279,701 $162,259,621 $(168,810,391) $ -- $ 728,931 $ 92,216 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 7,279,701 162,259,621 (168,810,391) -- 728,931 93,917 --
==================================================================================================================================
Subtotal $14,559,402 $324,519,242 $(337,620,782) $ -- $1,457,862 $186,133 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $34,975,975 $227,795,300 $ (235,035,725) $ -- $27,735,550 $ 7,985 $ --
==================================================================================================================================
Total $49,535,377 $552,314,542 $ (572,656,507) $ -- $29,193,412 $194,118 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
FS-223
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $10,662,464 and sales of $0, which resulted in net realized gain (loss) of $0.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $29,971.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $6,356 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-224
At April 30, 2005, securities with an aggregate value of $26,790,416 were on loan to brokers. The loans were secured by cash collateral of $27,735,550 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,985 for securities lending transactions, which are net of rebates.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of period -- $ --
-------------------------------------------------------------------------------------
Written 20,528 1,858,250
-------------------------------------------------------------------------------------
Closed (11,772) (965,369)
-------------------------------------------------------------------------------------
Exercised (2,900) (306,290)
-------------------------------------------------------------------------------------
Expired (4,856) (447,477)
=====================================================================================
End of period 1,000 $ 139,114
_____________________________________________________________________________________
=====================================================================================
|
OPEN CALL OPTIONS WRITTEN AT PERIOD END
-------------------------------------------------------------------------------------------------------------------------------
APRIL 30,
2005 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------------------
Genentech, Inc. Jun-05 $75.0 1,000 $139,114 $232,500 $(93,386)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,642,177,803 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2008 $ 85,920,513
------------------------------------------------------------------------------
October 31, 2009 845,288,837
------------------------------------------------------------------------------
October 31, 2010 617,527,392
------------------------------------------------------------------------------
October 31, 2011 102,944,109
==============================================================================
Total capital loss carryforward $1,651,680,851
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth & Income Fund into the Fund, are realized on securities held in each fund on such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
FS-225
NOTE 11--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, 2005 was $591,303,464 and $947,944,913, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $448,627,717 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (51,140,090) ============================================================================== Net unrealized appreciation of investment securities $397,487,627 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,844,605,933. |
NOTE 12--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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,359,730 $ 72,482,429 21,493,299 $ 237,822,246
--------------------------------------------------------------------------------------------------------------------------
Class B 2,254,845 24,336,885 7,106,647 75,074,355
--------------------------------------------------------------------------------------------------------------------------
Class C 878,657 9,489,987 2,785,689 29,371,888
--------------------------------------------------------------------------------------------------------------------------
Class R 119,906 1,364,272 672,346 7,394,140
--------------------------------------------------------------------------------------------------------------------------
Investor Class 155,266 1,763,079 513,156 5,688,744
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 975,823 11,324,304 4,421,094 48,593,658
==========================================================================================================================
Issued in connection with acquisitions:(b)
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 3,171,481 35,902,680 2,357,674 26,110,071
--------------------------------------------------------------------------------------------------------------------------
Class B (3,345,084) (35,902,680) (2,474,910) (26,110,071)
==========================================================================================================================
Reacquired:
Class A (23,714,089) (270,813,001) (45,616,888) (501,443,066)
--------------------------------------------------------------------------------------------------------------------------
Class B (15,296,751) (165,295,720) (25,052,874) (262,781,002)
--------------------------------------------------------------------------------------------------------------------------
Class C (5,076,515) (54,963,243) (9,864,695) (103,409,473)
--------------------------------------------------------------------------------------------------------------------------
Class R (73,643) (835,660) (270,057) (2,992,951)
--------------------------------------------------------------------------------------------------------------------------
Investor Class (551,773) (6,314,192) (1,149,919) (12,707,797)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (38,700) (446,470) (30,273) (336,706)
==========================================================================================================================
(34,180,847) $(377,907,330) (41,379,465) $(439,889,417)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 8% of the outstanding shares of
the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but
not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by this entity are also owned beneficially.
(b) 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 of 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-226
NOTE 13--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, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49
----------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.05(a) (0.02) (0.02) (0.04)(b) (0.04) (0.05)(b)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) (0.01) 0.27 1.49 (1.96) (6.03) 1.85
============================================================================================================================
Total from investment
operations 0.04 0.25 1.47 (2.00) (6.07) 1.80
============================================================================================================================
Net asset value, end of period $ 10.98 $ 10.94 $ 10.69 $ 9.22 $ 11.22 $ 17.29
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(c) 0.37% 2.34% 15.94% (17.82)% (35.11)% 11.60%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $1,084,894 $1,236,434 $1,439,518 $1,402,589 $2,067,602 $3,163,453
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average
net assets 1.41%(d)(e) 1.44%(e) 1.47% 1.40% 1.28% 1.19%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.81%(a)(d) (0.19)% (0.17)% (0.33)% (0.29)% (0.31)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.01 and 0.08%, respectively.
(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 the 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
$1,192,220,397.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.42% (annualized) and 1.45% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-227
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22
---------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.01(a) (0.10) (0.08) (0.10)(b) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.00 0.27 1.42 (1.89) (5.87) 1.82
===========================================================================================================================
Total from investment
operations 0.01 0.17 1.34 (1.99) (6.00) 1.65
===========================================================================================================================
Net asset value, end of period $ 10.40 $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.87
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 0.10% 1.66% 15.09% (18.31)% (35.57)% 10.87%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $862,551 $1,032,774 $1,223,821 $1,198,513 $1,806,464 $2,746,149
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average
net assets 2.06%(d)(e) 2.09%(e) 2.12% 2.05% 1.94% 1.88%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.16%(a)(d) (0.84)% (0.82)% (0.98)% (0.94)% (1.00)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.03) and (0.57)%, respectively.
(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 the 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
$990,225,357.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.07% (annualized) and 2.10% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-228
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------
2005 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21
-----------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.01(a) (0.10) (0.08) (0.10)(b) (0.13) (0.17)(b)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.00 0.27 1.42 (1.89) (5.86) 1.82
=================================================================================================================
Total from investment
operations 0.01 0.17 1.34 (1.99) (5.99) 1.65
=================================================================================================================
Net asset value, end of period $ 10.40 $ 10.39 $ 10.22 $ 8.88 $ 10.87 $ 16.86
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(c) 0.10% 1.66% 15.09% (18.31)% (35.53)% 10.82%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $179,232 $222,840 $290,396 $302,555 $487,838 $720,186
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average
net assets 2.06%(d)(e) 2.09%(e) 2.12% 2.05% 1.94% 1.88%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.16%(a)(d) (0.84)% (0.82)% (0.98)% (0.94)% (1.00)%
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(f) 24% 29% 28% 28% 31% 22%
_________________________________________________________________________________________________________________
=================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.03) and (0.57)%, respectively.
(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 the 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
$206,890,847.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.07% (annualized) and 2.10% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Not annualized for periods less than one year.
FS-229
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.91 $10.66 $ 9.22 $ 10.53
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) (0.03) (0.00) (0.02)(b)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.28 1.44 (1.29)
================================================================================================================
Total from investment operations 0.02 0.25 1.44 (1.31)
================================================================================================================
Net asset value, end of period $10.93 $10.91 $10.66 $ 9.22
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) 0.18% 2.35% 15.62% (12.44)%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,522 $6,000 $1,578 $ 37
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets 1.56%(d)(e) 1.59%(e) 1.62% 1.55%(f)
________________________________________________________________________________________________________________
================================================================================================================
Ratio of net investment income (loss) to average net assets 0.66%(a)(d) (0.34)% (0.32)% (0.49)(f)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(g) 24% 29% 28% 28%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.00) and (0.07)%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$6,594,065.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.57% (annualized) and 1.60% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Annualized.
(g) Not annualized for periods less than one year.
FS-230
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
--------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.96 $ 10.69 $10.16
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.24 (0.00)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.03 0.53
================================================================================================================
Total from investment operations 0.04 0.27 0.53
================================================================================================================
Net asset value, end of period $ 11.00 $ 10.96 $10.69
________________________________________________________________________________________________________________
================================================================================================================
Total return(b) 0.37% 2.53% 5.22%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $27,845 $32,084 $ 100
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets 1.31%(c)(d) 1.34%(d) 1.29%(e)
________________________________________________________________________________________________________________
================================================================================================================
Ratio of net investment income (loss) to average net assets 0.91%(a)(c) (0.09)% (0.01)(e)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(f) 24% 29% 28%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.01 and 0.18%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$31,040,288.
(d) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.32% (annualized) and 1.35% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-231
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
----------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.14 $ 10.81 $ 9.26 $ 12.13
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08(a) 0.04 0.06 0.02(b)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01) 0.29 1.49 (2.89)
==================================================================================================================
Total from investment operations 0.07 0.33 1.55 (2.87)
==================================================================================================================
Net asset value, end of period $ 11.21 $ 11.14 $10.81 $ 9.26
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 0.63% 3.05% 16.74% (23.66)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $59,888 $49,044 $ 136 $ 160
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 0.70%(d)(e) 0.74%(e) 0.77% 0.77%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of net investment income to average net assets 1.52%(a)(d) 0.51% 0.53% 0.30%(f)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(g) 24% 29% 28% 28%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$0.04 and 0.79%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$55,837,682.
(e) After fee waivers and/or expense reimbursements. Ratio to expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.71% (annualized) and 0.75% for the six months ended April 30, 2005
and the year ended October 31, 2004, respectively.
(f) Annualized.
(g) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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
FS-232
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-233
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS OTHER EQUITY INTERESTS-93.62%
ADVERTISING-1.59%
Omnicom Group Inc. 67,800 $ 5,620,620
--------------------------------------------------------------------------
R.H. Donnelley Corp.(a) 210,700 11,999,365
==========================================================================
17,619,985
==========================================================================
AEROSPACE & DEFENSE-1.04%
L-3 Communications Holdings, Inc.(b) 161,800 11,482,946
==========================================================================
AIR FREIGHT & LOGISTICS-0.84%
Robinson (C.H.) Worldwide, Inc.(b) 179,700 9,272,520
==========================================================================
APPAREL RETAIL-2.40%
Abercrombie & Fitch Co.-Class A 271,900 14,669,005
--------------------------------------------------------------------------
Ross Stores, Inc. 446,900 11,941,168
==========================================================================
26,610,173
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.48%
Polo Ralph Lauren Corp. 152,100 5,338,710
==========================================================================
APPLICATION SOFTWARE-4.27%
Amdocs Ltd. (United Kingdom)(a) 412,200 11,009,862
--------------------------------------------------------------------------
Autodesk, Inc. 395,900 12,601,497
--------------------------------------------------------------------------
Hyperion Solutions Corp.(a) 195,000 7,930,650
--------------------------------------------------------------------------
Macromedia, Inc.(a) 125,200 4,959,172
--------------------------------------------------------------------------
Mercury Interactive Corp.(a)(b) 262,700 10,857,391
==========================================================================
47,358,572
==========================================================================
AUTO PARTS & EQUIPMENT-0.71%
Autoliv, Inc. 176,600 7,814,550
==========================================================================
BIOTECHNOLOGY-1.74%
Charles River Laboratories International,
Inc.(a) 246,600 11,681,442
--------------------------------------------------------------------------
Martek Biosciences Corp.(a) 200,000 7,654,000
==========================================================================
19,335,442
==========================================================================
BUILDING PRODUCTS-1.02%
American Standard Cos. Inc. 253,800 11,347,398
==========================================================================
CASINOS & GAMING-2.53%
Harrah's Entertainment, Inc.(b) 234,400 15,381,328
--------------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 590,600 12,680,182
==========================================================================
28,061,510
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMODITY CHEMICALS-0.89%
Celanese Corp.-Series A(a) 677,200 $ 9,853,260
==========================================================================
COMMUNICATIONS EQUIPMENT-4.42%
Avaya Inc.(a)(b) 857,200 7,440,496
--------------------------------------------------------------------------
Corning Inc.(a) 489,900 6,736,125
--------------------------------------------------------------------------
Harris Corp. 347,800 9,807,960
--------------------------------------------------------------------------
Juniper Networks, Inc.(a) 275,800 6,230,322
--------------------------------------------------------------------------
Plantronics, Inc. 324,700 10,224,803
--------------------------------------------------------------------------
Scientific-Atlanta, Inc. 278,200 8,507,356
==========================================================================
48,947,062
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.12%
Emulex Corp.(a)(b) 463,700 7,201,261
--------------------------------------------------------------------------
Storage Technology Corp.(a)(b) 187,200 5,204,160
==========================================================================
12,405,421
==========================================================================
CONSUMER FINANCE-1.05%
AmeriCredit Corp.(a)(b) 497,100 11,632,140
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.64%
Alliance Data Systems Corp.(a)(b) 268,600 10,851,440
--------------------------------------------------------------------------
CSG Systems International, Inc.(a) 644,400 11,077,236
--------------------------------------------------------------------------
Iron Mountain Inc.(a)(b) 246,650 7,325,505
==========================================================================
29,254,181
==========================================================================
DEPARTMENT STORES-1.42%
Kohl's Corp.(a) 216,200 10,291,120
--------------------------------------------------------------------------
Nordstrom, Inc. 106,100 5,393,063
==========================================================================
15,684,183
==========================================================================
DISTILLERS & VINTNERS-1.07%
Constellation Brands, Inc.-Class A(a) 224,000 11,807,040
==========================================================================
DIVERSIFIED BANKS-0.83%
Centennial Bank Holdings, Inc. (Acquired
12/27/2004; Cost $8,963,850)(a)(c) 853,700 9,219,960
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.42%
Career Education Corp.(a) 212,900 6,693,576
--------------------------------------------------------------------------
ChoicePoint Inc.(a) 315,300 12,444,891
--------------------------------------------------------------------------
Corrections Corp. of America(a) 349,300 13,221,005
--------------------------------------------------------------------------
|
FS-234
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Jackson Hewitt Tax Service Inc. 299,300 $ 5,513,106
==========================================================================
37,872,578
==========================================================================
DRUG RETAIL-1.05%
Shoppers Drug Mart Corp. (Canada) 374,800 11,690,626
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.00%
Cooper Industries, Ltd.-Class A (Bermuda)(b) 174,100 11,083,206
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.71%
Aeroflex Inc.(a) 616,500 4,888,845
--------------------------------------------------------------------------
Amphenol Corp.-Class A 327,500 12,916,600
--------------------------------------------------------------------------
Dolby Laboratories Inc.-Class A(a) 57,600 1,177,920
==========================================================================
18,983,365
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.84%
Benchmark Electronics, Inc.(a) 346,100 9,358,544
==========================================================================
GAS UTILITIES-0.95%
Questar Corp.(b) 180,000 10,512,000
==========================================================================
GENERAL MERCHANDISE STORES-1.56%
Dollar General Corp. 565,600 11,509,960
--------------------------------------------------------------------------
Dollar Tree Stores, Inc.(a)(b) 235,900 5,777,191
==========================================================================
17,287,151
==========================================================================
HEALTH CARE DISTRIBUTORS-0.86%
Henry Schein, Inc.(a)(b) 253,800 9,520,038
==========================================================================
HEALTH CARE EQUIPMENT-6.21%
Biomet, Inc. 237,600 9,192,744
--------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 205,900 12,226,342
--------------------------------------------------------------------------
INAMED Corp.(a) 96,000 5,840,640
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a)(b) 204,200 12,548,090
--------------------------------------------------------------------------
PerkinElmer, Inc. 545,500 10,091,750
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)(b) 258,900 8,735,286
--------------------------------------------------------------------------
Waters Corp.(a) 256,500 10,165,095
==========================================================================
68,799,947
==========================================================================
HEALTH CARE FACILITIES-2.22%
Community Health Systems Inc.(a) 300,000 10,935,000
--------------------------------------------------------------------------
VCA Antech, Inc.(a)(b) 586,200 13,646,736
==========================================================================
24,581,736
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE SERVICES-6.23%
Caremark Rx, Inc.(a) 290,000 $ 11,614,500
--------------------------------------------------------------------------
Cerner Corp.(a)(b) 114,000 6,618,840
--------------------------------------------------------------------------
Covance Inc.(a) 198,900 9,077,796
--------------------------------------------------------------------------
DaVita, Inc.(a) 270,000 10,881,000
--------------------------------------------------------------------------
Express Scripts, Inc.(a)(b) 115,000 10,308,600
--------------------------------------------------------------------------
Omnicare, Inc.(b) 255,000 8,840,850
--------------------------------------------------------------------------
Renal Care Group, Inc.(a)(b) 306,900 11,708,235
==========================================================================
69,049,821
==========================================================================
HEALTH CARE SUPPLIES-0.97%
Cooper Cos., Inc. (The) 159,600 10,780,980
==========================================================================
HOME FURNISHINGS-0.89%
Tempur-Pedic International Inc.(a) 518,200 9,892,438
==========================================================================
HOMEBUILDING-1.07%
Ryland Group, Inc. (The) 192,700 11,831,780
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.10%
Hilton Hotels Corp. 557,800 12,176,774
==========================================================================
HOUSEHOLD PRODUCTS-0.19%
Central Garden & Pet Co.(a) 50,900 2,116,931
==========================================================================
HOUSEWARES & SPECIALTIES-1.66%
Fortune Brands, Inc. 65,300 5,523,074
--------------------------------------------------------------------------
Jarden Corp.(a)(b) 287,700 12,851,559
==========================================================================
18,374,633
==========================================================================
INDUSTRIAL MACHINERY-1.06%
Ingersoll-Rand Co.-Class A (Bermuda) 152,100 11,691,927
==========================================================================
INTEGRATED OIL & GAS-1.04%
Murphy Oil Corp.(b) 129,500 11,537,155
==========================================================================
INTERNET SOFTWARE & SERVICES-1.40%
Digital River, Inc.(a) 252,600 6,719,160
--------------------------------------------------------------------------
VeriSign, Inc.(a)(b) 331,200 8,763,552
==========================================================================
15,482,712
==========================================================================
LEISURE PRODUCTS-1.00%
Brunswick Corp.(b) 262,700 11,033,400
==========================================================================
MANAGED HEALTH CARE-0.51%
Molina Healthcare Inc.(a) 130,000 5,687,500
==========================================================================
MULTI-LINE INSURANCE-0.19%
Quanta Capital Holdings Ltd. (Bermuda)(a)(d) 264,441 2,115,528
==========================================================================
OFFICE ELECTRONICS-0.61%
Zebra Technologies Corp.-Class A(a)(b) 140,825 6,725,802
==========================================================================
|
FS-235
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OIL & GAS DRILLING-1.84%
Nabors Industries, Ltd. (Bermuda)(a) 100,000 $ 5,387,000
--------------------------------------------------------------------------
Noble Corp. (Cayman Islands)(b) 190,000 9,671,000
--------------------------------------------------------------------------
Pride International, Inc.(a) 237,900 5,305,170
==========================================================================
20,363,170
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.17%
National-Oilwell Varco Inc.(a) 250,000 9,935,000
--------------------------------------------------------------------------
Smith International, Inc. 92,000 5,352,560
--------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 168,000 8,761,200
==========================================================================
24,048,760
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.38%
Williams Cos., Inc. (The) 900,000 15,318,000
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.05%
Alliance Capital Management Holding L.P.(b) 256,300 11,518,122
--------------------------------------------------------------------------
CapitalSource Inc.(a)(b) 531,400 11,159,400
==========================================================================
22,677,522
==========================================================================
PHARMACEUTICALS-0.48%
Medicis Pharmaceutical Corp.-Class A(b) 191,000 5,367,100
==========================================================================
RAILROADS-0.48%
CSX Corp. 132,100 5,301,173
==========================================================================
REAL ESTATE-3.21%
Aames Investment Corp. 877,800 7,417,410
--------------------------------------------------------------------------
Fieldstone Investment Corp.(d) 574,779 7,339,928
--------------------------------------------------------------------------
KKR Financial Corp. (Acquired 08/05/2004;
Cost $10,250,000)(a)(c) 1,025,000 10,506,250
--------------------------------------------------------------------------
People's Choice Financial Corp. (Acquired
12/21/2004; Cost $10,296,000)(a)(c) 1,029,600 10,296,000
==========================================================================
35,559,588
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.04%
CB Richard Ellis Group, Inc.-Class A(a) 332,300 11,547,425
==========================================================================
REGIONAL BANKS-0.55%
Signature Bank(a) 48,100 1,184,703
--------------------------------------------------------------------------
UCBH Holdings, Inc. 314,000 4,939,220
==========================================================================
6,123,923
==========================================================================
RESTAURANTS-0.69%
Applebee's International, Inc. 307,400 7,617,372
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-0.93%
KLA-Tencor Corp.(b) 128,800 $ 5,025,776
--------------------------------------------------------------------------
Novellus Systems, Inc.(a) 223,900 5,245,977
==========================================================================
10,271,753
==========================================================================
SEMICONDUCTORS-2.53%
ATI Technologies Inc. (Canada)(a) 717,100 10,613,080
--------------------------------------------------------------------------
Microchip Technology Inc. 374,762 10,673,222
--------------------------------------------------------------------------
National Semiconductor Corp.(b) 351,300 6,702,804
==========================================================================
27,989,106
==========================================================================
SPECIALIZED FINANCE-0.65%
Chicago Mercantile Exchange Holdings Inc.(b) 36,700 7,175,584
==========================================================================
SPECIALTY CHEMICALS-0.55%
Minerals Technologies Inc. 92,700 6,055,164
==========================================================================
SPECIALTY STORES-3.23%
Advance Auto Parts, Inc.(a) 281,200 15,002,020
--------------------------------------------------------------------------
Office Depot, Inc.(a) 476,700 9,333,786
--------------------------------------------------------------------------
Williams-Sonoma, Inc.(a)(b) 341,600 11,440,184
==========================================================================
35,775,990
==========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.47%
W.W. Grainger, Inc. 93,300 5,158,557
==========================================================================
TRUCKING-0.52%
Swift Transportation Co., Inc.(a)(b) 268,000 5,716,440
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.05%
American Tower Corp.-Class A(a)(b) 668,500 11,518,255
--------------------------------------------------------------------------
NII Holdings Inc.(a)(b) 205,800 10,304,406
--------------------------------------------------------------------------
SpectraSite, Inc.(a) 213,100 11,961,303
==========================================================================
33,783,964
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $904,282,154) 1,037,082,216
==========================================================================
MONEY MARKET FUNDS-4.73%
Liquid Assets Portfolio-Institutional
Class(e) 26,175,446 26,175,446
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 26,175,446 26,175,446
==========================================================================
Total Money Market Funds (Cost
$52,350,892) 52,350,892
==========================================================================
TOTAL INVESTMENTS-98.35% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $956,633,046) 1,089,433,108
==========================================================================
|
FS-236
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-15.50%
Liquid Assets Portfolio-Institutional
Class(e)(f) 85,882,352 $ 85,882,352
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(e)(f) 85,882,352 85,882,352
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $171,764,704) 171,764,704
==========================================================================
TOTAL INVESTMENTS--113.85% (Cost
$1,128,397,750) 1,261,197,812
==========================================================================
OTHER ASSETS LESS LIABILITIES-(13.85%) (153,404,137)
==========================================================================
NET ASSETS-100.00% $1,107,793,675
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) 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 April 30, 2005 was
$30,022,210, which represented 2.71% of the Fund's Net Assets. These
securities are considered to be illiquid; the portfolio is limited to
investing 15% of net assets in illiquid securities.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate market value of these
securities at April 30, 2005 was $9,455,456, which represented 0.75% of the
Fund's Total Investments. See Note 1A.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-237
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$904,282,154)* $1,037,082,216
------------------------------------------------------------
Investments in affiliated money market funds
(cost $224,115,596) 224,115,596
============================================================
Total investments (cost $1,128,397,750) 1,261,197,812
============================================================
Receivables for:
Investments sold 24,437,428
------------------------------------------------------------
Fund shares sold 3,065,688
------------------------------------------------------------
Dividends 688,950
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 64,460
------------------------------------------------------------
Other assets 88,497
============================================================
Total assets 1,289,542,835
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,313,971
------------------------------------------------------------
Fund shares reacquired 2,332,651
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 119,733
------------------------------------------------------------
Collateral upon return of securities
loaned 171,764,704
------------------------------------------------------------
Accrued distribution fees 623,293
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,831
------------------------------------------------------------
Accrued transfer agent fees 510,896
------------------------------------------------------------
Accrued operating expenses 81,081
============================================================
Total liabilities 181,749,160
============================================================
Net assets applicable to shares outstanding $1,107,793,675
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 831,763,514
------------------------------------------------------------
Undistributed net investment income (loss) (4,501,168)
------------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 147,731,267
------------------------------------------------------------
Unrealized appreciation of investment
securities 132,800,062
============================================================
$1,107,793,675
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 686,699,298
____________________________________________________________
============================================================
Class B $ 331,944,271
____________________________________________________________
============================================================
Class C $ 76,854,483
____________________________________________________________
============================================================
Class R $ 6,683,041
____________________________________________________________
============================================================
Investor Class $ 899,915
____________________________________________________________
============================================================
Institutional Class $ 4,712,667
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 40,349,814
____________________________________________________________
============================================================
Class B 20,922,648
____________________________________________________________
============================================================
Class C 4,847,990
____________________________________________________________
============================================================
Class R 394,803
____________________________________________________________
============================================================
Investor Class 52,857
____________________________________________________________
============================================================
Institutional Class 271,604
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 17.02
------------------------------------------------------------
Offering price per share:
(Net asset value of $17.02 divided by
94.50%) $ 18.01
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 15.87
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 15.85
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 16.93
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 17.03
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 17.35
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $168,399,005 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-238
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,612) $ 4,268,388
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $187,500 after rebates of
$1,315,192) 554,377
===========================================================================
Total investment income 4,822,765
===========================================================================
EXPENSES:
Advisory fees 3,798,809
---------------------------------------------------------------------------
Administrative services fees 155,785
---------------------------------------------------------------------------
Custodian fees 25,623
---------------------------------------------------------------------------
Distribution fees:
Class A 1,193,863
---------------------------------------------------------------------------
Class B 1,866,911
---------------------------------------------------------------------------
Class C 396,294
---------------------------------------------------------------------------
Class R 16,255
---------------------------------------------------------------------------
Investor Class 772
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor Class 1,614,175
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,114
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 26,242
---------------------------------------------------------------------------
Other 158,613
===========================================================================
Total expenses 9,255,456
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (29,830)
===========================================================================
Net expenses 9,225,626
===========================================================================
Net investment income (loss) (4,402,861)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (includes gains from securities sold
to affiliates of $3,329,583) 148,146,801
---------------------------------------------------------------------------
Foreign currencies (14,460)
===========================================================================
148,132,341
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (114,816,847)
---------------------------------------------------------------------------
Foreign currencies 36,281
===========================================================================
(114,780,566)
===========================================================================
Net gain from investment securities and foreign currencies 33,351,775
===========================================================================
Net increase in net assets resulting from operations $ 28,948,914
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-239
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,402,861) $ (7,843,507)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 148,132,341 92,544,722
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (114,780,566) 9,256,653
==============================================================================================
Net increase in net assets resulting from operations 28,948,914 93,957,868
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (50,048,191) (13,528,020)
----------------------------------------------------------------------------------------------
Class B (30,864,454) (10,257,718)
----------------------------------------------------------------------------------------------
Class C (6,304,794) (1,789,455)
----------------------------------------------------------------------------------------------
Class R (466,191) (30,198)
----------------------------------------------------------------------------------------------
Investor Class (46,094) --
----------------------------------------------------------------------------------------------
Institutional Class (282,499) (242)
==============================================================================================
Decrease in net assets resulting from distributions (88,012,223) (25,605,633)
==============================================================================================
Share transactions-net:
Class A 104,559,478 31,588,830
----------------------------------------------------------------------------------------------
Class B (25,649,780) (40,086,908)
----------------------------------------------------------------------------------------------
Class C 7,461,334 1,351,823
----------------------------------------------------------------------------------------------
Class R 1,424,126 4,312,014
----------------------------------------------------------------------------------------------
Investor Class 991,725 --
----------------------------------------------------------------------------------------------
Institutional Class 4,903,915 55,370
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions 93,690,798 (2,778,871)
==============================================================================================
Net increase in net assets 34,627,489 65,573,364
==============================================================================================
NET ASSETS:
Beginning of period 1,073,166,186 1,007,592,822
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(4,501,168) and $(98,307),
respectively) $1,107,793,675 $1,073,166,186
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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
FS-240
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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
FS-241
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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $350 million 0.75% ---------------------------------------------------------------------- Over $350 million 0.625% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $3,995.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $10,778 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $155,785.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $1,614,175 for Class A, Class B, Class C, Class R and Investor Class share classes and $2,114 for Institutional Class shares.
FS-242
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $1,193,863, $1,866,911, $396,294, $16,255 and $772, 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, 2005, ADI advised the Fund that it retained $91,807 in front-end sales commissions from the sale of Class A shares and $2,662, $34,307, $2,747 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 10,261,930 $159,404,328 $(143,490,812) $ -- $ 26,175,446 $181,994 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 10,261,930 159,404,328 (143,490,812) -- 26,175,446 184,883 --
==================================================================================================================================
Subtotal $ 20,523,860 $318,808,656 $(286,981,624) $ -- $ 52,350,892 $366,877 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 69,189,281 $123,289,477 $(106,596,406) $ -- $ 85,882,352 $ 92,867 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 69,189,281 123,002,865 (106,309,794) -- 85,882,352 94,633 --
==================================================================================================================================
Subtotal $138,378,562 $246,292,342 $(212,906,200) $ -- $171,764,704 $187,500 $ --
==================================================================================================================================
Total $158,902,422 $565,100,998 $(499,887,824) $ -- $224,115,596 $554,377 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $12,999,593 and sales of $9,146,726, which resulted in net realized gains of $3,329,583.
FS-243
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $15,057.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $3,791 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $168,399,005 were on loan to brokers. The loans were secured by cash collateral of $171,764,704 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $187,500 for securities lending transactions, which are net of rebates.
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
FS-244
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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of October 31, 2004.
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, 2005 was $723,195,929 and $767,399,814, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $176,331,788 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (43,860,098) ============================================================================== Net unrealized appreciation of investment securities $132,471,690 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,128,726,122. |
NOTE 11--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, Investor Class and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A 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(a)
-----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,997,225 $109,076,125 6,956,116 $ 121,226,684
-----------------------------------------------------------------------------------------------------------------------
Class B 1,700,765 28,882,787 2,589,525 42,660,392
-----------------------------------------------------------------------------------------------------------------------
Class C 716,719 12,158,309 1,128,395 18,630,607
-----------------------------------------------------------------------------------------------------------------------
Class R 104,427 1,883,794 275,328 4,806,109
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 52,336 981,692 -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class 299,603 5,486,891 3,080 55,129
=======================================================================================================================
Issued as reinvestment of dividends:
Class A 2,609,949 47,005,175 727,483 12,170,787
-----------------------------------------------------------------------------------------------------------------------
Class B 1,735,416 29,207,056 564,080 8,923,747
-----------------------------------------------------------------------------------------------------------------------
Class C 358,665 6,032,748 96,104 1,519,408
-----------------------------------------------------------------------------------------------------------------------
Class R 25,963 465,263 1,810 30,198
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) 2,559 46,113 -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class 15,412 282,498 14 241
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,032,011 36,812,905 834,769 14,693,499
-----------------------------------------------------------------------------------------------------------------------
Class B (2,173,866) (36,812,905) (886,014) (14,693,499)
=======================================================================================================================
Reacquired:
Class A (4,855,136) (88,334,727) (6,701,600) (116,502,140)
-----------------------------------------------------------------------------------------------------------------------
Class B (2,761,426) (46,926,718) (4,698,851) (76,977,548)
-----------------------------------------------------------------------------------------------------------------------
Class C (634,973) (10,729,723) (1,149,534) (18,798,192)
-----------------------------------------------------------------------------------------------------------------------
Class R (51,771) (924,931) (30,395) (524,293)
-----------------------------------------------------------------------------------------------------------------------
Investor Class(b) (2,038) (36,080) -- --
-----------------------------------------------------------------------------------------------------------------------
Institutional Class (47,085) (865,474) -- --
=======================================================================================================================
5,124,755 $ 93,690,798 (289,690) $ (2,778,871)
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 6% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this entity are also owned
beneficially.
(b) Investor Class shares commenced sales on November 30, 2004.
FS-245
NOTE 12--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Mid Cap Stock Fund ("Selling Fund"), a series of AIM Stock Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
NOTE 13--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, -----------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.08)(a) (0.08)(a) (0.04)(a) (0.04) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.63 1.70 3.94 (1.85) (4.27) 6.68
=================================================================================================================================
Total from investment operations 0.58 1.62 3.86 (1.89) (4.31) 6.55
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 17.02 $ 17.86 $ 16.66 $ 12.80 $ 14.69 $ 21.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.81% 9.87% 30.16% (12.87)% (21.76)% 42.98%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $686,699 $617,194 $545,691 $456,268 $576,660 $759,838
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.36%(c) 1.40%(d) 1.53% 1.38% 1.33% 1.28%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.51)%(c) (0.46)% (0.56)% (0.29)% (0.21)% (0.60)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$687,861,007.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.41%.
(e) Not annualized for periods less than one year.
FS-246
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.18)(a) (0.16)(a) (0.14)(a) (0.15) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.60 1.60 3.74 (1.75) (4.12) 6.52
=================================================================================================================================
Total from investment operations 0.50 1.42 3.58 (1.89) (4.27) 6.26
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 15.87 $ 16.79 $ 15.79 $ 12.21 $ 14.10 $ 21.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.50% 9.13% 29.32% (13.40)% (22.29)% 42.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $331,944 $376,355 $392,382 $346,456 $454,018 $617,576
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.05%(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.16)%(c) (1.11)% (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$376,476,499.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
(e) Not annualized for periods less than one year.
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.18)(a) (0.16)(a) (0.14)(a) (0.14) (0.25)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.60 1.59 3.74 (1.76) (4.12) 6.51
=================================================================================================================================
Total from investment operations 0.50 1.41 3.58 (1.90) (4.26) 6.26
=================================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- -- (2.79) --
=================================================================================================================================
Net asset value, end of period $ 15.85 $ 16.77 $ 15.78 $ 12.20 $ 14.10 $ 21.15
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.49% 9.07% 29.34% (13.48)% (22.24)% 42.04%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $76,854 $73,929 $68,356 $56,298 $66,127 $82,982
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.01%(c) 2.05%(d) 2.18% 2.03% 1.99% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.16)%(c) (1.11)% (1.21)% (0.94)% (0.87)% (1.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 65% 74% 101% 120% 130% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 assets 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
$79,915,759.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.06%.
(e) Not annualized for periods less than one year.
FS-247
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.78 $16.62 $12.79 $ 16.62
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.10)(a) (0.10)(a) (0.03)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.63 1.68 3.93 (3.80)
======================================================================================================================
Total from investment operations 0.57 1.58 3.83 (3.83)
======================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- --
======================================================================================================================
Net asset value, end of period $16.93 $17.78 $16.62 $ 12.79
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.77% 9.65% 29.95% (23.05)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,683 $5,622 $1,154 $ 10
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 1.51%(c) 1.55%(d) 1.68% 1.54%(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.66)%(c) (0.61)% (0.71)% (0.44)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f) 65% 74% 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 assets 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
$6,555,819.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.56%.
(e) Annualized.
(f) Not annualized for periods less than one year.
INVESTOR CLASS
--------------
NOVEMBER 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2005
------------------------------------------------------------------------------
Net asset value, beginning of period $18.95
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a)
------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.47)
==============================================================================
Total from investment operations (0.50)
==============================================================================
Less distributions from net realized gains (1.42)
==============================================================================
Net asset value, end of period $17.03
______________________________________________________________________________
==============================================================================
Total return(b) (3.05)%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 900
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets 1.26%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (0.41)%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 65%
______________________________________________________________________________
==============================================================================
|
(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 assets 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 $741,486.
(d) Not annualized for periods less than one year.
FS-248
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
---------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $18.13 $16.83 $12.84 $ 17.25
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00(a) 0.01(a) 0.01(a) 0.02(a)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.71 3.98 (4.43)
=================================================================================================================
Total from investment operations 0.64 1.72 3.99 (4.41)
=================================================================================================================
Less distributions from net realized gains (1.42) (0.42) -- --
=================================================================================================================
Net asset value, end of period $17.35 $18.13 $16.83 $ 12.84
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 3.11% 10.38% 31.08% (25.57)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,713 $ 67 $ 10 $ 7
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.83%(c) 0.86% 0.87% 0.84%(d)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.83%(c) 1.15% 1.25% 0.99%(d)
=================================================================================================================
Ratio of net investment income to average net assets 0.02%(c) 0.08% 0.10% 0.25%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 65% 74% 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 assets 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
$4,261,254.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-249
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-250
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-72.76%
AEROSPACE & DEFENSE-1.48%
Northrop Grumman Corp. 700,000 $ 38,388,000
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.99%
Bank of New York Co., Inc. (The) 915,000 25,565,100
==========================================================================
COMPUTER HARDWARE-1.23%
International Business Machines Corp. 418,000 31,926,840
==========================================================================
COMPUTER STORAGE & PERIPHERALS-1.36%
Lexmark International, Inc.-Class A(a) 507,900 35,273,655
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.00%
First Data Corp. 685,000 26,050,550
==========================================================================
DEPARTMENT STORES-1.88%
Kohl's Corp.(a) 1,022,100 48,651,960
==========================================================================
DIVERSIFIED BANKS-1.40%
Bank of America Corp. 807,000 36,347,280
==========================================================================
DIVERSIFIED CHEMICALS-1.34%
Dow Chemical Co. (The) 758,000 34,814,940
==========================================================================
ELECTRIC UTILITIES-1.19%
FPL Group, Inc. 759,100 30,986,462
==========================================================================
ENVIRONMENTAL SERVICES-2.20%
Waste Management, Inc. 2,006,500 57,165,185
==========================================================================
FOOD RETAIL-1.77%
Kroger Co. (The)(a) 2,912,000 45,922,240
==========================================================================
HOUSEHOLD PRODUCTS-1.23%
Kimberly-Clark Corp. 513,000 32,036,850
==========================================================================
INDUSTRIAL CONGLOMERATES-2.00%
General Electric Co. 1,434,500 51,928,900
==========================================================================
INDUSTRIAL MACHINERY-1.43%
Dover Corp. 1,023,800 37,225,368
==========================================================================
INTEGRATED OIL & GAS-3.75%
Amerada Hess Corp.(b) 400,600 37,516,190
--------------------------------------------------------------------------
Exxon Mobil Corp. 603,500 34,417,605
--------------------------------------------------------------------------
Murphy Oil Corp. 284,650 25,359,468
==========================================================================
97,293,263
==========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.27%
SBC Communications Inc. 1,382,000 32,891,600
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-1.36%
Morgan Stanley 668,250 35,163,315
==========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.29%
Dominion Resources, Inc. 445,000 $ 33,553,000
==========================================================================
OFFICE ELECTRONICS-1.61%
Xerox Corp.(a) 3,156,300 41,820,975
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.78%
Baker Hughes Inc. 638,000 28,148,560
--------------------------------------------------------------------------
BJ Services Co. 830,000 40,462,500
--------------------------------------------------------------------------
Smith International, Inc. 504,800 29,369,264
==========================================================================
97,980,324
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.96%
Apache Corp. 442,200 24,891,438
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.21%
Citigroup Inc. 670,000 31,463,200
==========================================================================
PACKAGED FOODS & MEATS-6.25%
Campbell Soup Co. 1,507,000 44,818,180
--------------------------------------------------------------------------
General Mills, Inc. 1,610,000 79,534,000
--------------------------------------------------------------------------
Kraft Foods Inc.-Class A(b) 1,170,000 37,919,700
==========================================================================
162,271,880
==========================================================================
PAPER PRODUCTS-1.44%
Georgia-Pacific Corp. 1,087,000 37,251,490
==========================================================================
PHARMACEUTICALS-7.68%
Bristol-Myers Squibb Co. 1,635,000 42,510,000
--------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 1,070,000 38,177,600
--------------------------------------------------------------------------
Merck & Co. Inc. 2,420,000 82,038,000
--------------------------------------------------------------------------
Wyeth 815,000 36,626,100
==========================================================================
199,351,700
==========================================================================
PROPERTY & CASUALTY INSURANCE-4.70%
Berkshire Hathaway Inc.-Class A(a) 710 59,888,500
--------------------------------------------------------------------------
Chubb Corp. (The) 398,000 32,548,440
--------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 828,122 29,646,768
==========================================================================
122,083,708
==========================================================================
PUBLISHING-2.67%
Gannett Co., Inc. 450,000 34,650,000
--------------------------------------------------------------------------
Tribune Co. 900,000 34,740,000
==========================================================================
69,390,000
==========================================================================
RAILROADS-1.33%
Union Pacific Corp. 538,000 34,394,340
==========================================================================
|
FS-251
MARKET
SHARES VALUE
--------------------------------------------------------------------------
REGIONAL BANKS-1.06%
Fifth Third Bancorp 631,400 $ 27,465,900
==========================================================================
SEMICONDUCTORS-4.55%
Analog Devices, Inc. 751,000 25,616,610
--------------------------------------------------------------------------
Intel Corp. 1,441,500 33,904,080
--------------------------------------------------------------------------
National Semiconductor Corp.(b) 1,771,000 33,790,680
--------------------------------------------------------------------------
Xilinx, Inc. 915,000 24,650,100
==========================================================================
117,961,470
==========================================================================
SOFT DRINKS-1.52%
Coca-Cola Co. (The) 910,000 39,530,400
==========================================================================
SYSTEMS SOFTWARE-4.66%
Computer Associates International, Inc. 1,403,093 37,743,202
--------------------------------------------------------------------------
Microsoft Corp. 3,287,000 83,161,100
==========================================================================
120,904,302
==========================================================================
THRIFTS & MORTGAGE FINANCE-1.17%
Washington Mutual, Inc. 734,560 30,352,019
==========================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $1,706,485,623) 1,888,297,654
==========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-20.59%
BERMUDA-4.57%
Accenture Ltd.-Class A (IT Consulting & Other
Services)(a) 1,812,800 39,337,760
--------------------------------------------------------------------------
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 585,200 31,524,724
--------------------------------------------------------------------------
Tyco International Ltd. (Industrial
Conglomerates) 1,523,000 47,685,130
==========================================================================
118,547,614
==========================================================================
CAYMAN ISLANDS-2.81%
ACE Ltd. (Property & Casualty Insurance) 1,030,000 44,248,800
--------------------------------------------------------------------------
GlobalSantaFe Corp. (Oil & Gas Drilling) 852,100 28,630,560
==========================================================================
72,879,360
==========================================================================
FINLAND-1.18%
Nokia Oyj-ADR (Communications Equipment) 1,924,100 30,747,118
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
FRANCE-1.80%
TOTAL S.A. (Integrated Oil & Gas)(c) 210,000 46,697,625
==========================================================================
ISRAEL-1.83%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals)(b) 1,518,000 $ 47,422,320
==========================================================================
NETHERLANDS-4.27%
Heineken N.V. (Brewers)(c) 1,347,106 42,780,158
--------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Consumer Electronics)(a)(c) 1,570,900 38,967,777
--------------------------------------------------------------------------
Unilever N.V. (Packaged Foods & Meats)(c) 450,000 28,961,162
==========================================================================
110,709,097
==========================================================================
UNITED KINGDOM-4.13%
BP PLC-ADR (Integrated Oil & Gas) 573,100 34,901,790
--------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals)(b) 1,430,000 72,286,500
==========================================================================
107,188,290
==========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $461,517,613) 534,191,424
==========================================================================
MONEY MARKET FUNDS-7.64%
Liquid Assets Portfolio-Institutional
Class(d) 99,092,267 99,092,267
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 99,092,267 99,092,267
==========================================================================
Total Money Market Funds (Cost
$198,184,534) 198,184,534
==========================================================================
TOTAL INVESTMENTS-100.99% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,366,187,770) 2,620,673,612
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.87%
STIC Prime Portfolio-Institutional
Class(d)(e) 48,554,750 48,554,750
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $48,554,750) 48,554,750
==========================================================================
TOTAL INVESTMENTS-102.86% (Cost
$2,414,742,520) 2,669,228,362
==========================================================================
OTHER ASSETS LESS LIABILITIES-(2.86%) (74,116,177)
==========================================================================
NET ASSETS-100.00% $2,595,112,185
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at April 30, 2005 was
$157,406,722, which represented 5.90% 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-252
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,168,003,236)* $2,422,489,078
------------------------------------------------------------
Investments in affiliated money market funds
(cost $246,739,284) 246,739,284
============================================================
Total Investments (Cost $2,414,742,520) 2,669,228,362
============================================================
Receivables for:
Investments sold 10,259,283
------------------------------------------------------------
Fund shares sold 1,154,630
------------------------------------------------------------
Dividends 3,504,023
------------------------------------------------------------
Investments matured (Note 10) 3,726,980
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 182,582
------------------------------------------------------------
Other assets 77,730
============================================================
Total assets 2,688,133,590
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 35,732,912
------------------------------------------------------------
Fund shares reacquired 5,459,001
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 427,471
------------------------------------------------------------
Collateral upon return of securities
loaned 48,554,750
------------------------------------------------------------
Accrued distribution fees 1,154,170
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,283
------------------------------------------------------------
Accrued transfer agent fees 1,401,614
------------------------------------------------------------
Accrued operating expenses 287,204
============================================================
Total liabilities 93,021,405
============================================================
Net assets applicable to shares outstanding $2,595,112,185
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,864,487,450
------------------------------------------------------------
Undistributed net investment income 7,469,377
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (531,341,969)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 254,497,327
============================================================
$2,595,112,185
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,728,245,191
____________________________________________________________
============================================================
Class B $ 737,901,802
____________________________________________________________
============================================================
Class C $ 122,064,170
____________________________________________________________
============================================================
Class R $ 2,638,154
____________________________________________________________
============================================================
Institutional Class $ 4,262,868
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 138,840,425
____________________________________________________________
============================================================
Class B 61,847,517
____________________________________________________________
============================================================
Class C 10,202,499
____________________________________________________________
============================================================
Class R 212,871
____________________________________________________________
============================================================
Institutional Class 333,492
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.45
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.45 divided by
94.50%) $ 13.17
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.93
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.96
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.39
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.78
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $47,654,302 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-253
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $311,181) $ 37,178,554
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $7,888 after rebates of
$302,180) 2,434,220
--------------------------------------------------------------------------
Interest 3,097
==========================================================================
Total investment income 39,615,871
==========================================================================
EXPENSES:
Advisory fees 8,856,261
--------------------------------------------------------------------------
Administrative services fees 275,722
--------------------------------------------------------------------------
Custodian fees 125,795
--------------------------------------------------------------------------
Distribution fees:
Class A 2,728,904
--------------------------------------------------------------------------
Class B 4,171,339
--------------------------------------------------------------------------
Class C 661,778
--------------------------------------------------------------------------
Class R 6,750
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,726,604
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,879
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 57,881
--------------------------------------------------------------------------
Other 446,148
==========================================================================
Total expenses 21,059,061
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (226,717)
==========================================================================
Net expenses 20,832,344
==========================================================================
Net investment income 18,783,527
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains (losses) from
securities sold to affiliates of $(5,982)) 136,018,869
--------------------------------------------------------------------------
Foreign currencies 174,782
==========================================================================
136,193,651
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (59,923,704)
--------------------------------------------------------------------------
Foreign currencies 11,485
==========================================================================
(59,912,219)
==========================================================================
Net gain from investment securities and foreign currencies 76,281,432
==========================================================================
Net increase in net assets resulting from operations $ 95,064,959
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-254
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 18,783,527 $ 8,535,340
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 136,193,651 284,944,396
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (59,912,219) (662,843)
==============================================================================================
Net increase in net assets resulting from operations 95,064,959 292,816,893
==============================================================================================
Distributions to shareholders from net investment income:
Class A (16,183,702) (4,234,798)
----------------------------------------------------------------------------------------------
Class B (655,402) --
----------------------------------------------------------------------------------------------
Class C (102,493) --
----------------------------------------------------------------------------------------------
Class R (17,158) (2,682)
----------------------------------------------------------------------------------------------
Institutional Class (51,616) (14,410)
==============================================================================================
Decrease in net assets resulting from distributions (17,010,371) (4,251,890)
==============================================================================================
Share transactions-net:
Class A (161,731,225) (343,025,821)
----------------------------------------------------------------------------------------------
Class B (174,967,858) (360,933,716)
----------------------------------------------------------------------------------------------
Class C (20,451,511) (39,355,393)
----------------------------------------------------------------------------------------------
Class R 40,302 642,358
----------------------------------------------------------------------------------------------
Institutional Class 921,463 1,074,851
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (356,188,829) (741,597,721)
==============================================================================================
Net increase (decrease) in net assets (278,134,241) (453,032,718)
==============================================================================================
NET ASSETS:
Beginning of period 2,873,246,426 3,326,279,144
==============================================================================================
End of period (including undistributed net investment
income of $7,469,377 and $5,696,221, respectively) $2,595,112,185 $2,873,246,426
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-255
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-256
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $30 million 1.00% -------------------------------------------------------------------- Next $120 million 0.75% -------------------------------------------------------------------- Over $150 million 0.625% ____________________________________________________________________ ==================================================================== |
FS-257
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $150 million 0.75% -------------------------------------------------------------------- Next $4.85 billion 0.615% -------------------------------------------------------------------- Next $2.5 billion 0.57% -------------------------------------------------------------------- Next $2.5 billion 0.545% -------------------------------------------------------------------- Over $10 billion 0.52% ____________________________________________________________________ ==================================================================== |
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $138,646.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $54,403 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $275,722.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $3,726,604 for Class A, Class B, Class C and Class R share classes and $1,879 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $2,728,904, $4,171,339, $661,778 and $6,750, 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, 2005, ADI advised the Fund that it retained $102,930 in front-end sales commissions from the sale of Class A shares and $2,228, $80,265, $3,803 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 ADI.
FS-258
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 83,058,993 $250,248,566 $(234,215,292) $ -- $ 99,092,267 $1,201,857 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 83,058,993 250,248,566 (234,215,292) -- 99,092,267 1,224,475 --
===================================================================================================================================
Subtotal $166,117,986 $500,497,132 $(468,430,584) $ -- $198,184,534 $2,426,332 $ --
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 27,336,279 $290,566,923 $(269,348,452) $ -- $ 48,554,750 $ 7,888 $ --
===================================================================================================================================
Total $193,454,265 $791,064,055 $(737,779,036) $ -- $246,739,284 $2,434,220 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $23,943,012 and sales of $8,615,715, which resulted in net realized gain (loss) of $(5,982).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement, which resulted in a reduction of the Fund's total expenses of $33,667.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $6,892 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.
FS-259
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $47,654,302 were on loan to brokers. The loans were secured by cash collateral of $48,554,750 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,888 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
October 31, 2009 $488,443,372
---------------------------------------------------------------------------
October 31, 2011 $132,068,900
===========================================================================
Total capital loss carryforward $620,512,272
___________________________________________________________________________
===========================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-260
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, 2005 was $722,356,914 and $1,084,721,610, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
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 $ 285,511,965
----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (79,006,777)
================================================================================================================
Net unrealized appreciation of investment securities $ 206,505,188
________________________________________________________________________________________________________________
================================================================================================================
Cost of investments for tax purposes is $2,462,723,174.
|
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 certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,028,590 $ 38,274,928 7,951,437 $ 94,832,462
--------------------------------------------------------------------------------------------------------------------------
Class B 1,649,847 19,959,859 3,877,677 44,222,154
--------------------------------------------------------------------------------------------------------------------------
Class C 459,742 5,576,546 1,217,568 13,934,813
--------------------------------------------------------------------------------------------------------------------------
Class R 52,966 666,019 95,004 1,120,376
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 125,562 1,627,068 515,765 6,344,104
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,116,893 14,139,862 345,517 3,966,625
--------------------------------------------------------------------------------------------------------------------------
Class B 48,619 591,693 -- --
--------------------------------------------------------------------------------------------------------------------------
Class C 7,040 85,899 -- --
--------------------------------------------------------------------------------------------------------------------------
Class R 1,361 17,157 234 2,681
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,820 49,552 714 8,400
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 5,558,543 70,151,827 12,968,092 155,893,419
--------------------------------------------------------------------------------------------------------------------------
Class B (5,800,147) (70,151,827) (13,548,346) (155,893,419)
==========================================================================================================================
Reacquired:
Class A (22,452,411) (284,297,842) (50,261,476) (597,718,327)
--------------------------------------------------------------------------------------------------------------------------
Class B (10,349,655) (125,367,583) (21,841,949) (249,262,451)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,147,970) (26,113,956) (4,652,957) (53,290,206)
--------------------------------------------------------------------------------------------------------------------------
Class R (50,942) (642,874) (40,399) (480,699)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (58,123) (755,157) (434,182) (5,277,653)
==========================================================================================================================
(28,806,265) $(356,188,829) (63,807,301) $(741,597,721)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 13% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell the Fund Shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third part record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-261
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, ----------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.10(a) 0.06(b) 0.04(b) 0.01(c) (0.03) (0.04)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized and
unrealized) 0.30 1.00 1.51 (0.90) (6.70) 2.30
=================================================================================================================================
Total from investment
operations 0.40 1.06 1.55 (0.89) (6.73) 2.26
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.11) (0.02) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.11) (0.02) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 12.45 $ 12.16 $ 11.12 $ 9.57 $ 10.46 $ 18.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 3.27% 9.58% 16.20% (8.51)% (38.75)% 13.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,728,245 $1,843,623 $2,008,702 $2,096,866 $3,159,304 $5,801,869
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.25%(e) 1.26% 1.30% 1.22% 1.16% 1.06%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.27%(e) 1.27% 1.30% 1.22% 1.17% 1.08%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 1.59%(e) 0.54% 0.39% 0.09%(c) (0.24)% (0.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.88%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$1,834,345,939.
(f) Not annualized for periods less than one year.
FS-262
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) (0.02)(b) (0.03)(b) (0.08)(c) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.27 0.96 1.46 (0.86) (6.53) 2.27
=================================================================================================================================
Total from investment
operations 0.33 0.94 1.43 (0.94) (6.66) 2.10
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.01) -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.01) -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.93 $ 11.61 $ 10.67 $ 9.24 $ 10.18 $ 17.72
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 2.83% 8.81% 15.48% (9.23)% (39.14)% 12.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $737,902 $885,500 $1,149,943 $1,204,617 $1,719,470 $3,088,611
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.95%(e) 1.96% 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.97%(e) 1.97% 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.89%(e) (0.16)% (0.31)% (0.61)%(c) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.01 and 0.18%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$841,181,541.
(f) Not annualized for periods less than one year.
FS-263
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) (0.02)(b) (0.03)(b) (0.08)(c) (0.13) (0.17)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.27 0.96 1.46 (0.86) (6.55) 2.28
=================================================================================================================================
Total from investment operations 0.33 0.94 1.43 (0.94) (6.68) 2.11
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.01) -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.01) -- -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $ 11.96 $ 11.64 $ 10.70 $ 9.27 $ 10.21 $ 17.77
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 2.82% 8.79% 15.43% (9.21)% (39.14)% 12.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,064 $138,305 $163,859 $170,444 $248,533 $412,872
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.95%(e) 1.96% 2.00% 1.92% 1.86% 1.80%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(e) 1.97% 2.00% 1.92% 1.87% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.89%(e) (0.16)% (0.31)% (0.61)%(b) (0.94)% (0.94)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.01 and 0.18%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$133,452,530.
(f) Not annualized for periods less than one year.
FS-264
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
---------------------------------------------------
JUNE 3,
2002
(DATE SALES
SIX MONTHS YEAR ENDED COMMENCED)
ENDED OCTOBER 31, TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.10 $11.08 $ 9.56 $ 10.94
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09(a) 0.04(b) 0.02(b) (0.00)
-----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.28 1.00 1.50 (1.38)
=================================================================================================================
Total from investment operations 0.37 1.04 1.52 (1.38)
=================================================================================================================
Less distributions from net investment income (0.08) (0.02) -- --
=================================================================================================================
Net asset value, end of period $12.39 $12.10 $11.08 $ 9.56
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(c) 3.06% 9.35% 15.90% (12.61)%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,638 $2,534 $1,714 $ 16
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.45%(d) 1.46% 1.50% 1.42%(e)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.47%(d) 1.47% 1.50% 1.42%(e)
=================================================================================================================
Ratio of net investment income (loss) to average net assets 1.39%(d) 0.34% 0.19% (0.11)%(e)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103%
_________________________________________________________________________________________________________________
=================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.04 and 0.68%, respectively.
(b) Calculated using average shares outstanding.
(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 annualized and based on average daily net assets of
$2,722,410.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-265
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.53 $11.45 $ 9.80 $10.67 $18.33 $17.33
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.13(b) 0.09(b) 0.06(c) 0.04 0.52
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.29 1.03 1.56 (0.93) (6.82) 1.83
=================================================================================================================================
Total from investment operations 0.43 1.16 1.65 (0.87) (6.78) 2.35
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.18) (0.08) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.88) (1.35)
=================================================================================================================================
Total distributions (0.18) (0.08) -- -- (0.88) (1.35)
=================================================================================================================================
Net asset value, end of period $12.78 $12.53 $11.45 $ 9.80 $10.67 $18.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(d) 3.42% 10.21% 16.84% (8.15)% (38.46)% 14.02%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,263 $3,285 $2,061 $1,457 $1,648 $3,234
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.78%(e) 0.74% 0.79% 0.79% 0.68% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.80%(e) 0.75% 0.79% 0.83% 0.69% 0.68%
=================================================================================================================================
Ratio of net investment income to average net assets 2.06%(e) 1.06% 0.90% 0.52%(c) 0.25% 0.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 36% 28% 103% 78% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.10 and 1.35%, respectively.
(b) Calculated using average shares outstanding.
(c) 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.
(d) 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.
(e) Ratios are annualized and based on average daily net assets of
$3,787,313.
(f) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-266
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-267
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.09%
ADVERTISING-0.73%
Lamar Advertising Co.-Class A(a) 1,117,100 $ 41,757,198
========================================================================
AEROSPACE & DEFENSE-0.79%
Honeywell International Inc. 1,250,000 44,700,000
========================================================================
AIR FREIGHT & LOGISTICS-0.75%
FedEx Corp. 500,000 42,475,000
========================================================================
ALUMINUM-0.62%
Alcoa Inc. 1,208,500 35,070,670
========================================================================
APPAREL RETAIL-0.81%
Abercrombie & Fitch Co.-Class A 500,000 26,975,000
------------------------------------------------------------------------
Ross Stores, Inc. 711,200 19,003,264
========================================================================
45,978,264
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.94%
Coach, Inc.(a) 2,000,000 53,600,000
========================================================================
APPLICATION SOFTWARE-2.13%
Amdocs Ltd. (United Kingdom)(a) 800,000 21,368,000
------------------------------------------------------------------------
Autodesk, Inc. 1,200,000 38,196,000
------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 500,000 18,920,000
------------------------------------------------------------------------
Mercury Interactive Corp.(a) 600,000 24,798,000
------------------------------------------------------------------------
NAVTEQ Corp.(a) 500,000 18,210,000
========================================================================
121,492,000
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.64%
Franklin Resources, Inc. 300,000 20,604,000
------------------------------------------------------------------------
Investors Financial Services Corp. 380,000 15,941,000
========================================================================
36,545,000
========================================================================
BIOTECHNOLOGY-2.12%
Amgen Inc.(a) 744,700 43,348,987
------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 1,527,600 56,673,960
------------------------------------------------------------------------
Protein Design Labs, Inc.(a) 1,142,800 20,433,264
========================================================================
120,456,211
========================================================================
BROADCASTING & CABLE TV-1.18%
Univision Communications Inc.-Class A(a) 1,500,000 39,435,000
------------------------------------------------------------------------
XM Satellite Radio Holdings Inc.-Class
A(a)(b) 1,000,000 27,740,000
========================================================================
67,175,000
========================================================================
CASINOS & GAMING-0.08%
Las Vegas Sands Corp.(a) 120,800 4,523,960
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.55%
Cisco Systems, Inc.(a) 4,000,000 $ 69,120,000
------------------------------------------------------------------------
Comverse Technology, Inc.(a) 1,000,000 22,790,000
------------------------------------------------------------------------
Juniper Networks, Inc.(a) 1,074,764 24,278,919
------------------------------------------------------------------------
QUALCOMM Inc. 826,600 28,840,074
========================================================================
145,028,993
========================================================================
COMPUTER & ELECTRONICS RETAIL-0.53%
Best Buy Co., Inc. 600,000 30,204,000
========================================================================
COMPUTER HARDWARE-3.63%
Apple Computer, Inc.(a) 2,100,000 75,726,000
------------------------------------------------------------------------
Dell Inc.(a) 3,750,000 130,612,500
========================================================================
206,338,500
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.69%
EMC Corp.(a) 3,000,000 39,360,000
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.48%
Caterpillar Inc. 600,000 52,830,000
------------------------------------------------------------------------
Deere & Co. 500,000 31,270,000
========================================================================
84,100,000
========================================================================
CONSUMER ELECTRONICS-1.23%
Garmin Ltd. (Cayman Islands)(b) 400,000 15,800,000
------------------------------------------------------------------------
Harman International Industries, Inc. 693,200 54,471,656
========================================================================
70,271,656
========================================================================
CONSUMER FINANCE-1.53%
American Express Co. 750,000 39,525,000
------------------------------------------------------------------------
SLM Corp. 1,000,000 47,640,000
========================================================================
87,165,000
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.40%
Automatic Data Processing, Inc. 1,000,000 43,440,000
------------------------------------------------------------------------
Fiserv, Inc.(a) 1,500,000 63,450,000
------------------------------------------------------------------------
Iron Mountain Inc.(a) 1,000,000 29,700,000
========================================================================
136,590,000
========================================================================
DEPARTMENT STORES-0.79%
Kohl's Corp.(a) 500,000 23,800,000
------------------------------------------------------------------------
Sears Holdings Corp.(a) 157,372 21,282,989
========================================================================
45,082,989
========================================================================
DIVERSIFIED BANKS-0.79%
Bank of America Corp. 1,000,000 45,040,000
========================================================================
|
FS-268
MARKET
SHARES VALUE
------------------------------------------------------------------------
DIVERSIFIED CHEMICALS-1.92%
Dow Chemical Co. (The) 650,000 $ 29,854,500
------------------------------------------------------------------------
E. I. du Pont de Nemours & Co. 1,000,000 47,110,000
------------------------------------------------------------------------
Eastman Chemical Co. 600,000 32,400,000
========================================================================
109,364,500
========================================================================
DIVERSIFIED METALS & MINING-0.90%
Peabody Energy Corp. 390,300 17,083,431
------------------------------------------------------------------------
Phelps Dodge Corp. 400,000 34,340,000
========================================================================
51,423,431
========================================================================
DRUG RETAIL-0.76%
Walgreen Co. 1,000,000 43,060,000
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.13%
Emerson Electric Co. 510,500 31,993,035
------------------------------------------------------------------------
Rockwell Automation, Inc. 700,000 32,361,000
========================================================================
64,354,035
========================================================================
EMPLOYMENT SERVICES-0.98%
Robert Half International Inc. 2,250,000 55,845,000
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.11%
Dolby Laboratories Inc.-Class A(a)(c) 300,800 6,151,360
========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.72%
Monsanto Co. 700,000 41,034,000
========================================================================
FOOD DISTRIBUTORS-0.33%
Sysco Corp. 550,000 19,030,000
========================================================================
FOOD RETAIL-0.38%
Whole Foods Market, Inc. 214,700 21,409,884
========================================================================
FOOTWEAR-0.67%
NIKE, Inc.-Class B 500,000 38,405,000
========================================================================
GOLD-0.62%
Newmont Mining Corp. 545,500 20,712,635
------------------------------------------------------------------------
Placer Dome Inc. (Canada) 1,076,000 14,375,360
========================================================================
35,087,995
========================================================================
HEALTH CARE EQUIPMENT-6.85%
Bard (C.R.), Inc. 520,600 37,051,102
------------------------------------------------------------------------
Becton, Dickinson & Co. 1,034,200 60,521,384
------------------------------------------------------------------------
Biomet, Inc. 2,253,175 87,175,341
------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 665,300 39,505,514
------------------------------------------------------------------------
Medtronic, Inc. 815,700 42,987,390
------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 1,254,500 48,963,135
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 1,040,900 35,119,966
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
HEALTH CARE EQUIPMENT -- (CONTINUED)
Zimmer Holdings, Inc.(a) 475,600 38,723,352
========================================================================
390,047,184
========================================================================
HEALTH CARE FACILITIES-0.93%
HCA Inc. 500,000 $ 27,920,000
------------------------------------------------------------------------
Health Management Associates, Inc.-Class A 1,000,000 24,730,000
========================================================================
52,650,000
========================================================================
HEALTH CARE SERVICES-1.71%
Caremark Rx, Inc.(a) 2,427,881 97,236,634
========================================================================
HEALTH CARE SUPPLIES-1.15%
Alcon, Inc. (Switzerland)(a) 677,400 65,707,800
========================================================================
HOME ENTERTAINMENT SOFTWARE-0.52%
Electronic Arts Inc.(a) 550,000 29,364,500
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.49%
Carnival Corp. (Panama)(d) 900,000 43,992,000
------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(e) 750,000 40,755,000
========================================================================
84,747,000
========================================================================
HOUSEHOLD PRODUCTS-0.57%
Procter & Gamble Co. (The) 600,000 32,490,000
========================================================================
HYPERMARKETS & SUPER CENTERS-0.51%
Wal-Mart Stores, Inc. 613,400 28,915,676
========================================================================
INDUSTRIAL CONGLOMERATES-1.64%
General Electric Co. 1,500,000 54,300,000
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,250,000 39,137,500
========================================================================
93,437,500
========================================================================
INDUSTRIAL GASES-1.31%
Air Products & Chemicals, Inc. 600,000 35,238,000
------------------------------------------------------------------------
Praxair, Inc. 841,400 39,402,762
========================================================================
74,640,762
========================================================================
INDUSTRIAL MACHINERY-4.06%
Danaher Corp. 1,000,000 50,630,000
------------------------------------------------------------------------
Eaton Corp. 500,000 29,325,000
------------------------------------------------------------------------
Illinois Tool Works Inc. 363,300 30,451,806
------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd-Class A (Bermuda) 1,100,000 84,557,000
------------------------------------------------------------------------
Parker Hannifin Corp. 600,000 35,964,000
========================================================================
230,927,806
========================================================================
INTEGRATED OIL & GAS-3.37%
Chevron Corp. 488,000 25,376,000
------------------------------------------------------------------------
ConocoPhillips 500,000 52,425,000
------------------------------------------------------------------------
Exxon Mobil Corp. 1,500,000 85,545,000
------------------------------------------------------------------------
Occidental Petroleum Corp. 414,400 28,593,600
========================================================================
191,939,600
========================================================================
|
FS-269
MARKET
SHARES VALUE
------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-3.40%
Google Inc.-Class A(a) 250,413 $ 55,090,860
------------------------------------------------------------------------
VeriSign, Inc.(a) 1,000,000 26,460,000
------------------------------------------------------------------------
Yahoo! Inc.(a) 3,250,000 112,157,500
========================================================================
193,708,360
========================================================================
INVESTMENT BANKING & BROKERAGE-0.72%
Goldman Sachs Group, Inc. (The)(b) 250,000 26,697,500
------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 267,400 14,420,882
========================================================================
41,118,382
========================================================================
LIFE & HEALTH INSURANCE-0.52%
AFLAC Inc. 725,450 29,489,542
========================================================================
MANAGED HEALTH CARE-2.62%
Aetna Inc. 826,800 60,662,316
------------------------------------------------------------------------
PacifiCare Health Systems, Inc.(a) 479,300 28,642,968
------------------------------------------------------------------------
UnitedHealth Group Inc. 463,100 43,767,581
------------------------------------------------------------------------
WellPoint, Inc.(a) 126,600 16,173,150
========================================================================
149,246,015
========================================================================
MOVIES & ENTERTAINMENT-0.63%
DreamWorks Animation SKG, Inc.-Class A(a) 187,900 7,046,250
------------------------------------------------------------------------
Viacom Inc.-Class B 838,064 29,013,776
========================================================================
36,060,026
========================================================================
OIL & GAS DRILLING-1.66%
ENSCO International Inc. 1,062,000 34,621,200
------------------------------------------------------------------------
GlobalSantaFe Corp. (Cayman Islands) 850,000 28,560,000
------------------------------------------------------------------------
Patterson-UTI Energy, Inc. 1,300,000 31,161,000
========================================================================
94,342,200
========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.22%
Baker Hughes Inc. 840,000 37,060,800
------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 625,000 32,593,750
========================================================================
69,654,550
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.72%
Apache Corp. 400,000 22,516,000
------------------------------------------------------------------------
Burlington Resources Inc. 565,500 27,488,955
------------------------------------------------------------------------
Devon Energy Corp. 1,130,000 51,042,100
------------------------------------------------------------------------
Newfield Exploration Co.(a) 300,000 21,309,000
------------------------------------------------------------------------
XTO Energy, Inc. 1,066,666 32,181,313
========================================================================
154,537,368
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.02%
Valero Energy Corp. 850,000 58,250,500
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-0.92%
Citigroup Inc. 1,116,000 $ 52,407,360
========================================================================
PACKAGED FOODS & MEATS-0.92%
Hershey Co. (The) 500,000 31,950,000
------------------------------------------------------------------------
Kellogg Co. 451,700 20,303,915
========================================================================
52,253,915
========================================================================
PERSONAL PRODUCTS-0.95%
Gillette Co. (The) 1,042,000 53,808,880
========================================================================
PHARMACEUTICALS-4.09%
Johnson & Johnson 1,696,100 116,403,343
------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 1,323,600 37,193,160
------------------------------------------------------------------------
Pfizer Inc. 1,293,200 35,136,244
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,410,700 44,070,268
========================================================================
232,803,015
========================================================================
RESTAURANTS-1.45%
Brinker International, Inc.(a) 554,200 18,731,960
------------------------------------------------------------------------
McDonald's Corp. 1,000,000 29,310,000
------------------------------------------------------------------------
Starbucks Corp.(a) 700,000 34,664,000
========================================================================
82,705,960
========================================================================
SEMICONDUCTOR EQUIPMENT-0.76%
Applied Materials, Inc.(a) 1,583,600 23,548,132
------------------------------------------------------------------------
KLA-Tencor Corp. 500,000 19,510,000
========================================================================
43,058,132
========================================================================
SEMICONDUCTORS-4.43%
Analog Devices, Inc. 1,750,000 59,692,500
------------------------------------------------------------------------
Linear Technology Corp. 1,450,000 51,823,000
------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 750,000 25,110,000
------------------------------------------------------------------------
Maxim Integrated Products, Inc. 806,985 30,181,239
------------------------------------------------------------------------
Microchip Technology Inc. 3,000,052 85,441,481
========================================================================
252,248,220
========================================================================
SOFT DRINKS-0.59%
PepsiCo, Inc. 600,000 33,384,000
========================================================================
SPECIALIZED FINANCE-0.14%
Chicago Mercantile Exchange Holdings Inc. 41,200 8,055,424
========================================================================
SPECIALTY CHEMICALS-1.23%
Ecolab Inc. 800,000 26,168,000
------------------------------------------------------------------------
Rohm & Haas Co. 1,000,000 43,660,000
========================================================================
69,828,000
========================================================================
|
FS-270
MARKET
SHARES VALUE
------------------------------------------------------------------------
SPECIALTY STORES-2.15%
Bed Bath & Beyond Inc.(a) 1,200,000 $ 44,652,000
------------------------------------------------------------------------
Office Depot, Inc.(a) 1,163,800 22,787,204
------------------------------------------------------------------------
Staples, Inc. 2,895,000 55,207,650
========================================================================
122,646,854
========================================================================
STEEL-1.14%
Nucor Corp. 600,000 30,660,000
------------------------------------------------------------------------
United States Steel Corp. 796,900 34,075,444
========================================================================
64,735,444
========================================================================
SYSTEMS SOFTWARE-3.99%
Adobe Systems Inc. 474,400 28,212,568
------------------------------------------------------------------------
McAfee Inc.(a) 1,000,000 20,910,000
------------------------------------------------------------------------
Microsoft Corp. 5,000,000 126,500,000
------------------------------------------------------------------------
Oracle Corp.(a) 4,438,800 51,312,528
========================================================================
226,935,096
========================================================================
TECHNOLOGY DISTRIBUTORS-0.77%
CDW Corp. 800,000 43,752,000
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.26%
UAP Holding Corp.(a) 1,021,100 14,693,629
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.75%
Nextel Communications, Inc.-Class A(a) 987,200 27,631,728
------------------------------------------------------------------------
Syniverse Holdings Inc.(a) 1,266,600 15,325,860
========================================================================
42,957,588
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $4,397,459,758) 5,582,904,568
========================================================================
|
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
-------------------------------------------------------------------------
PUT OPTIONS
PURCHASED-0.00%
INTERNET SOFTWARE &
SERVICES-0.00%
Google Inc.-Class A 2,504 $180 May-05 $ 37,560
-------------------------------------------------------------------------
Yahoo! Inc. 16,250 30 May-05 121,875
=========================================================================
Total Put Options
Purchased (Cost
$2,939,040) 159,435
=========================================================================
|
SHARES
MONEY MARKET FUNDS-1.54%
Liquid Assets Portfolio-Institutional
Class(f) 43,885,756 43,885,756
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 43,885,756 43,885,756
==========================================================================
Total Money Market Funds (Cost
$87,771,512) 87,771,512
==========================================================================
TOTAL INVESTMENTS-99.63% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$4,488,170,310) 5,670,835,515
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.69%
Liquid Assets Portfolio-Institutional
Class(f)(g) 2 2
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(f)(g) 38,996,778 38,996,778
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $38,996,780) 38,996,780
==========================================================================
TOTAL INVESTMENTS-100.32% (Cost
$4,527,167,090) 5,709,832,295
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.32%) (18,379,168)
==========================================================================
NET ASSETS-100.00% $5,691,453,127
__________________________________________________________________________
==========================================================================
|
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, 2005.
(c) The Investment Company Act of 1940 defines affiliates as those companies in
which a fund holds 5% or more of the outstanding voting securities. The Fund
has not owned enough of the outstanding voting securities of the issuer to
have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value of this security at April 30, 2005 represented
0.11% of the Fund's Net Assets.
(d) Each unit represents one common share with paired trust share.
(e) Each unit represents one common share and one Class B share.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-271
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$4,394,419,464)* $ 5,576,912,643
------------------------------------------------------------
Investments in affiliates (cost
$132,747,626) 132,919,652
============================================================
Total investments (cost
$4,527,167,090) 5,709,832,295
============================================================
Receivables for:
Investments sold 101,291,425
------------------------------------------------------------
Fund shares sold 1,449,469
------------------------------------------------------------
Dividends 2,539,653
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 381,376
------------------------------------------------------------
Other assets 120,475
============================================================
Total assets 5,815,614,693
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 62,326,885
------------------------------------------------------------
Fund shares reacquired 15,717,121
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 999,652
------------------------------------------------------------
Collateral upon return of securities
loaned 38,996,780
------------------------------------------------------------
Accrued distribution fees 1,682,958
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 8,930
------------------------------------------------------------
Accrued transfer agent fees 3,747,717
------------------------------------------------------------
Accrued operating expenses 681,523
============================================================
Total liabilities 124,161,566
============================================================
Net assets applicable to shares outstanding $ 5,691,453,127
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 6,382,754,251
------------------------------------------------------------
Undistributed net investment income 1,640,148
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (1,875,606,477)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,182,665,205
============================================================
$ 5,691,453,127
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 4,875,650,421
____________________________________________________________
============================================================
Class B $ 542,849,216
____________________________________________________________
============================================================
Class C $ 135,737,907
____________________________________________________________
============================================================
Class R $ 7,273,813
____________________________________________________________
============================================================
Institutional Class $ 129,941,770
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 229,513,312
____________________________________________________________
============================================================
Class B 27,345,549
____________________________________________________________
============================================================
Class C 6,839,787
____________________________________________________________
============================================================
Class R 343,228
____________________________________________________________
============================================================
Institutional Class 5,639,934
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.24
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.24 divided by
94.50%) $ 22.48
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.85
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.85
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.19
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 23.04
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $38,055,509 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-272
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $67,357) $ 45,172,916
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $142,364 after rebates of
$4,903,339) 1,393,186
---------------------------------------------------------------------------
Interest 10,823
===========================================================================
Total investment income 46,576,925
===========================================================================
EXPENSES:
Advisory fees 19,936,223
---------------------------------------------------------------------------
Administrative services fees 338,055
---------------------------------------------------------------------------
Custodian fees 232,154
---------------------------------------------------------------------------
Distribution fees:
Class A 8,145,938
---------------------------------------------------------------------------
Class B 3,012,810
---------------------------------------------------------------------------
Class C 770,271
---------------------------------------------------------------------------
Class R 17,717
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 11,451,505
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 71,826
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 125,927
---------------------------------------------------------------------------
Other 624,384
===========================================================================
Total expenses 44,726,810
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (697,411)
===========================================================================
Net expenses 44,029,399
===========================================================================
Net investment income 2,547,526
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $14,506,408) 293,774,554
---------------------------------------------------------------------------
Foreign currencies 538,963
===========================================================================
294,313,517
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (266,545,569)
---------------------------------------------------------------------------
Foreign currencies (38)
===========================================================================
(266,545,607)
===========================================================================
Net gain from investment securities and foreign currencies 27,767,910
===========================================================================
Net increase in net assets resulting from operations $ 30,315,436
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-273
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
===============================================================================================
OPERATIONS:
Net investment income (loss) $ 2,547,526 $ (49,011,984)
-----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 294,313,517 750,199,227
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (266,545,607) (467,700,236)
===============================================================================================
Net increase in net assets resulting from operations 30,315,436 233,487,007
===============================================================================================
Share transactions-net:
Class A (768,061,208) (1,414,942,300)
-----------------------------------------------------------------------------------------------
Class B (74,499,696) (88,166,720)
-----------------------------------------------------------------------------------------------
Class C (27,428,925) (35,344,446)
-----------------------------------------------------------------------------------------------
Class R 1,136,036 3,284,897
-----------------------------------------------------------------------------------------------
Institutional Class (36,658,102) 4,128,631
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (905,511,895) (1,531,039,938)
===============================================================================================
Net increase (decrease) in net assets (875,196,459) (1,297,552,931)
===============================================================================================
NET ASSETS:
Beginning of period 6,566,649,586 7,864,202,517
===============================================================================================
End of period (including undistributed net investment
income (loss) of $1,640,148 and $(907,378),
respectively) $5,691,453,127 $ 6,566,649,586
_______________________________________________________________________________________________
===============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-274
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-275
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
I. 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
FS-276
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $30 million 1.00% ---------------------------------------------------------------------- Next $120 million 0.75% ---------------------------------------------------------------------- Over $150 million 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $150 million 0.75% ---------------------------------------------------------------------- Next $4.85 billion 0.615% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $496,001.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $120,475 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $338,055.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $11,451,505 for Class A, Class B, Class C and Class R share classes and $71,826 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $8,145,938, $3,012,810, $770,271 and $17,717, 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, 2005, ADI advised the Fund that it retained $296,082 in front-end sales commissions from the sale of Class A shares and $3,902, $119,082, $7,708 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 ADI.
FS-277
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 21,040,807 $ 586,477,578 $ (563,632,629) $ -- $ 43,885,756 $ 618,555 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 21,040,807 586,477,578 (563,632,629) -- 43,885,756 632,267 --
====================================================================================================================================
SUBTOTAL $ 42,081,614 $1,172,955,156 $(1,127,265,258) $ -- $ 87,771,512 $1,250,822 $ --
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 969,136,004 $ 898,782,312 $(1,867,918,314) $ -- $ 2 $ 112,977 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 4,938,485 762,611,137 (728,552,844) -- 38,996,778 29,387 --
====================================================================================================================================
SUBTOTAL $ 974,074,489 $1,661,393,449 $(2,596,471,158) $ -- $ 38,996,780 $ 142,364 $ --
====================================================================================================================================
|
* Net of rebates.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the transactions with affiliates for the six months ended April 30, 2005.
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Dolby
Laboratories
Inc.- Class A $ -- $ 5,979,335 $ -- $172,025 $ 6,151,360 $ -- $ --
====================================================================================================================================
TOTAL $1,016,156,103 $2,840,327,940 $(3,723,736,416) $172,025 $132,919,652 $1,393,186 $ --
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $28,568,696 and sales of $52,459,430, which resulted in net realized gains of $14,506,408.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $80,935.
FS-278
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $13,342 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $38,055,509 were on loan to brokers. The loans were secured by cash collateral of $38,996,780 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $142,364 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
FS-279
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $ 478,530,901
------------------------------------------------------------------------------
October 31, 2010 1,223,985,487
------------------------------------------------------------------------------
October 31, 2011 461,767,558
==============================================================================
Total capital loss carryforward $2,164,283,946
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above 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, 2005 was $1,593,183,924 and $2,572,446,999, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,353,183,814 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (170,602,114) ============================================================================== Net unrealized appreciation of investment securities $1,182,581,700 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $4,527,250,595. |
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 certain 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(a)
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,423,747 $ 164,532,085 21,730,966 $ 462,412,977
----------------------------------------------------------------------------------------------------------------------------
Class B 919,817 19,093,505 2,742,938 54,987,929
----------------------------------------------------------------------------------------------------------------------------
Class C 380,953 7,899,072 1,295,928 26,018,679
----------------------------------------------------------------------------------------------------------------------------
Class R 87,649 1,945,667 215,406 4,599,852
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 173,102 4,183,720 1,641,747 36,786,966
============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 202,798 4,494,364 403,007 8,647,784
----------------------------------------------------------------------------------------------------------------------------
Class B (216,717) (4,494,364) (428,243) (8,647,784)
============================================================================================================================
Reacquired:
Class A (42,114,293) (937,087,657) (89,250,664) (1,886,003,061)
----------------------------------------------------------------------------------------------------------------------------
Class B (4,288,080) (89,098,837) (6,761,489) (134,506,865)
----------------------------------------------------------------------------------------------------------------------------
Class C (1,700,000) (35,327,997) (3,085,701) (61,363,125)
----------------------------------------------------------------------------------------------------------------------------
Class R (36,395) (809,631) (61,955) (1,314,955)
----------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,690,242) (40,841,822) (1,437,940) (32,658,335)
============================================================================================================================
(40,857,661) $(905,511,895) (72,996,000) $(1,531,039,938)
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 14% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund. AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially.
FS-280
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, -------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.13)(b) (0.12)(b) (0.15)(b) (0.12) (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.05) 0.79 3.53 (2.37) (16.24) 12.39
=================================================================================================================================
Total from investment operations (0.03) 0.66 3.41 (2.52) (16.36) 12.13
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 21.24 $ 21.27 $ 20.61 $ 17.20 $ 19.72 $ 43.50
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.14)% 3.20% 19.83% (12.78)% (43.10)% 36.56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,875,650 $5,616,072 $6,825,023 $6,780,055 $9,703,277 $19,268,977
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.32%(d) 1.27% 1.29% 1.26% 1.14% 1.08%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.34%(d) 1.29% 1.30% 1.27% 1.17% 1.11%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.15%(a)(d) (0.59)% (0.67)% (0.74)% (0.46)% (0.61)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.05) and (0.42)%, respectively.
(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
$5,475,630,201.
(e) Not annualized for periods less than one year.
FS-281
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.26)(b) (0.23)(b) (0.27)(b) (0.28) (0.58)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.04) 0.75 3.33 (2.26) (15.69) 12.14
=================================================================================================================================
Total from investment operations (0.10) 0.49 3.10 (2.53) (15.97) 11.56
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 19.85 $ 19.95 $ 19.46 $ 16.36 $ 18.89 $ 42.28
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.50)% 2.52% 18.95% (13.39)% (43.49)% 35.51%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $542,849 $617,005 $688,587 $625,294 $818,343 $1,315,524
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.02%(d) 1.97% 1.99% 1.96% 1.86% 1.85%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.04%(d) 1.99% 2.00% 1.97% 1.89% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.55)%(a)(d) (1.29)% (1.37)% (1.44)% (1.17)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.13) and (1.12)%, respectively.
(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
$607,555,611.
(e) Not annualized for periods less than one year.
FS-282
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.26)(b) (0.23)(b) (0.27)(b) (0.29) (0.59)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.03) 0.74 3.33 (2.25) (15.68) 12.15
=================================================================================================================================
Total from investment operations (0.09) 0.48 3.10 (2.52) (15.97) 11.56
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 19.85 $ 19.94 $ 19.46 $ 16.36 $ 18.88 $ 42.27
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (0.45)% 2.47% 18.95% (13.35)% (43.51)% 35.52%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $135,738 $162,707 $193,585 $184,393 $258,786 $ 434,544
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.02%(d) 1.97% 1.99% 1.96% 1.86% 1.85%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.04%(d) 1.99% 2.00% 1.97% 1.89% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.55)%(a)(d) (1.29)% (1.37)% (1.44)% (1.17)% (1.38)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.13) and (1.12)%, respectively.
(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
$155,330,883.
(e) Not annualized for periods less than one year.
FS-283
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
--------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $21.24 $20.63 $17.26 $ 19.82
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.17)(b) (0.16)(b) (0.07)(b)
----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.05) 0.78 3.53 (2.49)
================================================================================================================
Total from investment operations (0.05) 0.61 3.37 (2.56)
================================================================================================================
Net asset value, end of period $21.19 $21.24 $20.63 $ 17.26
________________________________________________________________________________________________________________
================================================================================================================
Total return(c) (0.24)% 2.96% 19.52% (12.92)%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,274 $6,202 $2,857 $ 226
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.52%(d) 1.47% 1.49% 1.53%(e)
----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.54%(d) 1.49% 1.50% 1.54%(e)
================================================================================================================
Ratio of net investment income (loss) to average net assets (0.05)%(a)(d) (0.79)% (0.87)% (1.01)%(e)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate(f) 25% 50% 47% 57%
________________________________________________________________________________________________________________
================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.07) and (0.62)%, respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$7,145,464.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-284
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) (0.01)(b) (0.03)(b) (0.06) 0.01 (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.06) 0.85 3.80 (2.54) (17.14) 12.91
=================================================================================================================================
Total from investment operations 0.03 0.84 3.77 (2.60) (17.13) 12.82
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (7.42) (3.28)
=================================================================================================================================
Net asset value, end of period $ 23.04 $ 23.01 $ 22.17 $ 18.40 $ 21.00 $ 45.55
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.13% 3.79% 20.49% (12.38)% (42.80)% 37.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $129,942 $164,664 $154,150 $122,746 $150,609 $288,097
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.75%(d) 0.72% 0.75% 0.80% 0.65% 0.65%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.77%(d) 0.74% 0.76% 0.81% 0.68% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.72%(a)(d) (0.04)% (0.13)% (0.28)% 0.03% (0.18)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 25% 50% 47% 57% 75% 88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net Investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $0.02 and 0.15% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$144,798,872.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-285
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-286
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-89.08%
ADVERTISING-0.51%
Omnicom Group Inc. 14,000 $ 1,160,600
=========================================================================
AEROSPACE & DEFENSE-1.97%
Raytheon Co. 95,900 3,606,799
-------------------------------------------------------------------------
United Technologies Corp. 8,400 854,448
=========================================================================
4,461,247
=========================================================================
APPAREL RETAIL-2.55%
Limited Brands, Inc. 141,000 3,058,290
-------------------------------------------------------------------------
TJX Cos., Inc. (The) 119,300 2,702,145
=========================================================================
5,760,435
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.19%
V. F. Corp. 47,500 2,688,025
=========================================================================
APPLICATION SOFTWARE-0.74%
SAP A.G.-ADR (Germany) 42,500 1,675,804
=========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.47%
Federated Investors, Inc.-Class B 94,600 2,691,370
-------------------------------------------------------------------------
State Street Corp. 62,600 2,893,998
=========================================================================
5,585,368
=========================================================================
AUTO PARTS & EQUIPMENT-1.35%
Johnson Controls, Inc. 55,500 3,045,285
=========================================================================
BREWERS-1.05%
Anheuser-Busch Cos., Inc. 50,800 2,380,996
=========================================================================
BUILDING PRODUCTS-0.79%
Masco Corp. 56,700 1,785,483
=========================================================================
COMPUTER HARDWARE-2.46%
Hewlett-Packard Co. 132,200 2,706,134
-------------------------------------------------------------------------
International Business Machines Corp. 37,400 2,856,612
=========================================================================
5,562,746
=========================================================================
CONSTRUCTION & ENGINEERING-0.69%
Fluor Corp. 30,400 1,567,424
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.93%
Automatic Data Processing, Inc. 47,300 2,054,712
-------------------------------------------------------------------------
First Data Corp. 60,400 2,297,012
=========================================================================
4,351,724
=========================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DISTRIBUTORS-1.07%
Genuine Parts Co. 56,600 $ 2,428,140
=========================================================================
DIVERSIFIED BANKS-2.67%
Bank of America Corp. 42,200 1,900,688
-------------------------------------------------------------------------
U.S. Bancorp 101,400 2,829,060
-------------------------------------------------------------------------
Wachovia Corp. 25,500 1,305,090
=========================================================================
6,034,838
=========================================================================
DIVERSIFIED CHEMICALS-1.36%
Dow Chemical Co. (The) 21,700 996,681
-------------------------------------------------------------------------
PPG Industries, Inc. 30,600 2,067,030
=========================================================================
3,063,711
=========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.45%
H&R Block, Inc. 41,500 2,067,115
-------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc. 66,100 1,217,562
=========================================================================
3,284,677
=========================================================================
ELECTRIC UTILITIES-1.56%
Entergy Corp. 20,500 1,502,650
-------------------------------------------------------------------------
Exelon Corp. 40,900 2,024,550
=========================================================================
3,527,200
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.21%
Cooper Industries, Ltd.-Class A (Bermuda) 21,900 1,394,154
-------------------------------------------------------------------------
Emerson Electric Co. 57,500 3,603,525
=========================================================================
4,997,679
=========================================================================
FOOTWEAR-0.50%
NIKE, Inc.-Class B 14,700 1,129,107
=========================================================================
HEALTH CARE EQUIPMENT-3.55%
Baxter International Inc. 90,700 3,364,970
-------------------------------------------------------------------------
Becton, Dickinson & Co. 14,500 848,540
-------------------------------------------------------------------------
Medtronic, Inc. 72,200 3,804,940
=========================================================================
8,018,450
=========================================================================
HOME IMPROVEMENT RETAIL-1.45%
Home Depot, Inc. (The) 92,400 3,268,188
=========================================================================
HOUSEHOLD APPLIANCES-1.38%
Snap-on Inc. 94,100 3,121,297
=========================================================================
HOUSEHOLD PRODUCTS-2.02%
Colgate-Palmolive Co. 51,100 2,544,269
-------------------------------------------------------------------------
|
FS-287
MARKET
SHARES VALUE
-------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-(CONTINUED)
Kimberly-Clark Corp. 32,400 $ 2,023,380
=========================================================================
4,567,649
=========================================================================
INDUSTRIAL MACHINERY-1.96%
Ingersoll-Rand Co. Ltd.-Class A (Bermuda) 23,400 1,798,758
-------------------------------------------------------------------------
Pentair, Inc. 66,300 2,637,414
=========================================================================
4,436,172
=========================================================================
INSURANCE BROKERS-0.63%
Marsh & McLennan Cos., Inc. 51,200 1,435,136
=========================================================================
INTEGRATED OIL & GAS-4.73%
ConocoPhillips 21,400 2,243,790
-------------------------------------------------------------------------
Eni S.p.A. (Italy)(a) 54,800 1,377,971
-------------------------------------------------------------------------
Exxon Mobil Corp. 31,600 1,802,148
-------------------------------------------------------------------------
Occidental Petroleum Corp. 46,700 3,222,300
-------------------------------------------------------------------------
TOTAL S.A. (France)(a) 9,150 2,034,682
=========================================================================
10,680,891
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.33%
BellSouth Corp. 100,700 2,667,543
-------------------------------------------------------------------------
SBC Communications Inc. 109,000 2,594,200
=========================================================================
5,261,743
=========================================================================
INVESTMENT BANKING & BROKERAGE-1.38%
Morgan Stanley 59,300 3,120,366
=========================================================================
LIFE & HEALTH INSURANCE-0.35%
Prudential Financial, Inc. 13,700 782,955
=========================================================================
MULTI-LINE INSURANCE-1.17%
Hartford Financial Services Group, Inc. (The) 36,400 2,634,268
=========================================================================
MULTI-UTILITIES & UNREGULATED POWER-3.12%
Dominion Resources, Inc. 45,600 3,438,240
-------------------------------------------------------------------------
Public Service Enterprise Group Inc. 42,200 2,451,820
-------------------------------------------------------------------------
Wisconsin Energy Corp. 33,100 1,167,106
=========================================================================
7,057,166
=========================================================================
OFFICE SERVICES & SUPPLIES-1.36%
Pitney Bowes Inc. 68,500 3,063,320
=========================================================================
OIL & GAS DRILLING-1.28%
GlobalSantaFe Corp. (Cayman Islands) 86,100 2,892,960
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.72%
Citigroup Inc. 82,800 3,888,288
=========================================================================
PACKAGED FOODS & MEATS-2.24%
General Mills, Inc. 72,800 3,596,320
-------------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
PACKAGED FOODS & MEATS-(CONTINUED)
Sara Lee Corp. 69,000 $ 1,475,910
=========================================================================
5,072,230
=========================================================================
PAPER PACKAGING-1.70%
Bemis Co., Inc. 95,300 2,626,468
-------------------------------------------------------------------------
Sonoco Products Co. 44,800 1,213,632
=========================================================================
3,840,100
=========================================================================
PHARMACEUTICALS-9.76%
Abbott Laboratories 86,300 4,242,508
-------------------------------------------------------------------------
Bristol-Myers Squibb Co. 70,700 1,838,200
-------------------------------------------------------------------------
Johnson & Johnson 55,300 3,795,239
-------------------------------------------------------------------------
Lilly (Eli) & Co. 64,800 3,788,856
-------------------------------------------------------------------------
Merck & Co. Inc. 54,600 1,850,940
-------------------------------------------------------------------------
Pfizer Inc. 109,900 2,985,983
-------------------------------------------------------------------------
Wyeth 79,200 3,559,248
=========================================================================
22,060,974
=========================================================================
PROPERTY & CASUALTY INSURANCE-3.23%
Chubb Corp. (The) 14,200 1,161,276
-------------------------------------------------------------------------
MBIA Inc. 44,300 2,320,434
-------------------------------------------------------------------------
SAFECO Corp. 29,100 1,532,697
-------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The) 63,700 2,280,460
=========================================================================
7,294,867
=========================================================================
PUBLISHING-1.65%
Gannett Co., Inc. 48,300 3,719,100
=========================================================================
REGIONAL BANKS-4.16%
Cullen/Frost Bankers, Inc. 50,400 2,183,328
-------------------------------------------------------------------------
Fifth Third Bancorp 79,800 3,471,300
-------------------------------------------------------------------------
KeyCorp 27,700 918,532
-------------------------------------------------------------------------
North Fork Bancorp., Inc. 100,300 2,823,445
=========================================================================
9,396,605
=========================================================================
RESTAURANTS-1.16%
Outback Steakhouse, Inc. 64,700 2,613,880
=========================================================================
SEMICONDUCTORS-1.85%
Linear Technology Corp. 76,100 2,719,814
-------------------------------------------------------------------------
Texas Instruments Inc. 58,800 1,467,648
=========================================================================
4,187,462
=========================================================================
SOFT DRINKS-0.84%
PepsiCo, Inc. 34,200 1,902,888
=========================================================================
SPECIALTY CHEMICALS-0.89%
Ecolab Inc. 61,200 2,001,852
=========================================================================
SYSTEMS SOFTWARE-1.73%
Microsoft Corp. 154,300 3,903,790
=========================================================================
|
FS-288
MARKET
SHARES VALUE
-------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-1.28%
Fannie Mae 53,700 $ 2,897,115
=========================================================================
TOBACCO-1.64%
Altria Group, Inc. 56,900 3,697,931
=========================================================================
Total Common Stocks & Other Equity
Interests (Cost $188,882,699) 201,308,132
=========================================================================
PRINCIPAL
AMOUNT
NOTES-0.15%
AEROSPACE & DEFENSE-0.04%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06(b) $ 75,000 80,255
=========================================================================
ELECTRIC UTILITIES-0.07%
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05(b) 160,000 163,231
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.04%
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 2.85%,
01/30/06(b) 100,000 99,507
=========================================================================
Total Notes (Cost $345,297) 342,993
=========================================================================
|
-------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY SECURITIES-2.64%
U.S. TREASURY BONDS-1.32%
U.S. Treasury Bonds 3.38%, 02/28/07(b) $ 3,000,000 $ 2,986,890
=========================================================================
U.S. TREASURY NOTES-1.32%
U.S. Treasury Notes 3.38%, 02/15/08(b) 3,000,000 2,973,750
=========================================================================
Total U.S. Treasury Securities (Cost
$5,946,516) 5,960,640
=========================================================================
SHARES
MONEY MARKET FUNDS-9.40%
Liquid Assets Portfolio-Institutional
Class(c) 10,617,292 10,617,292
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 10,617,292 10,617,292
=========================================================================
Total Money Market Funds (Cost
$21,234,584) 21,234,584
=========================================================================
TOTAL INVESTMENTS-101.27% (Cost $216,409,096) 228,846,349
=========================================================================
OTHER ASSETS LESS LIABILITIES-(1.27%) (2,867,332)
=========================================================================
NET ASSETS-100.00% $225,979,017
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Sr. - Senior Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market
prices. The aggregate market value of these securities at April 30, 2005
was $3,412,653, which represented 1.49% of the Fund's Total Investments.
See Note 1A.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an
independent pricing service. The aggregate market value of these
securities at April 30, 2005 was $6,303,633, which represented 2.75% 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-289
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$195,174,512) $207,611,765
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $21,234,584) 21,234,584
===========================================================
Total Investments (Cost $216,409,096) 228,846,349
===========================================================
Receivables for:
Fund shares sold 1,210,353
-----------------------------------------------------------
Dividends and interest 345,364
-----------------------------------------------------------
Amount due from advisor 11,600
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 9,468
-----------------------------------------------------------
Other assets 43,738
===========================================================
Total assets 230,466,872
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 3,723,382
-----------------------------------------------------------
Fund shares reacquired 539,581
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 11,342
-----------------------------------------------------------
Accrued distribution fees 113,661
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,348
-----------------------------------------------------------
Accrued transfer agent fees 62,910
-----------------------------------------------------------
Accrued operating expenses 35,631
===========================================================
Total liabilities 4,487,855
===========================================================
Net assets applicable to shares outstanding $225,979,017
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $211,394,141
-----------------------------------------------------------
Undistributed net investment income (11,634)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
futures contracts and option contracts 2,159,257
-----------------------------------------------------------
Unrealized appreciation of investment
securities 12,437,253
===========================================================
$225,979,017
___________________________________________________________
===========================================================
NET ASSETS:
Class A $122,983,450
___________________________________________________________
===========================================================
Class B $ 72,925,778
___________________________________________________________
===========================================================
Class C $ 30,069,789
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,367,511
___________________________________________________________
===========================================================
Class B 6,201,486
___________________________________________________________
===========================================================
Class C 2,560,358
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.86
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.86 divided by
94.50%) $ 12.55
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.76
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.74
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-290
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,260) $2,069,949
------------------------------------------------------------------------
Dividends from affiliated money market funds 173,605
------------------------------------------------------------------------
Interest 37,547
========================================================================
Total investment income 2,281,101
========================================================================
EXPENSES:
Advisory fees 642,106
------------------------------------------------------------------------
Administrative services fees 24,795
------------------------------------------------------------------------
Custodian fees 15,176
------------------------------------------------------------------------
Distribution fees:
Class A 156,752
------------------------------------------------------------------------
Class B 294,641
------------------------------------------------------------------------
Class C 113,637
------------------------------------------------------------------------
Transfer agent fees 153,444
------------------------------------------------------------------------
Trustees' and officer's fees and benefits 9,588
------------------------------------------------------------------------
Other 92,468
========================================================================
Total expenses 1,502,607
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (379,181)
========================================================================
Net expenses 1,123,426
========================================================================
Net investment income 1,157,675
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain from:
Investment securities 2,180,972
------------------------------------------------------------------------
Foreign currencies 3,267
------------------------------------------------------------------------
Futures contracts 75,143
------------------------------------------------------------------------
Option contracts written 78,340
========================================================================
2,337,722
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 3,187,353
------------------------------------------------------------------------
Futures contracts (9,390)
========================================================================
3,177,963
========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 5,515,685
========================================================================
Net increase in net assets resulting from operations $6,673,360
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-291
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,157,675 $ 742,750
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures contracts and option contracts 2,337,722 3,210,309
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and futures contracts 3,177,963 4,353,104
==========================================================================================
Net increase in net assets resulting from operations 6,673,360 8,306,163
==========================================================================================
Distributions to shareholders from net investment income:
Class A (744,578) (500,393)
------------------------------------------------------------------------------------------
Class B (301,612) (204,810)
------------------------------------------------------------------------------------------
Class C (114,216) (63,792)
==========================================================================================
Total distributions from net investment income (1,160,406) (768,995)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A (1,261,432) --
------------------------------------------------------------------------------------------
Class B (887,849) --
------------------------------------------------------------------------------------------
Class C (318,378) --
==========================================================================================
Total distributions from net realized gains (2,467,659) --
==========================================================================================
Decrease in net assets resulting from distributions (3,628,065) (768,995)
==========================================================================================
Share transactions-net:
Class A 57,986,046 37,536,817
------------------------------------------------------------------------------------------
Class B 26,003,571 21,106,883
------------------------------------------------------------------------------------------
Class C 14,414,920 8,543,492
==========================================================================================
Net increase in net assets resulting from share
transactions 98,404,537 67,187,192
==========================================================================================
Net increase in net assets 101,449,832 74,724,360
==========================================================================================
NET ASSETS:
Beginning of period 124,529,185 49,804,825
==========================================================================================
End of period (including undistributed net investment
income of $(11,634) and $(8,903), respectively) $225,979,017 $124,529,185
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-292
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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 investment 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
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Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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.
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 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. 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
H. 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.
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 received or made depending upon whether unrealized gains or losses are incurred. When the contracts
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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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $1 billion 0.75% -------------------------------------------------------------------- Next $1 billion 0.70% -------------------------------------------------------------------- Over $2 billion 0.625% ____________________________________________________________________ ==================================================================== |
Effective January 1, 2005 through June 30, 2006, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $250 million 0.695% -------------------------------------------------------------------- Next $250 million 0.67% -------------------------------------------------------------------- Next $500 million 0.645% -------------------------------------------------------------------- Next $1.5 billion 0.62% -------------------------------------------------------------------- Next $2.5 billion 0.595% -------------------------------------------------------------------- Next $2.5 billion 0.57% -------------------------------------------------------------------- Next $2.5 billion 0.545% -------------------------------------------------------------------- Over $10 billion 0.52% ____________________________________________________________________ ==================================================================== |
AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.00%, 1.65% and 1.65% of average daily net assets, respectively. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 1.50%, 2.15% and 2.15% of average daily net assets, respectively, through October 31, 2005. 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 limits 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), or items designated as such 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, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the only expense offset arrangements from which the Fund may benefit 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. To the extent that the annualized expense ratio does not exceed the expense limitation, 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. AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $375,928.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP agreed to reimburse $1,433 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $24,795.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $153,444.
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The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B and Class C shares paid $156,752, $294,641 and $113,637 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 the six months ended April 30, 2005, ADI advised the Fund that it retained $77,637 in front-end sales commissions from the sale of Class A shares and $3,249, $20,253 and $1,339 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 ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from 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. The table below shows the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 8,365,886 $22,196,490 $(19,945,084) $ -- $10,617,292 $ 86,034 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 8,365,886 22,196,490 (19,945,084) -- 10,617,292 87,571 --
==================================================================================================================================
Total $16,731,772 $44,392,980 $(39,890,168) $ -- $21,234,584 $173,605 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
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NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $393,147 and sales of $0, which resulted in net realized gain (loss) of $0.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $1,820.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
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In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,089 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------------------
Beginning of period -- $ --
-----------------------------------------------------------------------------------
Written 1,319 116,594
-----------------------------------------------------------------------------------
Closed (1,083) (93,157)
-----------------------------------------------------------------------------------
Exercised (236) (23,437)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
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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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of October 31, 2004.
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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, 2005 was $99,739,755 and $10,367,635, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $16,304,992 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (4,018,218) =============================================================================== Net unrealized appreciation of investment securities $12,286,774 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $216,559,575. |
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 certain 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, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,604,962 $ 67,184,534 4,322,865 $ 48,449,001
----------------------------------------------------------------------------------------------------------------------
Class B 2,909,016 34,579,161 2,496,183 27,796,432
----------------------------------------------------------------------------------------------------------------------
Class C 1,395,359 16,564,227 891,143 9,870,802
======================================================================================================================
Issued as reinvestment of dividends:
Class A 156,144 1,861,646 41,472 465,571
----------------------------------------------------------------------------------------------------------------------
Class B 91,265 1,078,872 16,701 185,244
----------------------------------------------------------------------------------------------------------------------
Class C 34,015 401,510 5,270 58,491
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 196,320 2,348,312 186,137 2,093,587
----------------------------------------------------------------------------------------------------------------------
Class B (197,993) (2,348,312) (187,728) (2,093,587)
======================================================================================================================
Reacquired:
Class A (1,121,645) (13,408,446) (1,198,931) (13,471,342)
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Class B (615,674) (7,306,150) (432,094) (4,781,206)
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Class C (216,169) (2,550,817) (125,008) (1,385,801)
======================================================================================================================
8,235,600 $ 98,404,537 6,016,010 $ 67,187,192
______________________________________________________________________________________________________________________
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NOTE 12--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Core Stock Fund ("Selling Fund"), a series of AIM Combination Stock & Bond Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
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NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.48 $ 10.26 $ 8.70 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10(a) 0.14 0.06(b) (0.03)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.23 1.54 (1.27)
=========================================================================================================================
Total from investment operations 0.69 1.37 1.60 (1.30)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.15) (0.04) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.31) (0.15) (0.04) --
=========================================================================================================================
Net asset value, end of period $ 11.86 $ 11.48 $ 10.26 $ 8.70
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.98% 13.36% 18.39% (13.00)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,983 $63,513 $22,375 $ 7,834
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(d) 1.00% 1.51% 1.75%(e)
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Without fee waivers and/or expense reimbursements 1.45%(d) 1.70% 2.12% 4.26%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.66%(a)(d) 1.27% 0.65% (0.34)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.09 and 1.38%, respectively.
(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
$90,314,821.
(e) Annualized.
(f) Not annualized for periods less than one year.
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NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------ OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.38 $ 10.17 $ 8.65 $ 10.00
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 1.21 1.53 (1.27)
=========================================================================================================================
Total from investment operations 0.65 1.28 1.53 (1.35)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
=========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
=========================================================================================================================
Net asset value, end of period $ 11.76 $ 11.38 $ 10.17 $ 8.65
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.67% 12.63% 17.67% (13.50)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,926 $45,700 $21,582 $ 7,100
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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
$59,416,500.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-300
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
----------------------------------------------------------
DECEMBER 31, 2001
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------- OCTOBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.37 $ 10.16 $ 8.65 $ 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.07 0.00(b) (0.08)(b)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.58 1.21 1.52 (1.27)
========================================================================================================================
Total from investment operations 0.64 1.28 1.52 (1.35)
========================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.07) (0.01) --
------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) -- -- --
========================================================================================================================
Total distributions (0.27) (0.07) (0.01) --
========================================================================================================================
Net asset value, end of period $ 11.74 $ 11.37 $10.16 $ 8.65
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 5.59% 12.64% 17.55% (13.50)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,070 $15,316 $5,848 $ 1,116
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(d) 1.65% 2.16% 2.40%(e)
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.10%(d) 2.35% 2.77% 4.91%(e)
========================================================================================================================
Ratio of net investment income (loss) to average net assets 1.01%(a)(d) 0.62% 0.00% (0.99)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 7% 30% 72% 42%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.05 and 0.73%, respectively.
(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
$22,915,866.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-301
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-302
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.87%
ADVERTISING-4.96%
Interpublic Group of Cos., Inc. (The)(a) 562,200 $ 7,229,892
-----------------------------------------------------------------------
Omnicom Group Inc. 137,600 11,407,040
=======================================================================
18,636,932
=======================================================================
AEROSPACE & DEFENSE-1.53%
Honeywell International Inc. 160,300 5,732,328
=======================================================================
ALUMINUM-1.33%
Alcoa Inc. 171,500 4,976,930
=======================================================================
APPAREL RETAIL-1.68%
Gap, Inc. (The) 295,700 6,313,195
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.95%
Bank of New York Co., Inc. (The) 262,600 7,337,044
=======================================================================
BUILDING PRODUCTS-1.97%
Masco Corp. 235,200 7,406,448
=======================================================================
COMMUNICATIONS EQUIPMENT-0.87%
Motorola, Inc. 213,200 3,270,488
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.81%
Deere & Co. 48,800 3,051,952
=======================================================================
CONSUMER ELECTRONICS-3.07%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 191,970 4,758,936
-----------------------------------------------------------------------
Sony Corp.-ADR (Japan) 184,700 6,780,337
=======================================================================
11,539,273
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.04%
Ceridian Corp.(a) 291,700 4,920,979
-----------------------------------------------------------------------
First Data Corp. 269,700 10,256,691
=======================================================================
15,177,670
=======================================================================
DIVERSIFIED CHEMICALS-0.67%
Dow Chemical Co. (The) 54,600 2,507,778
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.31%
Cendant Corp. 435,600 8,672,796
=======================================================================
ENVIRONMENTAL SERVICES-2.86%
Waste Management, Inc. 376,550 10,727,910
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
FOOD RETAIL-3.07%
Kroger Co. (The)(a) 404,600 $ 6,380,542
-----------------------------------------------------------------------
Safeway Inc.(a) 240,800 5,126,632
=======================================================================
11,507,174
=======================================================================
GENERAL MERCHANDISE STORES-2.07%
Target Corp. 167,600 7,776,640
=======================================================================
HEALTH CARE DISTRIBUTORS-6.18%
Cardinal Health, Inc. 264,600 14,703,822
-----------------------------------------------------------------------
McKesson Corp. 230,100 8,513,700
=======================================================================
23,217,522
=======================================================================
HEALTH CARE EQUIPMENT-1.64%
Baxter International Inc. 165,800 6,151,180
=======================================================================
HEALTH CARE FACILITIES-2.51%
HCA Inc. 168,400 9,403,456
=======================================================================
INDUSTRIAL CONGLOMERATES-5.89%
General Electric Co. 225,500 8,163,100
-----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 445,800 13,957,998
=======================================================================
22,121,098
=======================================================================
INDUSTRIAL MACHINERY-2.07%
Illinois Tool Works Inc. 92,515 7,754,607
=======================================================================
INVESTMENT BANKING & BROKERAGE-3.98%
Merrill Lynch & Co., Inc. 123,800 6,676,534
-----------------------------------------------------------------------
Morgan Stanley 157,000 8,261,340
=======================================================================
14,937,874
=======================================================================
MANAGED HEALTH CARE-3.23%
WellPoint, Inc.(a) 95,000 12,136,250
=======================================================================
MOVIES & ENTERTAINMENT-2.50%
Walt Disney Co. (The) 356,100 9,401,040
=======================================================================
MULTI-LINE INSURANCE-2.19%
Hartford Financial Services Group, Inc. (The) 113,600 8,221,232
=======================================================================
OIL & GAS DRILLING-2.54%
Transocean Inc. (Cayman Islands)(a) 205,377 9,523,332
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.84%
Halliburton Co. 257,100 10,692,789
-----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 109,100 7,463,531
=======================================================================
18,156,320
=======================================================================
|
FS-303
MARKET
SHARES VALUE
-----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-6.41%
Citigroup Inc. 275,619 $ 12,943,068
-----------------------------------------------------------------------
JPMorgan Chase & Co. 313,356 11,121,004
=======================================================================
24,064,072
=======================================================================
PACKAGED FOODS & MEATS-3.02%
Kraft Foods Inc.-Class A 170,300 5,519,423
-----------------------------------------------------------------------
Unilever N.V. (Netherlands)(b) 90,300 5,811,540
=======================================================================
11,330,963
=======================================================================
PHARMACEUTICALS-8.14%
Pfizer Inc. 320,700 8,713,419
-----------------------------------------------------------------------
Sanofi-Aventis (France)(b) 159,452 14,119,923
-----------------------------------------------------------------------
Wyeth 172,300 7,743,162
=======================================================================
30,576,504
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.31%
ACE Ltd. (Cayman Islands) 201,800 8,669,328
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
SYSTEMS SOFTWARE-2.93%
Computer Associates International, Inc. 408,499 $ 10,988,623
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.30%
Fannie Mae 168,300 9,079,785
-----------------------------------------------------------------------
Freddie Mac 54,000 3,322,080
=======================================================================
12,401,865
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $302,771,714) 363,689,824
=======================================================================
MONEY MARKET FUNDS-3.06%
Liquid Assets Portfolio-Institutional
Class(c) 5,736,779 5,736,779
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 5,736,779 5,736,779
=======================================================================
Total Money Market Funds (Cost
$11,473,558) 11,473,558
=======================================================================
TOTAL INVESTMENTS-99.93% (Cost $314,245,272) 375,163,382
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.07% 275,719
=======================================================================
NET ASSETS-100.00% $375,439,101
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at April 30, 2005 was
$19,931,463, which represented 5.31% 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-304
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$302,771,714) $363,689,824
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $11,473,558) 11,473,558
===========================================================
Total Investments (Cost $314,245,272) 375,163,382
===========================================================
Receivables for:
Fund shares sold 745,253
-----------------------------------------------------------
Dividends 500,618
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 51,360
-----------------------------------------------------------
Other assets 89,417
===========================================================
Total assets 376,550,030
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 704,724
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 68,018
-----------------------------------------------------------
Accrued distribution fees 150,246
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,524
-----------------------------------------------------------
Accrued transfer agent fees 147,023
-----------------------------------------------------------
Accrued operating expenses 39,394
===========================================================
Total liabilities 1,110,929
===========================================================
Net assets applicable to shares outstanding $375,439,101
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $333,357,486
-----------------------------------------------------------
Undistributed net investment income (loss) (89,162)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (18,747,333)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 60,918,110
===========================================================
$375,439,101
___________________________________________________________
===========================================================
NET ASSETS:
Class A $140,880,232
___________________________________________________________
===========================================================
Class B $ 77,068,743
___________________________________________________________
===========================================================
Class C $ 30,095,298
___________________________________________________________
===========================================================
Class R $ 1,194,675
___________________________________________________________
===========================================================
Investor Class $ 65,423,626
___________________________________________________________
===========================================================
Institutional Class $ 60,776,527
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,773,984
___________________________________________________________
===========================================================
Class B 6,079,460
___________________________________________________________
===========================================================
Class C 2,374,129
___________________________________________________________
===========================================================
Class R 91,810
___________________________________________________________
===========================================================
Investor Class 4,995,913
___________________________________________________________
===========================================================
Institutional Class 4,622,747
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 13.08
-----------------------------------------------------------
Offering price per share:
(Net asset value of $13.08 divided by
94.50%) $ 13.84
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.68
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.68
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 13.01
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 13.10
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 13.15
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-305
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $26,330) $ 2,699,471
-------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $8,916 after rebates of
$35,363) 128,259
=========================================================================
Total investment income 2,827,730
=========================================================================
EXPENSES:
Advisory fees 1,138,942
-------------------------------------------------------------------------
Administrative services fees 68,454
-------------------------------------------------------------------------
Custodian fees 18,994
-------------------------------------------------------------------------
Distribution fees:
Class A 261,313
-------------------------------------------------------------------------
Class B 419,614
-------------------------------------------------------------------------
Class C 156,005
-------------------------------------------------------------------------
Class R 2,922
-------------------------------------------------------------------------
Investor Class 87,870
-------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R and Investor 524,634
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,667
-------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,448
-------------------------------------------------------------------------
Other 174,643
=========================================================================
Total expenses 2,868,506
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (8,667)
=========================================================================
Net expenses 2,859,839
=========================================================================
Net investment income (loss) (32,109)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 1,821,318
-------------------------------------------------------------------------
Foreign currencies (19,436)
=========================================================================
1,801,882
=========================================================================
Change in net unrealized appreciation of Investment
securities 19,319,428
=========================================================================
Net gain from investment securities and foreign currencies 21,121,310
=========================================================================
Net increase in net assets resulting from operations $21,089,201
_________________________________________________________________________
=========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-306
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (32,109) $ (318,275)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 1,801,882 12,500,527
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 19,319,428 13,417,119
==========================================================================================
Net increase in net assets resulting from operations 21,089,201 25,599,371
==========================================================================================
Share transactions-net:
Class A (18,270,630) 18,535,871
------------------------------------------------------------------------------------------
Class B (12,647,890) (1,304,921)
------------------------------------------------------------------------------------------
Class C (2,437,776) 2,160,392
------------------------------------------------------------------------------------------
Class R 147,432 365,393
------------------------------------------------------------------------------------------
Investor Class (9,401,985) 62,887,146
------------------------------------------------------------------------------------------
Institutional Class 40,755,289 18,632,135
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,855,560) 101,276,016
==========================================================================================
Net increase in net assets 19,233,641 126,875,387
==========================================================================================
NET ASSETS:
Beginning of period 356,205,460 229,330,073
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(89,162) and $(57,053), respectively) $375,439,101 $356,205,460
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-307
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-308
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $1 billion 0.60% ---------------------------------------------------------------------- Next $1 billion 0.575% ---------------------------------------------------------------------- Over $2 billion 0.55% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate
FS-309
comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $1,251.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $2,910 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $68,454.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $524,634 for Class A, Class B, Class C, Class R and Investor Class share classes and $1,667 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $261,313, $419,614, $156,005, $2,922, $87,870, 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, 2005, ADI advised the Fund that it retained $28,704 in front-end sales commissions from the sale of Class A shares and $30, $16,357, $2,041 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 ADI.
FS-310
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 3,790,466 $21,764,963 $(19,818,650) $ -- $ 5,736,779 $ 59,148 $ --
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 3,790,466 21,764,963 (19,818,650) -- 5,736,779 60,195 --
==========================================================================================================================
SUBTOTAL $ 7,580,932 $43,529,926 $(39,637,300) $ -- $11,473,558 $119,343 $ --
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 7,196,450 $31,235,303 $(38,431,753) $ -- $ -- $ 8,916 $ --
==========================================================================================================================
TOTAL $14,777,382 $74,765,229 $(78,069,053) $ -- $11,473,558 $128,259 $ --
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Net of rebates
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $4,506.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,501 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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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-311
During the six months ended April 30, 2005, 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 SSB, 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 at 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, 2005, there were no securities on loan to brokers. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $8,916 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
October 31, 2010 $ 9,120,472
-----------------------------------------------------------------------------
October 31, 2011 9,531,242
=============================================================================
Total capital loss carryforward $18,651,714
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above 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, 2005 was $16,952,459 and $24,305,793, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 72,261,886 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (13,199,749) ============================================================================== Net unrealized appreciation of investment securities $ 59,062,137 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $316,101,245. |
FS-312
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 certain 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 (A)(B)
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,329,019 $ 17,541,983 4,797,896 $ 59,721,792
----------------------------------------------------------------------------------------------------------------------
Class B 445,547 5,713,018 1,918,978 23,316,127
----------------------------------------------------------------------------------------------------------------------
Class C 278,358 3,587,900 753,705 9,128,932
----------------------------------------------------------------------------------------------------------------------
Class R 27,239 358,135 54,757 677,970
----------------------------------------------------------------------------------------------------------------------
Investor Class 392,698 5,210,814 1,838,069 22,849,380
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) 3,283,721 43,083,544 1,526,455 18,788,116
======================================================================================================================
Issued in connection with acquisitions(d)
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 221,997 2,936,727 467,293 5,834,860
----------------------------------------------------------------------------------------------------------------------
Class B (228,630) (2,936,727) (478,951) (5,834,860)
======================================================================================================================
Reacquired:
Class A (2,932,777) (38,749,340) (3,841,386) (47,289,385)
----------------------------------------------------------------------------------------------------------------------
Class B (1,201,954) (15,424,181) (1,581,802) (19,136,388)
----------------------------------------------------------------------------------------------------------------------
Class C (470,284) (6,025,676) (671,051) (8,091,321)
----------------------------------------------------------------------------------------------------------------------
Class R (15,964) (210,703) (25,935) (312,577)
----------------------------------------------------------------------------------------------------------------------
Investor Class (1,100,927) (14,612,799) (3,812,184) (47,235,254)
----------------------------------------------------------------------------------------------------------------------
Institutional Class(c) (174,789) (2,328,255) (12,640) (155,981)
======================================================================================================================
(146,746) $ (1,855,560) 8,751,494 $101,276,016
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) 13% of the outstanding shares of the Fund are owned by affiliated mutual
funds. Affiliated mutual funds are mutual funds that are also advised by
AIM.
(b) There are two entities that are record owners of more than 5% of the
outstanding shares of the fund and they own 15% of the outstanding
shares of the Fund. AIM Distributors has an agreement with these
entities to sell Fund shares. The Fund AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund. AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(c) Institutional Class shares commenced sales on April 30, 2004.
(d) 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 on 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-313
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, ---------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.36 $ 11.39 $ 9.20 $ 10.94 $ 12.05 $ 9.40
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.01(a) (0.00)(a) 0.01(a) 0.02(a) 0.07(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.71 0.96 2.19 (1.75) (1.07) 2.88
=================================================================================================================================
Total from investment operations 0.72 0.97 2.19 (1.74) (1.05) 2.95
=================================================================================================================================
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 $ 13.08 $ 12.36 $ 11.39 $ 9.20 $ 10.94 $12.05
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.83% 8.52% 23.80% (15.90)% (8.74)% 32.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $140,880 $150,190 $121,980 $94,387 $68,676 $5,888
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.41%(c) 1.33% 1.42% 1.38% 1.27% 1.25%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.41%(c) 1.35% 1.42% 1.38% 1.36% 8.21%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets 0.09%(c) 0.11% (0.01)% 0.11% 0.17% 0.62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 5% 32% 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
$150,588,976.
(d) Not annualized for periods less than one year.
FS-314
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
--------------------------------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.02 $ 11.15 $ 9.07 $ 10.86 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.04)(a) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.70 0.94 2.15 (1.73) (1.05) 1.17
=================================================================================================================================
Total from investment
operations 0.66 0.87 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 $ 12.68 $ 12.02 $ 11.15 $ 9.07 $ 10.86 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.49% 7.80% 22.93% (16.48)% (9.25)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $77,069 $84,896 $80,018 $63,977 $58,681 $2,815
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.06%(c) 1.98% 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.06%(c) 2.00% 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.56)%(c) (0.54)% (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 5% 32% 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
$84,618,368.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-315
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
--------------------------------------------------------------------------------------------------
AUGUST 1, 2000
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 12.02 $ 11.15 $ 9.07 $ 10.85 $ 12.02 $10.85
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.04)(a) (0.07)(a) (0.07)(a) (0.06)(a) (0.06)(a) (0.00)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.70 0.94 2.15 (1.72) (1.06) 1.17
=================================================================================================================================
Total from investment
operations 0.66 0.87 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 $ 12.68 $ 12.02 $ 11.15 $ 9.07 $ 10.85 $12.02
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.49% 7.80% 22.93% (16.41)% (9.33)% 10.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $30,095 $30,835 $26,566 $21,775 $20,680 $1,248
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.06%(c) 1.98% 2.07% 2.02% 1.95% 1.93%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.06%(c) 2.00% 2.07% 2.02% 2.04% 8.89%(d)
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.56)%(c) (0.54)% (0.66)% (0.53)% (0.51)% (0.06)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 5% 32% 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
$31,459,631.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-316
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
-----------------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------- OCTOBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.31 $11.36 $ 9.20 $ 11.60
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.01)(a) (0.02)(a) (0.00)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.70 0.96 2.18 (2.40)
===============================================================================================================================
Total from investment operations 0.70 0.95 2.16 (2.40)
===============================================================================================================================
Net asset value, end of period $13.01 $12.31 $11.36 $ 9.20
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 5.69% 8.36% 23.48% (20.69)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,195 $ 991 $ 588 $ 8
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.56%(c) 1.48%(d) 1.57% 1.54%(e)
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.04)% (0.16)% (0.05)%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f) 5% 32% 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
$1,178,440.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.50% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-317
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
-------------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.37 $ 11.39 $10.98
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.03(a) (0.00)(a)
---------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.72 0.95 0.41
=====================================================================================================================
Total from investment operations 0.73 0.98 0.41
=====================================================================================================================
Net asset value, end of period $ 13.10 $ 12.37 $11.39
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 5.90% 8.60% 3.73%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $65,424 $70,548 $ 178
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 1.31%(c) 1.24%(d) 1.25%(e)
=====================================================================================================================
Ratio of net investment income (loss) to average net assets 0.19%(c) 0.20% 0.16%(e)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate(f) 5% 32% 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
$70,878,492.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.25% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.38 $ 12.62
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05(a) 0.04(a)
-----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.72 (0.28)
===============================================================================================
Total from investment operations 0.77 (0.24)
===============================================================================================
Net asset value, end of period $ 13.15 $ 12.38
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 6.22% (1.90)%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,777 $18,745
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets 0.75%(c) 0.80%(d)(e)
===============================================================================================
Ratio of net investment income to average net assets 0.75%(c) 0.64%(e)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 5% 32%
_______________________________________________________________________________________________
===============================================================================================
|
(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
$44,099,689.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.81% for the year ended October 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-318
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA,
FS-319
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-320
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.35%
AEROSPACE & DEFENSE-4.72%
Boeing Co. (The) 142,000 $ 8,451,840
------------------------------------------------------------------------
General Dynamics Corp. 55,000 5,777,750
------------------------------------------------------------------------
Precision Castparts Corp. 105,000 7,734,300
------------------------------------------------------------------------
Rockwell Collins, Inc. 170,000 7,799,600
------------------------------------------------------------------------
United Technologies Corp. 56,200 5,716,664
========================================================================
35,480,154
========================================================================
AIR FREIGHT & LOGISTICS-0.62%
FedEx Corp. 55,000 4,672,250
========================================================================
APPAREL RETAIL-1.94%
Abercrombie & Fitch Co.-Class A 170,000 9,171,500
------------------------------------------------------------------------
Chico's FAS, Inc.(a)(b) 210,000 5,382,300
========================================================================
14,553,800
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.70%
Coach, Inc.(a) 196,000 5,252,800
========================================================================
APPLICATION SOFTWARE-1.12%
Autodesk, Inc. 264,000 8,403,120
========================================================================
COMMUNICATIONS EQUIPMENT-1.67%
Cisco Systems, Inc.(a) 493,440 8,526,643
------------------------------------------------------------------------
Motorola, Inc. 260,000 3,988,400
========================================================================
12,515,043
========================================================================
COMPUTER HARDWARE-5.86%
Apple Computer, Inc.(a) 208,000 7,500,480
------------------------------------------------------------------------
Dell Inc.(a) 896,600 31,228,578
------------------------------------------------------------------------
NCR Corp.(a) 162,000 5,346,000
========================================================================
44,075,058
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.73%
Seagate Technology (Cayman Islands)(a) 310,000 5,449,800
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.72%
PACCAR Inc. 80,000 5,432,000
========================================================================
CONSUMER FINANCE-2.54%
SLM Corp. 401,000 19,103,640
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
DEPARTMENT STORES-2.29%
J.C. Penney Co., Inc. 124,000 $ 5,878,840
------------------------------------------------------------------------
Nordstrom, Inc. 223,000 11,335,090
========================================================================
17,213,930
========================================================================
DIVERSIFIED METALS & MINING-0.65%
Southern Peru Copper Corp.(b) 95,000 4,858,300
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.17%
Rockwell Automation, Inc. 191,000 8,829,930
========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.59%
Monsanto Co. 204,000 11,958,480
========================================================================
FOOTWEAR-2.03%
NIKE, Inc.-Class B 199,000 15,285,190
========================================================================
HEALTH CARE EQUIPMENT-3.18%
Bard (C.R.), Inc.(b) 100,000 7,117,000
------------------------------------------------------------------------
Becton, Dickinson & Co. 287,000 16,795,240
========================================================================
23,912,240
========================================================================
HEALTH CARE FACILITIES-2.08%
HCA Inc.(b) 280,000 15,635,200
========================================================================
HEALTH CARE SERVICES-2.19%
Medco Health Solutions, Inc.(a) 125,000 6,371,250
------------------------------------------------------------------------
Quest Diagnostics Inc. 95,000 10,051,000
========================================================================
16,422,250
========================================================================
HEALTH CARE SUPPLIES-2.76%
Alcon, Inc. (Switzerland)(a) 213,700 20,728,900
========================================================================
HOME IMPROVEMENT RETAIL-1.06%
Home Depot, Inc. (The) 225,000 7,958,250
========================================================================
HOMEBUILDING-1.83%
D.R. Horton, Inc.(b) 240,000 7,320,000
------------------------------------------------------------------------
NVR, Inc.(a)(b) 9,000 6,465,150
========================================================================
13,785,150
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.68%
Marriott International, Inc.-Class A 81,000 5,082,750
========================================================================
HOUSEHOLD PRODUCTS-2.62%
Clorox Co. (The)(b) 130,000 8,229,000
------------------------------------------------------------------------
|
FS-321
MARKET
SHARES VALUE
------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-(CONTINUED)
Procter & Gamble Co. (The) 212,000 $ 11,479,800
========================================================================
19,708,800
========================================================================
HOUSEWARES & SPECIALTIES-1.16%
Fortune Brands, Inc. 103,000 8,711,740
========================================================================
HYPERMARKETS & SUPER CENTERS-0.76%
Costco Wholesale Corp.(b) 140,000 5,681,200
========================================================================
INDUSTRIAL CONGLOMERATES-0.86%
Tyco International Ltd. (Bermuda) 207,000 6,481,170
========================================================================
INTEGRATED OIL & GAS-4.77%
BP PLC-ADR (United Kingdom) 143,000 8,708,700
------------------------------------------------------------------------
Chevron Corp. 221,000 11,492,000
------------------------------------------------------------------------
ConocoPhillips 149,000 15,622,650
========================================================================
35,823,350
========================================================================
INTERNET SOFTWARE & SERVICES-0.70%
VeriSign, Inc.(a) 200,000 5,292,000
========================================================================
INVESTMENT BANKING & BROKERAGE-3.99%
Bear Stearns Cos. Inc. (The) 71,000 6,720,860
------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 106,000 11,319,740
------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 130,000 11,923,600
========================================================================
29,964,200
========================================================================
IT CONSULTING & OTHER SERVICES-1.18%
Accenture Ltd.-Class A (Bermuda)(a) 409,000 8,875,300
========================================================================
MANAGED HEALTH CARE-7.05%
Aetna Inc. 248,000 18,195,760
------------------------------------------------------------------------
UnitedHealth Group Inc. 267,000 25,234,170
------------------------------------------------------------------------
WellPoint, Inc.(a) 75,000 9,581,250
========================================================================
53,011,180
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.80%
Apache Corp. 100,000 5,629,000
------------------------------------------------------------------------
Devon Energy Corp. 175,000 7,904,750
========================================================================
13,533,750
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-2.09%
Valero Energy Corp. 229,000 15,693,370
========================================================================
PACKAGED FOODS & MEATS-1.11%
Hershey Co. (The) 130,000 8,307,000
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
PERSONAL PRODUCTS-3.48%
Gillette Co. (The) 506,000 $ 26,129,840
========================================================================
PHARMACEUTICALS-6.95%
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom)(b) 203,000 6,309,240
------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom) 128,000 6,470,400
------------------------------------------------------------------------
Johnson & Johnson 491,000 33,697,330
------------------------------------------------------------------------
Sanofi-Aventis-ADR (France) 130,000 5,768,100
========================================================================
52,245,070
========================================================================
PROPERTY & CASUALTY INSURANCE-0.94%
Allstate Corp. (The) 126,000 7,076,160
========================================================================
RAILROADS-0.71%
Norfolk Southern Corp. 170,000 5,338,000
========================================================================
RESTAURANTS-4.14%
Darden Restaurants, Inc. 265,000 7,950,000
------------------------------------------------------------------------
McDonald's Corp. 250,000 7,327,500
------------------------------------------------------------------------
Yum! Brands, Inc. 337,000 15,825,520
========================================================================
31,103,020
========================================================================
SEMICONDUCTORS-1.18%
Intel Corp. 149,000 3,504,480
------------------------------------------------------------------------
National Semiconductor Corp. 283,000 5,399,640
========================================================================
8,904,120
========================================================================
SOFT DRINKS-1.08%
PepsiCo, Inc. 146,000 8,123,440
========================================================================
SPECIALTY STORES-2.02%
Staples, Inc. 796,000 15,179,720
========================================================================
STEEL-1.83%
Nucor Corp.(b) 184,000 9,402,400
------------------------------------------------------------------------
United States Steel Corp. 102,000 4,361,520
========================================================================
13,763,920
========================================================================
SYSTEMS SOFTWARE-3.93%
Adobe Systems Inc. 239,000 14,213,330
------------------------------------------------------------------------
Microsoft Corp. 429,280 10,860,784
------------------------------------------------------------------------
Oracle Corp.(a) 389,000 4,496,840
========================================================================
29,570,954
========================================================================
THRIFTS & MORTGAGE FINANCE-1.87%
Countrywide Financial Corp. 389,000 14,077,910
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $669,535,613) 739,203,449
========================================================================
|
FS-322
MARKET
SHARES VALUE
------------------------------------------------------------------------
MONEY MARKET FUNDS-2.38%
Liquid Assets Portfolio-Institutional
Class(c) 8,940,682 $ 8,940,682
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 8,940,682 8,940,682
========================================================================
Total Money Market Funds (Cost
$17,881,364) 17,881,364
========================================================================
TOTAL INVESTMENTS-100.73% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $687,416,977) 757,084,813
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-4.43%
STIC Prime Portfolio-Institutional
Class(c)(d) 33,327,138 $ 33,327,138
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $33,327,138) 33,327,138
========================================================================
TOTAL INVESTMENTS-105.16% (Cost $720,744,115) 790,411,951
========================================================================
OTHER ASSETS LESS LIABILITIES-(5.16%) (38,818,675)
========================================================================
NET ASSETS-100.00% $751,593,276
________________________________________________________________________
========================================================================
|
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, 2005.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-323
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$669,535,613)* $ 739,203,449
------------------------------------------------------------
Investments in affiliated money market
funds (cost $51,208,502) 51,208,502
============================================================
Total investments (cost $720,744,115) 790,411,951
============================================================
Receivables for:
Fund shares sold 1,098,975
------------------------------------------------------------
Dividends 708,237
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 157,296
------------------------------------------------------------
Other assets 103,576
============================================================
Total assets 792,480,035
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,587,618
------------------------------------------------------------
Fund shares reacquired 999,519
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 201,036
------------------------------------------------------------
Collateral upon return of securities
loaned 33,327,138
------------------------------------------------------------
Accrued distribution fees 247,691
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,315
------------------------------------------------------------
Accrued transfer agent fees 486,221
------------------------------------------------------------
Accrued operating expenses 35,221
============================================================
Total liabilities 40,886,759
============================================================
Net assets applicable to shares outstanding $ 751,593,276
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,297,925,258
------------------------------------------------------------
Undistributed net investment income (88,320)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,615,911,498)
------------------------------------------------------------
Unrealized appreciation of investment
securities 69,667,836
============================================================
$ 751,593,276
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 186,431,217
____________________________________________________________
============================================================
Class B $ 105,857,250
____________________________________________________________
============================================================
Class C $ 47,817,195
____________________________________________________________
============================================================
Class R $ 2,131,582
____________________________________________________________
============================================================
Investor Class $ 350,468,858
____________________________________________________________
============================================================
Institutional Class $ 58,887,174
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 20,166,877
____________________________________________________________
============================================================
Class B 11,921,117
____________________________________________________________
============================================================
Class C 5,382,267
____________________________________________________________
============================================================
Class R 231,509
____________________________________________________________
============================================================
Investor Class 37,721,028
____________________________________________________________
============================================================
Institutional Class 6,332,814
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.24
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.24 divided by
94.50%) $ 9.78
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.88
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.88
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.21
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 9.29
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.30
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $32,769,431 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-324
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,646) $ 5,990,107
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $14,847 after rebates of
$161,510) 140,372
==========================================================================
Total investment income 6,130,479
==========================================================================
EXPENSES:
Advisory fees 2,914,287
--------------------------------------------------------------------------
Administrative services fees 114,166
--------------------------------------------------------------------------
Custodian fees 38,813
--------------------------------------------------------------------------
Distribution fees:
Class A 331,943
--------------------------------------------------------------------------
Class B 571,187
--------------------------------------------------------------------------
Class C 253,087
--------------------------------------------------------------------------
Class R 7,121
--------------------------------------------------------------------------
Investor Class 365,984
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C, R & Investor 1,408,294
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 6,130
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 20,696
--------------------------------------------------------------------------
Other 300,139
==========================================================================
Total expenses 6,331,847
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (244,157)
==========================================================================
Net expenses 6,087,690
==========================================================================
Net investment income 42,789
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities (includes gains
from securities sold to affiliates of $2,126,225) 25,807,818
==========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (19,161,150)
==========================================================================
Net gain from investment securities 6,646,668
==========================================================================
Net increase in net assets resulting from operations $ 6,689,457
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-325
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 42,789 $ (6,606,212)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 25,807,818 98,213,764
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (19,161,150) (67,692,338)
==========================================================================================
Net increase in net assets resulting from operations 6,689,457 23,915,214
==========================================================================================
Share transactions-net:
Class A 7,685,475 18,678,547
------------------------------------------------------------------------------------------
Class B (8,148,920) (12,082,083)
------------------------------------------------------------------------------------------
Class C (907,138) 3,097,603
------------------------------------------------------------------------------------------
Class R (679,048) 574,491
------------------------------------------------------------------------------------------
Investor Class (31,720,180) 361,821,129
------------------------------------------------------------------------------------------
Institutional Class 37,968,651 22,063,157
==========================================================================================
Net increase in net assets resulting from share
transactions 4,198,840 394,152,844
==========================================================================================
Net increase in net assets 10,888,297 418,068,058
==========================================================================================
NET ASSETS:
Beginning of period 740,704,979 322,636,921
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(88,320) and $(131,109), respectively) $751,593,276 $740,704,979
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-326
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-327
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
FS-328
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 paid an advisory fee based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $1 billion 0.75% ---------------------------------------------------------------------- Next $1 billion 0.70% ---------------------------------------------------------------------- Over $2 billion 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $250 million 0.695% ---------------------------------------------------------------------- Next $250 million 0.67% ---------------------------------------------------------------------- Next $500 million 0.645% ---------------------------------------------------------------------- Next $1.5 billion 0.62% ---------------------------------------------------------------------- Next $2.5 billion 0.595% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $209,967.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $20,806 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $114,166.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $1,408,294 for Class A, Class B, Class C, Class R and Investor Class share classes and $6,130 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. The Fund, pursuant to the Investor Class Plan, pays ADI 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. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class 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 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, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $331,943, $571,187, $253,087, $7,121 and $365,984, 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, 2005, ADI advised the Fund that it retained $38,261 in front-end sales commissions from the sale of Class A shares and $1,506, $16,492, $3,258 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 ADI.
FS-329
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $14,259,968 $ 43,067,825 $ (48,387,111) $ -- $ 8,940,682 $ 62,236 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 14,259,968 43,067,825 (48,387,111) -- 8,940,682 63,289 --
==================================================================================================================================
Subtotal $28,519,936 $ 86,135,650 $ (96,774,222) $ -- $17,881,364 $125,525 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 4,905,700 $ 77,755,697 $ (82,661,397) $ -- $ -- $ 5,223 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 130,131,667 (96,804,529) -- 33,327,138 9,624 --
==================================================================================================================================
Subtotal $ 4,905,700 $207,887,364 $(179,465,926) $ -- $33,327,138 $ 14,847 $ --
==================================================================================================================================
Total $33,425,636 $294,023,014 $(276,240,148) $ -- $51,208,502 $140,372 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $0 and sales of $7,735,000, which resulted in net realized gains of $2,126,225.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended April 30, 2005, the Fund received credits from these arrangements which resulted in the reduction of the Fund's total expenses of $13,384.
FS-330
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $3,189 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $32,769,431 were on loan to brokers. The loans were secured by cash collateral of $33,327,138 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $14,847 for securities lending transactions, which are net of rebates.
FS-331
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these Limitation rules, the Fund is limited as of October 31, 2004 to utilizing $1,546,948,307 of capital loss carryforward in the fiscal year ended October 31, 2005.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $1,067,080,173
------------------------------------------------------------------------------
October 31, 2010 532,535,321
------------------------------------------------------------------------------
October 31, 2011 35,095,604
==============================================================================
Total capital loss carryforward $1,634,711,098
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 3, 2003, the date of the reorganization of INVESCO Growth Fund into the Fund, are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization.
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, 2005 was $387,343,053 and $365,180,262, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 80,318,882 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (17,164,639) ============================================================================== Net unrealized appreciation of investment securities $ 63,154,243 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $727,257,708. |
FS-332
NOTE 11--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 certain 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(A)
------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,456,295 $ 33,478,961 6,225,450 $ 57,170,463
------------------------------------------------------------------------------------------------------------------------
Class B 1,158,312 10,764,191 2,516,228 22,341,073
------------------------------------------------------------------------------------------------------------------------
Class C 1,034,121 9,651,420 2,041,593 18,173,950
------------------------------------------------------------------------------------------------------------------------
Class R 41,704 402,574 111,709 1,022,930
------------------------------------------------------------------------------------------------------------------------
Investor Class 1,494,394 14,520,052 4,268,368 39,323,955
------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 3,989,941 38,701,639 2,436,212 22,232,973
========================================================================================================================
Issued in connection with acquisitions:(c)
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 203,261 1,964,867 472,810 4,373,299
------------------------------------------------------------------------------------------------------------------------
Class B (211,295) (1,964,867) (489,052) (4,373,299)
========================================================================================================================
Reacquired:
Class A (2,877,653) (27,758,353) (5,108,536) (46,826,136)
------------------------------------------------------------------------------------------------------------------------
Class B (1,823,491) (16,948,244) (3,420,244) (30,260,712)
------------------------------------------------------------------------------------------------------------------------
Class C (1,136,316) (10,558,558) (2,120,502) (18,744,901)
------------------------------------------------------------------------------------------------------------------------
Class R (112,698) (1,081,622) (48,964) (448,439)
------------------------------------------------------------------------------------------------------------------------
Investor Class (4,759,426) (46,240,232) (13,848,145) (126,645,903)
------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) (74,710) (732,988) (18,629) (169,816)
========================================================================================================================
382,439 $ 4,198,840 44,460,987 $ 394,152,844
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 10% of the outstanding shares
of the Fund. AIM Distributors has an agreement with this entity to sell
Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
this entity, which is considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but
not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. 7% of the outstanding
shares of the fund are owned by affiliated mutual funds. Affiliated
mutual funds are mutual funds that are advised by AIM. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
(c) As of the opening of business on November 3, 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 on 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-333
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, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74 $ 11.29
------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.00(a)(b) (0.08)(a) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.08 0.36 1.59 (1.36) (8.84) 6.60
========================================================================================================================
Total from investment
operations 0.08 0.28 1.51 (1.45) (8.92) 6.45
========================================================================================================================
Net asset value, end of period $ 9.24 $ 9.16 $ 8.88 $ 7.37 $ 8.82 $ 17.74
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 0.87% 3.15% 20.49% (16.44)% (50.28)% 57.13%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $186,431 $177,498 $154,052 $105,320 $138,269 $225,255
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 1.55%(d) 1.54% 1.82% 1.70% 1.57% 1.58%
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.61%(d) 1.55% 1.82% 1.70% 1.57% 1.58%
========================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.03%(b)(d) (0.92)% (1.01)% (1.01)% (0.72)% (0.82)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income (loss) per share and the ratio of net investment income (loss) to
average net assets excluding the special dividend are $(0.01) and
$(0.30)%, respectively.
(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 the 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
$191,253,560.
(e) Not annualized for periods less than one year.
CLASS B
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54 $ 11.25
-------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.03)(a)(b) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.09 0.35 1.53 (1.33) (8.71) 6.56
=========================================================================================================================
Total from investment
operations 0.06 0.21 1.41 (1.47) (8.87) 6.29
=========================================================================================================================
Net asset value, end of period $ 8.88 $ 8.82 $ 8.61 $ 7.20 $ 8.67 $ 17.54
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 0.68% 2.44% 19.58% (16.96)% (50.57)% 55.91%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $105,857 $112,931 $122,011 $104,040 $144,747 $210,224
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.20%(d) 2.19% 2.47% 2.35% 2.23% 2.24%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.26%(d) 2.20% 2.47% 2.35% 2.23% 2.24%
=========================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.62)%(b)(d) (1.57)% (1.66)% (1.66)% (1.39)% (1.48)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and $(0.95)%, respectively.
(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 the 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
$115,184,129.
(e) Not annualized for periods less than one year.
FS-334
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55 $ 11.25
------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.03)(a)(b) (0.14)(a) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.08 0.35 1.53 (1.32) (8.72) 6.57
==================================================================================================================
Total from investment
operations 0.05 0.21 1.41 (1.46) (8.88) 6.30
==================================================================================================================
Net asset value, end of period $ 8.88 $ 8.83 $ 8.62 $ 7.21 $ 8.67 $ 17.55
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 0.57% 2.44% 19.56% (16.84)% (50.60)% 56.00%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $47,817 $48,420 $44,272 $36,575 $57,865 $79,392
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 2.20%(d) 2.19% 2.47% 2.35% 2.23% 2.24%
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.26%(d) 2.20% 2.47% 2.35% 2.23% 2.24%
==================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.62)%(b)(d) (1.57)% (1.66)% (1.66)% (1.39)% (1.48)%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 48% 111% 123% 111% 124% 113%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and $(0.95)%, respectively.
(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 the 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
$51,036,875.
(e) Not annualized for periods less than one year.
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.13 $ 8.87 $ 7.37 $ 8.40
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a)(b) (0.10)(a) (0.09)(a) (0.04)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.09 0.36 1.59 (0.99)
======================================================================================================================
Total from investment operations 0.08 0.26 1.50 (1.03)
======================================================================================================================
Net asset value, end of period $ 9.21 $ 9.13 $ 8.87 $ 7.37
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(c) 0.88% 2.93% 20.35% (12.26)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,132 $2,761 $2,127 $ 9
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.70%(d) 1.69% 1.97% 1.85%(e)
----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.76%(d) 1.70% 1.97% 1.85%(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.12)%(b)(d) (1.07)% (1.16)% (1.16)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f) 48% 111% 123% 111%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.02) and $(0.45)%, respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$2,871,902.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-335
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS
---------------------------------------------------------
SEPTEMBER 30, 2003
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.20 $ 8.88 $ 8.24
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a)(b) (0.05)(a)(c) (0.01)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 0.37 0.65
=======================================================================================================================
Total from investment operations 0.09 0.32 0.64
=======================================================================================================================
Net asset value, end of period $ 9.29 $ 9.20 $ 8.88
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(d) 0.98% 3.60%(c) 7.77%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $350,469 $376,905 $ 174
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.39%(e) 1.19% 1.56%(f)
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.45%(e) 1.42% 1.56%(f)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets 0.19%(b)(e) (0.57)% (0.75)%(f)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(g) 48% 111% 123%
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income (loss) to
average net assets excluding the special dividend are $0.00 and
$(0.14)%, respectively.
(c) The advisor reimbursed Investor Class expenses related to an overpayment
of Rule 12b-1 fees of the INVESCO Growth fund paid to INVESCO
Distributors, Inc., the prior distributor of INVESCO Growth Fund. Had
the advisor not reimbursed these expenses the net investment income per
share, the ratio of expenses to average net assets, the ratio of net
investment income to average net assets and the total return would have
been (0.07), 1.41%, (0.79) and 3.27%, respectively.
(d) 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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(e) Ratios are annualized and based on average daily net assets of
$381,925,018.
(f) Annualized.
(g) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.18 $ 9.13
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)(b) (0.01)(a)
---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 0.06
=============================================================================================
Total from investment operations 0.12 0.05
=============================================================================================
Net asset value, end of period $ 9.30 $ 9.18
_____________________________________________________________________________________________
=============================================================================================
Total return(c) 1.31% 0.55%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,887 $22,190
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.84%(d) 0.92%(e)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.90%(d) 0.93%(e)
=============================================================================================
Ratio of net investment income to average net assets 0.74%(b)(d) (0.30)%(e)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(f) 48% 111%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.03 and $0.41%,
respectively.
(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 the returns for
shareholder transactions. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$41,312,037.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-336
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA,
FS-337
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-338
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.94%
ADVERTISING-0.86%
Omnicom Group Inc. 18,000 $ 1,492,200
=======================================================================
AEROSPACE & DEFENSE-1.08%
L-3 Communications Holdings, Inc. 26,500 1,880,705
=======================================================================
AIR FREIGHT & LOGISTICS-0.80%
Robinson (C.H.) Worldwide, Inc. 27,000 1,393,200
=======================================================================
APPAREL RETAIL-2.31%
Abercrombie & Fitch Co.-Class A 22,000 1,186,900
-----------------------------------------------------------------------
Chico's FAS, Inc.(a) 53,000 1,358,390
-----------------------------------------------------------------------
Urban Outfitters, Inc.(a) 33,000 1,461,900
=======================================================================
4,007,190
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.19%
Coach, Inc.(a) 83,000 2,224,400
-----------------------------------------------------------------------
Polo Ralph Lauren Corp. 45,000 1,579,500
=======================================================================
3,803,900
=======================================================================
APPLICATION SOFTWARE-3.35%
Amdocs Ltd. (United Kingdom)(a) 60,000 1,602,600
-----------------------------------------------------------------------
Autodesk, Inc.(a) 35,100 1,117,233
-----------------------------------------------------------------------
Mercury Interactive Corp.(a) 36,000 1,487,880
-----------------------------------------------------------------------
MicroStrategy Inc.-Class A(a) 18,000 783,540
-----------------------------------------------------------------------
NAVTEQ Corp.(a) 22,700 826,734
=======================================================================
5,817,987
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.07%
Investors Financial Services Corp.(b) 50,000 2,097,500
-----------------------------------------------------------------------
Legg Mason, Inc. 21,000 1,488,060
=======================================================================
3,585,560
=======================================================================
AUTO PARTS & EQUIPMENT-0.87%
Autoliv, Inc. 34,000 1,504,500
=======================================================================
BIOTECHNOLOGY-3.85%
Charles River Laboratories International,
Inc.(a) 40,400 1,913,748
-----------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a) 30,000 689,700
-----------------------------------------------------------------------
Gilead Sciences, Inc.(a) 45,000 1,669,500
-----------------------------------------------------------------------
Invitrogen Corp.(a) 14,000 1,025,780
-----------------------------------------------------------------------
Martek Biosciences Corp.(a)(b) 36,000 1,377,720
=======================================================================
6,676,448
=======================================================================
CASINOS & GAMING-0.93%
Station Casinos, Inc. 25,000 1,613,250
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
COMMODITY CHEMICALS-1.03%
Celanese Corp.-Series A(a) 122,400 $ 1,780,920
=======================================================================
COMMUNICATIONS EQUIPMENT-4.23%
Avaya Inc.(a) 140,000 1,215,200
-----------------------------------------------------------------------
Comverse Technology, Inc.(a) 58,000 1,321,820
-----------------------------------------------------------------------
Corning Inc.(a) 100,000 1,375,000
-----------------------------------------------------------------------
Juniper Networks, Inc.(a) 88,200 1,992,438
-----------------------------------------------------------------------
Scientific-Atlanta, Inc. 47,000 1,437,260
=======================================================================
7,341,718
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.27%
QLogic Corp.(a) 40,000 1,329,600
-----------------------------------------------------------------------
Storage Technology Corp.(a) 31,700 881,260
=======================================================================
2,210,860
=======================================================================
CONSUMER FINANCE-0.67%
First Marblehead Corp. (The)(a)(b) 30,000 1,155,900
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.02%
Alliance Data Systems Corp.(a) 58,000 2,343,200
-----------------------------------------------------------------------
Iron Mountain Inc.(a) 39,000 1,158,300
=======================================================================
3,501,500
=======================================================================
DEPARTMENT STORES-2.27%
Kohl's Corp.(a) 40,000 1,904,000
-----------------------------------------------------------------------
Nordstrom, Inc. 40,000 2,033,200
=======================================================================
3,937,200
=======================================================================
DIVERSIFIED BANKS-0.98%
Centennial Bank Holdings, Inc. (Acquired
12/27/04; Cost $1,653,750)(a)(c) 157,500 1,701,000
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.71%
Career Education Corp.(a) 33,800 1,062,672
-----------------------------------------------------------------------
ChoicePoint Inc.(a) 36,400 1,436,708
-----------------------------------------------------------------------
Corporate Executive Board Co. (The) 34,000 2,234,820
-----------------------------------------------------------------------
Corrections Corp. of America(a) 45,000 1,703,250
=======================================================================
6,437,450
=======================================================================
DRUG RETAIL-1.08%
Shoppers Drug Mart Corp. (Canada)(a) 60,000 1,871,498
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.98%
Cooper Industries, Ltd.-Class A (Bermuda) 26,700 1,699,722
=======================================================================
|
FS-339
MARKET
SHARES VALUE
-----------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-0.61%
Amphenol Corp.-Class A 27,000 $ 1,064,880
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.78%
Benchmark Electronics, Inc.(a) 50,000 1,352,000
=======================================================================
GENERAL MERCHANDISE STORES-1.49%
Dollar General Corp. 80,700 1,642,245
-----------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 38,300 937,967
=======================================================================
2,580,212
=======================================================================
HEALTH CARE DISTRIBUTORS-0.86%
Schein (Henry), Inc.(a) 40,000 1,500,400
=======================================================================
HEALTH CARE EQUIPMENT-6.66%
Biomet, Inc. 42,000 1,624,980
-----------------------------------------------------------------------
Fisher Scientific International Inc.(a) 24,000 1,425,120
-----------------------------------------------------------------------
INAMED Corp.(a) 15,000 912,600
-----------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 45,000 2,765,250
-----------------------------------------------------------------------
PerkinElmer, Inc. 99,000 1,831,500
-----------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 41,900 1,413,706
-----------------------------------------------------------------------
Waters Corp.(a) 40,000 1,585,200
=======================================================================
11,558,356
=======================================================================
HEALTH CARE FACILITIES-1.05%
Community Health Systems Inc.(a) 50,000 1,822,500
=======================================================================
HEALTH CARE SERVICES-3.52%
Caremark Rx, Inc.(a) 45,000 1,802,250
-----------------------------------------------------------------------
Cerner Corp.(a)(b) 20,000 1,161,200
-----------------------------------------------------------------------
Express Scripts, Inc.(a) 18,000 1,613,520
-----------------------------------------------------------------------
Renal Care Group, Inc.(a) 40,000 1,526,000
=======================================================================
6,102,970
=======================================================================
HEALTH CARE SUPPLIES-1.01%
Cooper Cos., Inc. (The) 25,900 1,749,545
=======================================================================
HOME FURNISHINGS-0.53%
Tempur-Pedic International Inc.(a) 48,000 916,320
=======================================================================
HOMEBUILDING-1.03%
Pulte Homes, Inc. 25,000 1,786,250
=======================================================================
HOTELS, RESORTS & CRUISE LINES-2.26%
Hilton Hotels Corp. 105,000 2,292,150
-----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(d) 30,000 1,630,200
=======================================================================
3,922,350
=======================================================================
HOUSEWARES & SPECIALTIES-1.53%
Fortune Brands, Inc. 10,200 862,716
-----------------------------------------------------------------------
Jarden Corp.(a) 40,000 1,786,800
=======================================================================
2,649,516
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
INDUSTRIAL MACHINERY-0.53%
Ingersoll-Rand Co. Ltd.-Class A (Bermuda) 12,000 $ 922,440
=======================================================================
INTEGRATED OIL & GAS-1.23%
Murphy Oil Corp. 24,000 2,138,160
=======================================================================
INTERNET SOFTWARE & SERVICES-1.88%
Digital River, Inc.(a) 45,500 1,210,300
-----------------------------------------------------------------------
VeriSign, Inc.(a) 77,300 2,045,358
=======================================================================
3,255,658
=======================================================================
IT CONSULTING & OTHER SERVICES-0.99%
Cognizant Technology Solutions Corp.-Class
A(a) 41,000 1,722,410
=======================================================================
LEISURE PRODUCTS-0.48%
Brunswick Corp. 20,000 840,000
=======================================================================
MANAGED HEALTH CARE-0.36%
AMERIGROUP Corp.(a) 18,000 632,160
=======================================================================
MULTI-LINE INSURANCE-0.19%
Quanta Capital Holdings Ltd. (Bermuda)(a) 41,177 329,416
=======================================================================
OFFICE ELECTRONICS-0.56%
Zebra Technologies Corp.-Class A(a) 20,400 974,304
=======================================================================
OIL & GAS DRILLING-2.02%
Nabors Industries, Ltd. (Bermuda)(a) 32,000 1,723,840
-----------------------------------------------------------------------
Noble Corp. (Cayman Islands) 35,000 1,781,500
=======================================================================
3,505,340
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.51%
National-Oilwell Varco Inc.(a) 37,000 1,470,380
-----------------------------------------------------------------------
Smith International, Inc. 30,000 1,745,400
-----------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 22,000 1,147,300
=======================================================================
4,363,080
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.45%
Ultra Petroleum Corp. (Canada)(a) 50,000 2,524,000
=======================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.03%
Williams Cos., Inc. (The) 105,000 1,787,100
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.06%
CapitalSource Inc.(a) 88,000 1,848,000
=======================================================================
PHARMACEUTICALS-2.23%
Medicis Pharmaceutical Corp.-Class A 32,000 899,200
-----------------------------------------------------------------------
MGI Pharma, Inc.(a) 64,000 1,411,200
-----------------------------------------------------------------------
Valeant Pharmaceuticals International 75,000 1,556,250
=======================================================================
3,866,650
=======================================================================
|
FS-340
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PUBLISHING-0.49%
Getty Images, Inc.(a) 12,000 $ 858,600
=======================================================================
RAILROADS-0.49%
CSX Corp. 21,000 842,730
=======================================================================
REAL ESTATE-1.84%
Aames Investment Corp. 152,400 1,287,780
-----------------------------------------------------------------------
People's Choice Financial Corp. (Acquired
12/21/04; Cost $1,897,000)(a)(c) 189,700 1,897,000
=======================================================================
3,184,780
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.16%
CB Richard Ellis Group, Inc.-Class A(a) 57,900 2,012,025
=======================================================================
REGIONAL BANKS-0.56%
Signature Bank(a) 39,600 975,348
=======================================================================
SEMICONDUCTOR EQUIPMENT-0.98%
Novellus Systems, Inc.(a) 36,000 843,480
-----------------------------------------------------------------------
Tessera Technologies Inc.(a) 32,400 860,544
=======================================================================
1,704,024
=======================================================================
SEMICONDUCTORS-5.45%
Altera Corp.(a) 100,000 2,073,000
-----------------------------------------------------------------------
ATI Technologies Inc. (Canada)(a) 114,700 1,697,560
-----------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 45,000 1,506,600
-----------------------------------------------------------------------
Microchip Technology Inc. 80,000 2,278,400
-----------------------------------------------------------------------
National Semiconductor Corp. 100,000 1,908,000
=======================================================================
9,463,560
=======================================================================
SPECIALIZED FINANCE-0.72%
Chicago Mercantile Exchange Holdings Inc. 6,400 1,251,328
=======================================================================
SPECIALTY STORES-5.01%
Advance Auto Parts, Inc.(a) 37,000 1,973,950
-----------------------------------------------------------------------
Bed Bath & Beyond Inc.(a) 40,000 1,488,400
-----------------------------------------------------------------------
Office Depot, Inc.(a) 76,000 1,488,080
-----------------------------------------------------------------------
Staples, Inc. 91,500 1,744,905
-----------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 59,500 1,992,655
=======================================================================
8,687,990
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS-1.40%
MSC Industrial Direct Co., Inc.-Class A 57,000 $ 1,531,590
-----------------------------------------------------------------------
W.W. Grainger, Inc. 16,300 901,227
=======================================================================
2,432,817
=======================================================================
TRUCKING-0.53%
Swift Transportation Co., Inc.(a) 43,000 917,190
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.91%
American Tower Corp.-Class A(a) 82,600 1,423,198
-----------------------------------------------------------------------
Nextel Partners, Inc.-Class A(a) 90,000 2,116,800
-----------------------------------------------------------------------
NII Holdings Inc.(a) 28,000 1,401,960
-----------------------------------------------------------------------
SpectraSite, Inc.(a) 33,000 1,852,290
=======================================================================
6,794,248
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $154,999,096) 168,251,365
=======================================================================
MONEY MARKET FUNDS-2.75%
Liquid Assets Portfolio-Institutional
Class(e) 2,385,692 2,385,692
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 2,385,692 2,385,692
=======================================================================
Total Money Market Funds (Cost
$4,771,384) 4,771,384
=======================================================================
TOTAL INVESTMENTS-99.69% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $159,770,480) 173,022,749
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-2.72%
STIC Prime Portfolio-Institutional
Class(e)(f) 4,723,100 4,723,100
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $4,723,100) 4,723,100
=======================================================================
TOTAL INVESTMENTS-102.41% (Cost $164,493,580) 177,745,849
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.41%) (4,190,098)
=======================================================================
NET ASSETS-100.00% $173,555,751
_______________________________________________________________________
=======================================================================
|
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, 2005.
(c) 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 April 30, 2005 was
$3,598,000, which represented 2.07% of the Fund's Net Assets. These
securities are considered to be illiquid; the portfolio is limited to
investing 15% of net assets in illiquid securities.
(d) Each unit represents one common share and one Class B share.
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-341
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$154,999,096)* $ 168,251,365
------------------------------------------------------------
Investments in affiliated money market funds
(cost $9,494,484) 9,494,484
============================================================
Total investments (cost $164,493,580) 177,745,849
============================================================
Receivables for:
Investments sold 2,369,701
------------------------------------------------------------
Fund shares sold 79,121
------------------------------------------------------------
Dividends 61,133
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 24,529
------------------------------------------------------------
Other assets 27,946
============================================================
Total assets 180,308,279
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,300,277
------------------------------------------------------------
Fund shares reacquired 407,921
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 32,061
------------------------------------------------------------
Collateral upon return of securities loaned 4,723,100
------------------------------------------------------------
Accrued distribution fees 95,667
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,383
------------------------------------------------------------
Accrued transfer agent fees 140,290
------------------------------------------------------------
Accrued operating expenses 51,829
============================================================
Total liabilities 6,752,528
============================================================
Net assets applicable to shares outstanding $ 173,555,751
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 282,014,629
------------------------------------------------------------
Undistributed net investment income (loss) (1,592,487)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (120,118,527)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 13,252,136
============================================================
$ 173,555,751
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 88,060,287
____________________________________________________________
============================================================
Class B $ 62,328,884
____________________________________________________________
============================================================
Class C $ 22,078,567
____________________________________________________________
============================================================
Class R $ 1,077,949
____________________________________________________________
============================================================
Institutional Class $ 10,064
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 9,560,702
____________________________________________________________
============================================================
Class B 7,029,958
____________________________________________________________
============================================================
Class C 2,489,778
____________________________________________________________
============================================================
Class R 117,727
____________________________________________________________
============================================================
Institutional Class 1,085
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.21
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.21 divided by
94.50%) $ 9.75
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 8.87
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 8.87
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.16
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 9.28
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $3,721,463 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-342
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,182) $ 462,289
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $7,003 after rebates of
$57,773) 59,761
==========================================================================
Total investment income 522,050
==========================================================================
EXPENSES:
Advisory fees 807,397
--------------------------------------------------------------------------
Administrative services fees 24,795
--------------------------------------------------------------------------
Custodian fees 7,582
--------------------------------------------------------------------------
Distribution fees:
Class A 181,426
--------------------------------------------------------------------------
Class B 359,708
--------------------------------------------------------------------------
Class C 125,661
--------------------------------------------------------------------------
Class R 2,733
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 507,388
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 5
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 11,111
--------------------------------------------------------------------------
Other 106,055
==========================================================================
Total expenses 2,133,861
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (48,695)
==========================================================================
Net expenses 2,085,166
==========================================================================
Net investment income (loss) (1,563,116)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (includes gains (losses) from
securities sold to affiliates of $(318,507)) 19,028,063
--------------------------------------------------------------------------
Foreign currencies (1,671)
==========================================================================
19,026,392
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (13,408,650)
--------------------------------------------------------------------------
Foreign currencies 6,416
==========================================================================
(13,402,234)
==========================================================================
Net gain from investment securities and foreign currencies 5,624,158
==========================================================================
Net increase in net assets resulting from operations $ 4,061,042
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-343
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,563,116) $ (3,749,647)
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 19,026,392 9,151,671
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (13,402,234) (2,982,396)
==========================================================================================
Net increase in net assets resulting from operations 4,061,042 2,419,628
==========================================================================================
Share transactions-net:
Class A (13,470,372) (10,422,993)
------------------------------------------------------------------------------------------
Class B (9,440,141) (11,811,705)
------------------------------------------------------------------------------------------
Class C (2,871,385) (4,684,464)
------------------------------------------------------------------------------------------
Class R 204,721 676,095
------------------------------------------------------------------------------------------
Institutional Class -- 10,000
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (25,577,177) (26,233,067)
==========================================================================================
Net increase (decrease) in net assets (21,516,135) (23,813,439)
==========================================================================================
NET ASSETS:
Beginning of period 195,071,886 218,885,325
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(1,592,487) and $(29,371),
respectively) $173,555,751 $195,071,886
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-344
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-345
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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 (net of foreign taxes withheld on disposition) 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 (net of estimated foreign tax withholding) 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.
G. 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.
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-346
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $1 billion 0.80% -------------------------------------------------------------------- Over $1 billion 0.75% ____________________________________________________________________ ==================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $250 million 0.745% -------------------------------------------------------------------- Next $250 million 0.73% -------------------------------------------------------------------- Next $500 million 0.715% -------------------------------------------------------------------- Next $1.5 billion 0.70% -------------------------------------------------------------------- Next $2.5 billion 0.685% -------------------------------------------------------------------- Next $2.5 billion 0.67% -------------------------------------------------------------------- Next $2.5 billion 0.655% -------------------------------------------------------------------- Over $10 billion 0.64% ____________________________________________________________________ ==================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $36,886.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP agreed to reimburse $9,355 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $24,795.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $507,388 for Class A, Class B, Class C and Class R share classes and $5 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $181,426, $359,708, $125,661 and $2,733, 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, 2005, ADI advised the Fund that it retained $18,491 in front-end sales commissions from the sale of Class A shares and $25, $18,942, $1,745 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 ADI.
FS-347
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,818,420 $29,453,914 $(28,886,642) $ -- $2,385,692 $26,132 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,818,420 29,453,914 (28,886,642) -- 2,385,692 26,626 --
==================================================================================================================================
Subtotal $ 3,636,840 $58,907,828 $(57,773,284) $ -- $4,771,384 $52,758 $ --
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ 6,790,375 $27,408,013 $(29,475,288) $ -- $4,723,100 $ 7,003 $ --
==================================================================================================================================
Total $10,427,215 $86,315,841 $(87,248,572) $ -- $9,494,484 $59,761 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $1,609,832 and sales of $2,346,010, which resulted in net realized gain (loss) of $(318,507).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $2,454.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $2,200 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.
FS-348
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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. During the six months ended April 30, 2005, the average interfund borrowings for the one day the borrowings were outstanding was $5,340,100 with a weighted average interest rate of 2.94% and interest expense of $430.
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. The Fund did not borrow under the facility during the six months ended April 30, 2005.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $3,721,463 were on loan to brokers. The loans were secured by cash collateral of $4,723,100 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $7,003 for securities lending transactions, which are net of rebates.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
October 31, 2008 $ 407,338
---------------------------------------------------------------------------
October 31, 2009 86,724,292
---------------------------------------------------------------------------
October 31, 2010 50,812,218
===========================================================================
Total capital loss carryforward $137,943,848
___________________________________________________________________________
===========================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-349
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, 2005 was $124,041,823 and $152,710,015, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $20,666,997 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,002,162) =============================================================================== Net unrealized appreciation of investment securities $12,664,835 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $165,081,014. |
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 certain 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, 2005 OCTOBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,606,859 $ 15,552,162 3,366,280 $ 31,467,821
----------------------------------------------------------------------------------------------------------------------
Class B 662,305 6,186,393 1,689,471 15,326,444
----------------------------------------------------------------------------------------------------------------------
Class C 320,993 3,010,529 1,055,967 9,613,286
----------------------------------------------------------------------------------------------------------------------
Class R 46,364 447,790 79,652 742,690
----------------------------------------------------------------------------------------------------------------------
Institutional Class(a) -- -- 1,085 10,000
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 103,592 1,007,200 287,382 2,711,609
----------------------------------------------------------------------------------------------------------------------
Class B (107,470) (1,007,200) (296,604) (2,711,609)
======================================================================================================================
Reacquired:
Class A (3,084,661) (30,029,734) (4,869,016) (44,602,423)
----------------------------------------------------------------------------------------------------------------------
Class B (1,558,332) (14,619,334) (2,730,826) (24,426,540)
----------------------------------------------------------------------------------------------------------------------
Class C (625,745) (5,881,914) (1,595,627) (14,297,750)
----------------------------------------------------------------------------------------------------------------------
Class R (25,701) (243,069) (7,765) (66,595)
======================================================================================================================
(2,661,796) $(25,577,177) (3,020,001) $(26,233,067)
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Institutional Class shares commenced sales on April 30, 2004.
FS-350
NOTE 12--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,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.13)(a) (0.11)(a) (0.13)(a) (0.11)(a) (0.12)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.29 2.49 (1.91) (5.69) 4.50
=================================================================================================================================
Total from investment operations 0.13 0.16 2.38 (2.04) (5.80) 4.38
=================================================================================================================================
Net asset value, end of period $ 9.21 $ 9.08 $ 8.92 $ 6.54 $ 8.58 $ 14.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.43% 1.79% 36.39% (23.78)% (40.33)% 43.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $88,060 $99,262 $108,436 $63,463 $94,457 $114,913
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.76%(c) 1.74% 1.90% 1.83% 1.65% 1.63%(d)
=================================================================================================================================
Without fee waivers and/or expense
reimbursements 1.80%(c) 1.76% 1.90% 1.83% 1.65% 1.63%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.24)%(c) (1.36)% (1.42)% (1.49)% (1.06)% (0.76)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$104,530,799.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-351
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-----------------------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.27 2.43 (1.87) (5.62) 4.47
=================================================================================================================================
Total from investment operations 0.10 0.09 2.28 (2.05) (5.80) 4.25
=================================================================================================================================
Net asset value, end of period $ 8.87 $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.14% 1.04% 35.63% (24.26)% (40.70)% 42.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $62,329 $70,421 $81,298 $58,654 $81,905 $103,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.41%(c) 2.39% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Without fee waivers and/or expense
reimbursements 2.45%(c) 2.41% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.89)%(c) (2.01)% (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$72,537,839.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-352
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-----------------------------------------------------------------------------------------
NOVEMBER 1, 1999
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------------------- OCTOBER 31,
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.18)(a) (0.15)(a) (0.18)(a) (0.18)(a) (0.22)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.27 2.43 (1.87) (5.63) 4.48
=================================================================================================================================
Total from investment operations 0.10 0.09 2.28 (2.05) (5.81) 4.26
=================================================================================================================================
Net asset value, end of period $ 8.87 $ 8.77 $ 8.68 $ 6.40 $ 8.45 $ 14.26
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.14% 1.04% 35.63% (24.26)% (40.74)% 42.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $22,079 $24,503 $28,928 $16,404 $23,971 $29,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.41%(c) 2.39% 2.55% 2.48% 2.32% 2.32%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.45%(c) 2.41% 2.55% 2.48% 2.32% 2.32%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.89)%(c) (2.01)% (2.07)% (2.14)% (1.73)% (1.45)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 167% 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
$25,340,541.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS R
--------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------- OCTOBER 31,
2005 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.03 $8.89 $6.54 $ 8.73
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.14)(a) (0.13)(a) (0.05)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 0.28 2.48 (2.14)
======================================================================================================================
Total from investment operations 0.13 0.14 2.35 (2.19)
======================================================================================================================
Net asset value, end of period $ 9.16 $9.03 $8.89 $ 6.54
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 1.44% 1.57% 35.93% (25.09)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,078 $ 877 $ 224 $ 7
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.91%(c) 1.89% 2.05% 1.98%(d)
======================================================================================================================
Without fee waivers and/or expense reimbursements 1.95%(c) 1.91% 2.05% 1.98%(d)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.39)%(c) (1.51)% (1.57)% (1.64)%(d)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(e) 63% 167% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,102,309.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-353
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
APRIL 30, OCTOBER 31,
2005 2004
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.11 $ 9.22
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.04)(a)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 (0.07)
=============================================================================================
Total from investment operations 0.17 (0.11)
=============================================================================================
Net asset value, end of period $ 9.28 $ 9.11
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 1.87% (1.19)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 10
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(c) 1.20%(d)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.05%(c) 1.28%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.49)%(c) (0.82)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 63% 167%
_____________________________________________________________________________________________
=============================================================================================
|
(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 $10,612.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these
FS-354
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-355
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.15%
AEROSPACE & DEFENSE-0.80%
Boeing Co. (The) 275,000 $ 16,368,000
==========================================================================
AIR FREIGHT & LOGISTICS-1.14%
FedEx Corp. 275,000 23,361,250
==========================================================================
APPAREL RETAIL-1.00%
Chico's FAS, Inc.(a) 800,000 20,504,000
==========================================================================
APPLICATION SOFTWARE-1.88%
Amdocs Ltd. (United Kingdom)(a) 1,450,000 38,729,500
==========================================================================
BIOTECHNOLOGY-1.62%
Gilead Sciences, Inc.(a) 900,000 33,390,000
==========================================================================
CASINOS & GAMING-1.00%
Las Vegas Sands Corp.(a)(b) 550,000 20,597,500
==========================================================================
COMMUNICATIONS EQUIPMENT-4.91%
Cisco Systems, Inc.(a) 2,100,000 36,288,000
--------------------------------------------------------------------------
QUALCOMM Inc. 1,300,000 45,357,000
--------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a)(b) 300,000 19,323,000
==========================================================================
100,968,000
==========================================================================
COMPUTER HARDWARE-5.15%
Apple Computer, Inc.(a) 1,200,000 43,272,000
--------------------------------------------------------------------------
Dell Inc.(a) 1,800,000 62,694,000
==========================================================================
105,966,000
==========================================================================
COMPUTER STORAGE & PERIPHERALS-2.71%
EMC Corp.(a) 2,650,000 34,768,000
--------------------------------------------------------------------------
Lexmark International, Inc.-Class A(a) 300,000 20,835,000
==========================================================================
55,603,000
==========================================================================
CONSUMER FINANCE-2.90%
American Express Co. 500,000 26,350,000
--------------------------------------------------------------------------
SLM Corp. 700,000 33,348,000
==========================================================================
59,698,000
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.97%
Alliance Data Systems Corp.(a) 600,000 24,240,000
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 375,000 16,290,000
==========================================================================
40,530,000
==========================================================================
DEPARTMENT STORES-3.60%
J.C. Penney Co., Inc. 700,000 33,187,000
--------------------------------------------------------------------------
Kohl's Corp.(a) 111,400 5,302,640
--------------------------------------------------------------------------
Nordstrom, Inc. 700,000 35,581,000
==========================================================================
74,070,640
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
DISTILLERS & VINTNERS-0.71%
Constellation Brands, Inc.-Class A(a) 275,000 14,495,250
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.04%
Cendant Corp. 1,075,000 $ 21,403,250
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.31%
Cooper Industries, Ltd.-Class A (Bermuda) 275,000 17,506,500
--------------------------------------------------------------------------
Rockwell Automation, Inc. 646,400 29,883,072
==========================================================================
47,389,572
==========================================================================
FOOTWEAR-1.31%
NIKE, Inc.-Class B 350,000 26,883,500
==========================================================================
GENERAL MERCHANDISE STORES-1.13%
Target Corp. 500,000 23,200,000
==========================================================================
HEALTH CARE EQUIPMENT-3.58%
Bard (C.R.), Inc. 300,000 21,351,000
--------------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 300,000 18,435,000
--------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 475,000 16,026,500
--------------------------------------------------------------------------
Waters Corp.(a) 450,000 17,833,500
==========================================================================
73,646,000
==========================================================================
HEALTH CARE FACILITIES-1.56%
HCA Inc. 575,000 32,108,000
==========================================================================
HEALTH CARE SERVICES-1.07%
Caremark Rx, Inc.(a) 550,000 22,027,500
==========================================================================
HEALTH CARE SUPPLIES-1.53%
Alcon, Inc. (Switzerland)(a) 325,000 31,525,000
==========================================================================
HOME IMPROVEMENT RETAIL-0.95%
Home Depot, Inc. (The) 550,000 19,453,500
==========================================================================
HOMEBUILDING-0.82%
D.R. Horton, Inc. 550,000 16,775,000
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.22%
Hilton Hotels Corp. 1,150,000 25,104,500
==========================================================================
HOUSEHOLD PRODUCTS-1.00%
Clorox Co. (The) 325,000 20,572,500
==========================================================================
HOUSEWARES & SPECIALTIES-1.54%
Fortune Brands, Inc. 375,000 31,717,500
==========================================================================
INDUSTRIAL CONGLOMERATES-5.14%
Textron Inc. 300,000 22,605,000
--------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 2,650,000 82,971,500
==========================================================================
105,576,500
==========================================================================
INDUSTRIAL MACHINERY-0.86%
Danaher Corp. 350,000 17,720,500
==========================================================================
|
FS-356
MARKET
SHARES VALUE
--------------------------------------------------------------------------
INTEGRATED OIL & GAS-1.02%
ConocoPhillips 200,000 $ 20,970,000
==========================================================================
INTERNET SOFTWARE & SERVICES-5.72%
Google Inc.-Class A(a)(b) 200,000 44,000,000
--------------------------------------------------------------------------
VeriSign, Inc.(a) 1,150,000 30,429,000
--------------------------------------------------------------------------
Yahoo! Inc.(a) 1,250,000 43,137,500
==========================================================================
117,566,500
==========================================================================
INVESTMENT BANKING & BROKERAGE-4.76%
Goldman Sachs Group, Inc. (The) 500,000 53,395,000
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 250,000 22,930,000
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 400,000 21,572,000
==========================================================================
97,897,000
==========================================================================
IT CONSULTING & OTHER SERVICES-0.95%
Accenture Ltd.-Class A (Bermuda)(a) 900,000 19,530,000
==========================================================================
MANAGED HEALTH CARE-5.60%
Aetna Inc. 750,000 55,027,500
--------------------------------------------------------------------------
UnitedHealth Group Inc. 400,000 37,804,000
--------------------------------------------------------------------------
WellPoint, Inc.(a) 175,000 22,356,250
==========================================================================
115,187,750
==========================================================================
MOVIES & ENTERTAINMENT-1.48%
Walt Disney Co. (The) 1,150,000 30,360,000
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.63%
BJ Services Co. 700,000 34,125,000
--------------------------------------------------------------------------
National-Oilwell Varco Inc.(a) 500,000 19,870,000
==========================================================================
53,995,000
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.50%
Valero Energy Corp. 450,000 30,838,500
==========================================================================
PERSONAL PRODUCTS-2.26%
Gillette Co. (The) 900,000 46,476,000
==========================================================================
PHARMACEUTICALS-5.06%
Johnson & Johnson 850,000 58,335,500
--------------------------------------------------------------------------
Sepracor Inc.(a)(b) 400,000 23,968,000
--------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC-ADR (United
Kingdom) 700,000 21,756,000
==========================================================================
104,059,500
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
RESTAURANTS-1.51%
McDonald's Corp. 500,000 $ 14,655,000
--------------------------------------------------------------------------
Yum! Brands, Inc. 350,000 16,436,000
==========================================================================
31,091,000
==========================================================================
SEMICONDUCTORS-4.77%
Analog Devices, Inc. 1,100,000 37,521,000
--------------------------------------------------------------------------
Microchip Technology Inc. 950,000 27,056,000
--------------------------------------------------------------------------
National Semiconductor Corp. 1,750,000 33,390,000
==========================================================================
97,967,000
==========================================================================
SPECIALIZED FINANCE-1.19%
Chicago Mercantile Exchange Holdings Inc. 125,000 24,440,000
==========================================================================
SPECIALTY CHEMICALS-1.03%
Ecolab Inc. 650,000 21,261,500
==========================================================================
SYSTEMS SOFTWARE-4.22%
McAfee Inc.(a) 248,600 5,198,226
--------------------------------------------------------------------------
Oracle Corp.(a) 3,500,000 40,460,000
--------------------------------------------------------------------------
VERITAS Software Corp.(a) 2,000,000 41,180,000
==========================================================================
86,838,226
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,688,052,756) 2,017,861,938
==========================================================================
MONEY MARKET FUNDS-2.05%
Liquid Assets Portfolio-Institutional
Class(c) 21,046,502 21,046,502
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 21,046,502 21,046,502
==========================================================================
Total Money Market Funds (Cost
$42,093,004) 42,093,004
==========================================================================
TOTAL INVESTMENTS-100.20% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,730,145,760) 2,059,954,942
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-2.86%
STIC Prime Portfolio-Institutional
Class(c)(d) 58,849,525 58,849,525
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $58,849,525) 58,849,525
==========================================================================
TOTAL INVESTMENTS-103.06% (Cost
$1,788,995,285) 2,118,804,467
==========================================================================
OTHER ASSETS LESS LIABILITIES-(3.06%) (62,915,799)
==========================================================================
NET ASSETS-100.00% $2,055,888,668
__________________________________________________________________________
==========================================================================
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, 2005 .
(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 8.
See accompanying notes which are an integral part of the financial statements.
FS-357
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,688,052,756)* $ 2,017,861,938
------------------------------------------------------------
Investments in affiliated money market
funds (cost $100,942,529) 100,942,529
============================================================
Total investments (cost $1,788,995,285) 2,118,804,467
============================================================
Receivables for:
Investments sold 21,581,790
------------------------------------------------------------
Fund shares sold 584,850
------------------------------------------------------------
Dividends 968,339
------------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 211,894
------------------------------------------------------------
Other assets 128,376
============================================================
Total assets 2,142,279,716
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 18,939,872
------------------------------------------------------------
Fund shares reacquired 5,562,588
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 497,176
------------------------------------------------------------
Collateral upon return of securities
loaned 58,849,525
------------------------------------------------------------
Accrued distribution fees 740,478
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,782
------------------------------------------------------------
Accrued transfer agent fees 1,462,644
------------------------------------------------------------
Accrued operating expenses 333,983
============================================================
Total liabilities 86,391,048
============================================================
Net assets applicable to shares outstanding $ 2,055,888,668
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 4,883,168,381
------------------------------------------------------------
Undistributed net investment income (loss) (5,875,139)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option
contracts (3,151,213,756)
------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 329,809,182
============================================================
$ 2,055,888,668
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 1,618,532,928
____________________________________________________________
============================================================
Class B $ 366,723,117
____________________________________________________________
============================================================
Class C $ 67,313,497
____________________________________________________________
============================================================
Class R $ 1,612,837
____________________________________________________________
============================================================
Institutional Class $ 1,706,289
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 133,066,083
____________________________________________________________
============================================================
Class B 32,959,977
____________________________________________________________
============================================================
Class C 6,044,504
____________________________________________________________
============================================================
Class R 133,457
____________________________________________________________
============================================================
Institutional Class 132,105
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 12.16
------------------------------------------------------------
Offering price per share:
(Net asset value of $12.16 divided by
94.50%) $ 12.87
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.14
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 12.09
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 12.92
____________________________________________________________
============================================================
|
* At April 30, 2005, securities with an aggregate market value of $57,096,353 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-358
STATEMENT OF OPERATIONS
For the six months ended April 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $357) $ 11,963,824
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $55,923 after rebates of
$415,906) 166,381
===========================================================================
Total investment income 12,130,205
===========================================================================
EXPENSES:
Advisory fees 7,408,645
---------------------------------------------------------------------------
Administrative services fees 243,033
---------------------------------------------------------------------------
Custodian fees 50,666
---------------------------------------------------------------------------
Distribution fees:
Class A 2,688,134
---------------------------------------------------------------------------
Class B 2,089,262
---------------------------------------------------------------------------
Class C 380,433
---------------------------------------------------------------------------
Class R 3,967
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 4,308,306
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 913
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 50,778
---------------------------------------------------------------------------
Other 462,940
===========================================================================
Total expenses 17,687,077
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (166,118)
===========================================================================
Net expenses 17,520,959
===========================================================================
Net investment income (loss) (5,390,754)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities (includes gain (loss) from
securities sold to affiliates of $(750,898)) 186,981,968
---------------------------------------------------------------------------
Option contracts written 1,212,461
===========================================================================
188,194,429
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (141,841,247)
---------------------------------------------------------------------------
Option contracts written (23,540)
===========================================================================
(141,864,787)
===========================================================================
Net gain from investment securities and option contracts 46,329,642
===========================================================================
Net increase in net assets resulting from operations $ 40,938,888
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-359
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2005 and the year ended October 31, 2004
(Unaudited)
APRIL 30, OCTOBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (5,390,754) $ (21,767,576)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 188,194,429 236,255,314
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (141,864,787) (114,821,148)
==============================================================================================
Net increase in net assets resulting from operations 40,938,888 99,666,590
==============================================================================================
Share transactions-net:
Class A (259,345,924) (395,056,301)
----------------------------------------------------------------------------------------------
Class B (74,620,782) (138,803,397)
----------------------------------------------------------------------------------------------
Class C (12,197,097) (15,793,039)
----------------------------------------------------------------------------------------------
Class R 156,669 1,126,374
----------------------------------------------------------------------------------------------
Institutional Class (86,603) (547,138)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (346,093,737) (549,073,501)
==============================================================================================
Net increase (decrease) in net assets (305,154,849) (449,406,911)
==============================================================================================
NET ASSETS:
Beginning of period 2,361,043,517 2,810,450,428
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(5,875,139) and $(484,385),
respectively) $2,055,888,668 $2,361,043,517
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-360
NOTES TO FINANCIAL STATEMENTS
April 30, 2005
(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 thirteen 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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, which may be considered fair valued, 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.
Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-361
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 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 and other shareholder recordkeeping 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.
F. 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.
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 paid an advisory fee based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $30 million 1.00% ---------------------------------------------------------------------- Next $320 million 0.75% ---------------------------------------------------------------------- Over $350 million 0.625% ______________________________________________________________________ ====================================================================== |
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $250 million 0.695% ---------------------------------------------------------------------- Next $250 million 0.67% ---------------------------------------------------------------------- Next $500 million 0.645% ---------------------------------------------------------------------- Next $1.5 billion 0.62% ---------------------------------------------------------------------- Next $2.5 billion 0.595% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
FS-362
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.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended April 30, 2005, AIM waived fees of $62,848.
For the six months ended April 30, 2005, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $75,427 of expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement, for the six months ended April 30, 2005, AIM was paid $243,033.
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 and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended April 30, 2005, the Fund paid AISI $4,308,306 for Class A, Class B, Class C and Class R share classes and $913 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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 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, 2005, the Class A, Class B, Class C and Class R shares paid $2,688,134, $2,089,262, $380,433 and $3,967, 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, 2005, ADI advised the Fund that it retained $99,040 in front-end sales commissions from the sale of Class A shares and $1,177, $86,886, $3,471 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 ADI.
FS-363
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended April 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME GAIN (LOSS)
-------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 6,546,085 $182,155,234 $(167,654,817) $ -- $21,046,502 $ 54,859 $ --
-------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 6,546,085 182,155,234 (167,654,817) -- 21,046,502 55,599 --
===============================================================================================================================
Subtotal $13,092,170 $364,310,468 $(335,309,634) $ -- $42,093,004 $110,458 $ --
===============================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 04/30/05 INCOME* GAIN (LOSS)
-------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $40,952,850 $234,408,345 $(216,511,670) $ -- $ 58,849,525 $ 55,923 $ --
===============================================================================================================================
Total $54,045,020 $598,718,813 $(551,821,304) $ -- $100,942,529 $166,381 $ --
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
* Net of rebates.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended April 30, 2005, the Fund engaged in securities purchases of $33,084,071 and sales of $3,815,066, which resulted in net realized gain (loss) of $(750,898).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended April 30, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $27,843.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended April 30, 2005, the Fund paid legal fees of $5,996 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.
FS-364
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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.
During the six months ended April 30, 2005, the average interfund borrowings for the 17 days the borrowings were outstanding was $7,503,571 with a weighted average interest rate of 2.57% and interest expense of $8,980.
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. The Fund did not borrow under the facility during the six months ended April 30, 2005.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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, 2005, securities with an aggregate value of $57,096,353 were on loan to brokers. The loans were secured by cash collateral of $58,849,525 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2005, the Fund received dividends on cash collateral of $55,923 for securities lending transactions, which are net of rebates.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Beginning of period 3,000 $ 421,040
-------------------------------------------------------------------------------------
Written 1,477 1,110,403
-------------------------------------------------------------------------------------
Closed (477) (811,191)
-------------------------------------------------------------------------------------
Exercised (924) (132,776)
-------------------------------------------------------------------------------------
Expired (3,076) (587,476)
=====================================================================================
End of period -- $ --
_____________________________________________________________________________________
=====================================================================================
|
FS-365
NOTE 10--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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
------------------------------------------------------------------------------
October 31, 2009 $2,358,363,619
------------------------------------------------------------------------------
October 31, 2010 763,027,747
------------------------------------------------------------------------------
October 31, 2011 196,611,268
==============================================================================
Total capital loss carryforward $3,318,002,634
______________________________________________________________________________
==============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--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, 2005 was $1,085,963,124 and $1,431,732,259, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $363,179,923 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (43,484,014) ============================================================================== Net unrealized appreciation of investment securities $319,695,909 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,799,108,558. |
FS-366
NOTE 12--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 certain 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(a)
------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,118,284 $ 26,832,587 6,161,430 $ 74,474,713
------------------------------------------------------------------------------------------------------------------------------
Class B 1,054,165 12,243,873 2,836,554 31,535,843
------------------------------------------------------------------------------------------------------------------------------
Class C 349,994 4,055,643 1,109,204 12,390,482
------------------------------------------------------------------------------------------------------------------------------
Class R 25,422 321,355 139,257 1,669,192
------------------------------------------------------------------------------------------------------------------------------
Institutional Class 10,462 140,178 13,498 172,948
==============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,649,811 20,864,289 4,502,782 54,704,748
------------------------------------------------------------------------------------------------------------------------------
Class B (1,800,544) (20,864,289) (4,888,349) (54,704,748)
==============================================================================================================================
Reacquired:
Class A (24,188,075) (307,042,800) (43,655,916) (524,235,762)
------------------------------------------------------------------------------------------------------------------------------
Class B (5,680,482) (66,000,366) (10,449,964) (115,634,492)
------------------------------------------------------------------------------------------------------------------------------
Class C (1,398,272) (16,252,740) (2,535,106) (28,183,521)
------------------------------------------------------------------------------------------------------------------------------
Class R (13,100) (164,686) (45,049) (542,818)
------------------------------------------------------------------------------------------------------------------------------
Institutional Class (16,846) (226,781) (56,324) (720,086)
==============================================================================================================================
(27,889,181) $(346,093,737) (46,867,983) $(549,073,501)
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 15% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund share. The Fund, AIM, and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
NOTE 13--SIGNIFICANT EVENT
The Board of Trustees of the Trust ("Buyer") unanimously approved, on March 22, 2005, an Agreement and Plan of Reorganization (the "Agreement") pursuant to which the Fund ("Buying Fund") a series of Buyer, would acquire all of the assets of AIM Dent Demographic Trends Fund ("Selling Fund"), a series of AIM Equity Funds ("the Reorganization"). Upon closing of the transaction, shareholders of Selling Fund will receive a corresponding class of shares of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations.
The Agreement requires approval of Selling Fund shareholders. The Fund currently intends to submit the Agreement to the shareholders for their consideration at a meeting to be held on or around June 28, 2005. Additional information regarding the Agreement will be included in proxy materials to be mailed to shareholders for consideration. If the Agreement is approved by the shareholders of Selling Fund and certain conditions required by the Agreement are satisfied, the transaction is expected to become effective shortly thereafter.
FS-367
NOTE 14--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, -------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.08)(b) (0.07) (0.07)(b) (0.10) (0.14)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.16 0.51 2.19 (3.11) (11.87) 3.18
=================================================================================================================================
Total from investment operations 0.14 0.43 2.12 (3.18) (11.97) 3.04
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 12.16 $ 12.02 $ 11.59 $ 9.47 $ 12.65 $ 28.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.17% 3.71% 22.39% (25.14)% (47.38)% 10.61%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,618,533 $1,844,930 $2,160,823 $2,104,660 $4,001,552 $8,948,781
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.38%(d) 1.39% 1.47% 1.33% 1.21% 1.03%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.39%(d) 1.40% 1.47% 1.33% 1.22% 1.07%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.32)%(a)(d) (0.67)% (0.68)% (0.64)% (0.56)% (0.45)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.04) and (0.54)% respectively.
(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
$1,806,941,166.
(e) Not annualized for periods less than one year.
FS-368
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.15)(b) (0.14) (0.15)(b) (0.21) (0.36)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.16 0.47 2.03 (2.89) (11.21) 3.08
=================================================================================================================================
Total from investment
operations 0.10 0.32 1.89 (3.04) (11.42) 2.72
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 11.13 $ 11.03 $ 10.71 $ 8.82 $ 11.86 $ 26.82
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.91% 2.99% 21.43% (25.63)% (47.75)% 9.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $366,723 $434,572 $555,779 $533,224 $922,476 $1,927,514
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.08%(d) 2.09% 2.17% 2.04% 1.92% 1.78%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 2.09%(d) 2.10% 2.17% 2.04% 1.93% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (1.02)%(a)(d) (1.37)% (1.38)% (1.34)% (1.27)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (1.24)% respectively.
(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
$421,315,256.
(e) Not annualized for periods less than one year.
CLASS C
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.15)(b) (0.14) (0.15)(b) (0.21) (0.36)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.16 0.47 2.03 (2.89) (11.23) 3.10
=================================================================================================================================
Total from investment operations 0.10 0.32 1.89 (3.04) (11.44) 2.74
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $ 11.14 $ 11.04 $ 10.72 $ 8.83 $ 11.87 $ 26.85
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 0.91% 2.99% 21.40% (25.61)% (47.77)% 9.83%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $67,313 $78,330 $91,325 $86,455 $150,604 $301,590
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.08%(d) 2.09% 2.17% 2.04% 1.92% 1.78%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.09%(d) 2.10% 2.17% 2.04% 1.93% 1.82%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.02)%(a)(d) (1.37)% (1.38)% (1.34)% (1.27)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (1.24)% respectively.
(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
$76,717,203.
(e) Not annualized for periods less than one year.
FS-369
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
----------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 3, 2002
ENDED OCTOBER 31, (DATE SALES
APRIL 30, ------------------- COMMENCED) TO
2005 2004 2003 OCTOBER 31, 2002
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.95 $11.56 $ 9.47 $ 11.36
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.10)(b) (0.06) (0.03)(b)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.17 0.49 2.15 (1.86)
========================================================================================================================
Total from investment operations 0.14 0.39 2.09 (1.89)
========================================================================================================================
Net asset value, end of period $12.09 $11.95 $11.56 $ 9.47
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 1.17% 3.37% 22.07% (16.64)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,613 $1,448 $ 311 $ 76
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.58%(d) 1.59% 1.67% 1.53%(e)
========================================================================================================================
Without fee waivers and/or expense reimbursements 1.59%(d) 1.60% 1.67% 1.53%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.52)%(a)(d) (0.87)% (0.88)% (0.84)%(e)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f) 48% 74% 111% 217%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.05) and (0.74)% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,600,090.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-370
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.01)(b) 0.00 (0.01)(b) (0.01) (0.06)(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.17 0.54 2.29 (3.24) (12.29) 3.29
=================================================================================================================================
Total from investment operations 0.19 0.53 2.29 (3.25) (12.30) 3.23
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (3.54) (3.19)
=================================================================================================================================
Net asset value, end of period $12.92 $12.73 $12.20 $ 9.91 $ 13.16 $ 29.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.49% 4.34% 23.11% (24.70)% (47.11)% 11.07%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,706 $1,763 $2,213 $ 1,883 $ 7,667 $18,634
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.81%(d) 0.84% 0.78% 0.82% 0.69% 0.64%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.82%(d) 0.85% 0.78% 0.82% 0.70% 0.68%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.25%(a)(d) (0.12)% 0.01% (0.12)% (0.04)% (0.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 74% 111% 217% 240% 145%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income per share and the ratio of net investment income to average net
assets excluding the special dividend are $0.00 and 0.03% respectively.
(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. Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,839,891.
(e) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including, among others, the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and/or investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG.
As part of the settlements, IFG agreed to pay a total of $325 million (including $110 million in civil penalties). Additionally, AIM and ADI agreed to pay a total of $50 million (including $30 million in civil penalties). These settlement funds will be made available for distribution to the shareholders of the applicable AIM Funds that were harmed by market timing activity, and may (or may not) increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading. The settlement funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these settlement funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to
FS-371
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in these proceedings. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related issues in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- 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;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-372
PART C
OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Amended and Restated Agreement and Declaration of Trust of
Registrant, dated May 15, 2002.(18)
- (b) Amendment No. 1, dated June 11, 2002, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(19)
- (c) Amendment No. 2, dated February 6, 2003, to the Amended
and Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002, as amended June 11, 2002.(21)
- (d) Amendment No. 3, dated May 14, 2003, to the Amended and
Restated Agreement and Declaration of Trust, dated May 15,
2002.(23)
- (e) Amendment No. 4, dated June 11, 2003, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(24)
- (f) Amendment No. 5, dated December 10, 2003, to the Amended
and Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(24)
- (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)
- (h) Amendment No. 7, dated December 2, 2004, to the Amended
and Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002. (27)
- (i) Amendment No. 8, dated February 25, 2005, to the Amended
and Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(29)
- (j) Amendment No. 9, dated March 15, 2005, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(30)
- (k) Amendment No. 10, dated August 4, 2005, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(31)
b (1) - (a) Amended and Restated By-Laws of Registrant, adopted
effective May 15, 2002.(18)
- (b) First Amendment adopted effective November 6, 2003, to the
Amended and Restated By-Laws of Registrant, adopted effective
May 15, 2002.(25)
- (c) Second Amendment adopted effective September 15, 2004, to
the Amended and Restated By-Laws of Registrant, adopted
effective May 15, 2002.(26)
- (d) Third Amendment adopted effective June 30, 2005, to the
Amended and Restated By-Laws of Registrant, adopted effective
May 15, 2002.(31)
|
c - Articles II, VI, VII, VIII and IX of the Amended and Restated
Agreement Declaration of Trust, as amended, and Articles IV,
V and VI of the Amended and Restated By-Laws define rights of
holders of shares.
d (1) - (a) Master Investment Advisory Agreement, dated June 21, 2000,
between Registrant and A I M Advisors, Inc.(13)
- (b) Amendment No. 1, dated December 28, 2001, to Master
Investment Advisory Agreement, dated June 21, 2000, between
Registrant and A I M Advisors, Inc.(17)
- (c) Amendment No. 2, dated August 29, 2002, to Master
Investment Advisory Agreement, dated June 21, 2000, between
Registrant and A I M Advisors, Inc.(21)
- (d) Amendment No. 3, dated May 2, 2003, to Master Investment
Advisory Agreement, dated June 21, 2000, between Registrant
and A I M Advisors, Inc.(23)
- (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)
- (g) Amendment No. 6, dated March 15, 2005, to Master
Investment Advisory Agreement, dated June 21, 2000, between
Registrant and A I M Advisors, Inc.(31)
- (h) Amendment No. 7, dated July 18, 2005, to Master Investment
Advisory Agreement, dated June 21, 2000, between Registrant
and A I M Advisors, Inc.(31)
(2) - Master Sub-Advisory Agreement, dated June 21, 2000, between
A I M Advisors, Inc. and A I M Capital Management, 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)
- (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.(27)
- (l) Amendment No. 11 to the Amended and Restated Master
Distribution Agreement, dated as of October 15, 2004, between
Registrant (all classes of shares except Class B Shares) and A
I M Distributors, Inc.(27)
- (m) Amendment No. 12 to the Amended and Restated Master
Distribution Agreement, dated as of November 30, 2004, between
Registrant (all classes of shares except Class B Shares) and A
I M Distributors, Inc.(27)
- (n) Amendment No. 13 to the Amended and Restated Master
Distribution Agreement, dated as of December 30, 2004, between
Registrant (all classes of shares except Class B Shares) and A
I M Distributors, Inc.(28)
- (o) Amendment No. 14 to the Amended and Restated Master
Distribution Agreement, dated as of February 23, 2005, between
Registrant (all classes of shares except Class B Shares) and A
I M Distributors, Inc.(29)
- (p) Amendment No. 15 to the Amended and Restated Master
Distribution Agreement, dated March 15, 2005, between
Registrant (all classes of shares except Class B Shares) and A
I M Distributors, Inc.(29)
- (q) Amendment No. 16 to the Amended and Restated Master
Distribution Agreement dated April 25, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.(31)
- (r) Amendment No. 17 to the Amended and Restated Master
Distribution Agreement dated July 13, 2005, between Registrant
(all classes of shares except Class B shares) and A I M
Distributors, Inc.(31)
- (s) Amendment No. 18 to the Amended and Restated Master
Distribution Agreement dated July 18, 2005, between Registrant
(all classes of shares except Class B shares) and A I M
Distributors, Inc.(31)
|
- (t) Form of Amendment No. 19 to the Amended and Restated
Master Distribution Agreement dated October 22, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.(31)
- (u) Form of Amendment No. 20 to the Amended and Restated
Master Distribution Agreement dated October 25, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.(31)
(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)
- (l) Amendment No. 11 to the Amended and Restated Master
Distribution Agreement, dated as of October 15, 2004, between
Registrant (Class B Shares) and A I M Distributors, Inc.(27)
- (m) Amendment No. 12 to the Amended and Restated Master
Distribution Agreement, dated as of December 30, 2004, between
Registrant (Class B Shares) and A I M Distributors, Inc.(28)
- (n) Amendment No. 13 to the Amended and Restated Master
Distribution Agreement, dated as of March 15, 2005, between
Registrant (Class B shares) and A I M Distributors, Inc.(31)
- (o) Amendment No. 14 to the Amended and Restated Master
Distribution Agreement, dated as of April 29, 2005, between
Registrant (Class B shares) and A I M Distributors, Inc.(31)
- (p) Amendment No. 15 to the Amended and Restated Master
Distribution Agreement, dated July 18, 2005, between
Registrant (Class B shares) and A I M Distributors, Inc.(31)
(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) - Form of 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)
- (e) Amendment, dated September 8, 2004, to the Custodian
Contract dated May 1, 2002 between Registrant and State Street
Bank and Trust Company. (27)
|
(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)
(3) - (a) Amended and Restated Master Administrative Services
Agreement, dated July 1, 2004, between Registrant and A I M
Advisors, Inc.(27)
- (b) Amendment No. 1 dated September 15, 2004, to the Amended
and Restated Master Administrative Services Agreement dated
July 1, 2004, between Registrant and A I M Advisors, Inc.(27)
- (c) Amendment No. 2 dated December 2, 2004, to the Amended and
Restated Master Administrative Services Agreement dated July
1, 2004, between Registrant and A I M Advisors, Inc.(27)
- (d) Amendment No. 3 dated March 15, 2005, to the Amended and
Restated Master Administrative Services Agreement dated July
1, 2004, between Registrant and A I M Advisors, Inc.(31)
- (e) Amendment No. 4 dated July 18, 2005, to the Amended and
Restated Master Administrative Services Agreement dated July
1, 2004, between Registrant and A I M Advisors, Inc.(31)
(4) - Memorandum of Agreement, regarding securities lending, dated
October 29, 2003, between Registrant, on behalf of all Funds,
and A I M Advisors, Inc.(26)
|
(5) - Memorandum of Agreement, dated July 1, 2005, between
Registrant, on behalf of AIM Diversified Dividend Fund, AIM
Large Cap Basic Value Fund, AIM Large Cap Growth Fund, and A I
M Advisors, Inc.(28)
(6) - Memorandum of Agreement, dated May 5, 2005, between
Registrant, on behalf of each Fund, and A I M Advisors, Inc.
(31)
(7) - Second Amended and Restated Interfund Loan Agreement, dated
April 30, 2004, between Registrant and A I M Advisors,
Inc.(28)
(8) - 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.(31)
j (1) - Consent of Ernst & Young LLP.(31)
(2) - Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Core Stock Fund.(31)
(3) - Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Dent Demographics Fund.(31)
(4) - Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Emerging Growth Fund.(31)
(5) - Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Libra Fund.(31)
(6) - Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Mid Cap Stock Fund.(31)
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 Large Cap Basic Value Fund, dated June 29, 1999.(9)
(3) - Agreement concerning initial capitalization of Registrant's
AIM Mid Cap Growth Fund, dated November 1, 1999.(10)
(4) - 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)
|
- (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)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(27)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(27)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(28)
- (l) Amendment No. 11, dated January 1, 2005, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(28)
- (m) Amendment No. 12, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.(31)
- (n) Amendment No. 13, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.(31)
- (o) Amendment No. 14, dated July 1, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.(31)
|
- (p) Amendment No. 15, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.(31)
(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)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(27)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(27)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(28)
- (l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.(31)
|
- (m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.(31)
- (n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.(31)
(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)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(27)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(27)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(28)
|
- (l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(31)
- (m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(31)
- (n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(31)
(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)
- (f) Amendment No. 5, dated September 14, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class R Shares) and A I M Distributors, Inc.(27)
- (g) Amendment No. 6, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class R Shares) and A I M Distributors, Inc.(27)
- (h) Amendment No. 7, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class R
Shares) and A I M Distributors, Inc.(31)
- (i) Amendment No. 8, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class R
Shares) and A I M Distribution, Inc.(31)
|
(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)
- (b) Amendment No. 1, dated October 15, 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.(27)
- (c) Amendment No. 2, dated November 30, 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.(27)
- (d) Amendment No. 3, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan (Compensation) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004.(31)
- (e) Amendment No. 4, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Compensation) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004.(31)
(6) - (a) Amended and Restated Master Distribution Plan
(Reimbursement) between Registrant (Investor Class Shares) and
A I M Distributors, Inc., effective July 1, 2004.(26)
- (b) Amendment No. 1, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004.(27)
- (c) Amendment No. 2, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004.(29)
- (d) Amendment No. 3, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004.(31)
(7) - Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Class A Shares).(31)
(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 (1) - Seventh Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R) effective December 12, 2001 as amended and
restated June 30, 2005.(31)
(2) - Eighth Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R) effective December 12, 2001 as amended and
restated August 4, 2005.(31)
o - Reserved.
p (1) - The A I M Management Group Code of Ethics, adopted May 1,
1981, as last approved December 2, 2004 to be effective
January 1, 2005, relating to A I M Management Group Inc. and A
I M Advisors, Inc. and its wholly owned and indirect
subsidiaries.(28)
(2) - AIM Funds Code of Ethics of the Registrant, effective
September 23, 2000.(14)
q - Powers of Attorney for Messrs. Baker, Bayley, Bunch, Crockett,
Dowden, Dunn, Fields, Frischling, Graham, Lewis, Pennock, and
Williamson and Drs. Mathai-Davis and Soll and Miss.
Quigley.(27)
|
(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) Incorporated herein by reference to PEA No. 80, filed on September 29, 2004.
(27) Incorporated herein by reference to PEA No. 81, filed on December 23, 2004.
(28) Incorporated herein by reference to PEA No. 82, filed on February 25, 2005.
(29) Incorporated herein by reference to PEA No. 83, filed on March 1, 2005.
(30) Incorporated herein by reference to PEA No. 84, filed on March 30, 2005.
(31) Filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control With the Fund
None.
Item 25. Indemnification
Indemnification provisions for officers, directors, and employees of
the Registrant are set forth in Article VIII of the Registrant's
Agreement and Declaration of Trust and Article VIII of its Bylaws,
and are hereby incorporated by reference. See Item 23(a) and (b)
above. Under the Agreement and Declaration of Trust dated July 29,
2003, (i) Trustees or officers, when acting in such capacity, shall
not be personally liable for any act, omission or obligation of the
Registrant or any Trustee or officer except by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office with the Trust;
(ii) every Trustee, officer, employee or agent of the Registrant
shall be indemnified to the fullest extent permitted under the
Delaware Statutory Trust act, the Registrant's Bylaws and other
applicable law; (iii) in case any shareholder of former shareholder
of the Registrant shall be held to be personally liable solely by
reason of his being or having been a shareholder of the Registrant
or any portfolio or class and not because of his acts or omissions
or for some other reason, the shareholder or former shareholder (or
his heirs, executors, administrators or other legal representatives,
or, in the case of a corporation or other entity, its corporate or
general successor) shall be entitled, out of the assets belonging
to the applicable portfolio (or allocable to the applicable class),
to be held harmless from the indemnified against all loss and
expense arising from such liability in accordance with the Bylaws
and applicable law. [The Registrant, on behalf of the affected
portfolio (or class), shall upon request by the shareholder, assume
the defense of any such claim made against the shareholder for any
act or obligation of that portfolio (or class). The Registrant,
A I M Advisors, Inc. ("AIM") and other investment companies managed
by AIM, their respective officers, trustees, directors and employees
are insured under a joint Mutual Fund and Investment Advisory
Professional and Directors and Officers Liability Policy also
maintains liability insurance policies covering its directors and
officers.]
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 and certain other domestic insurers, with limits up to $60,000,000 (plus an additional $20,000,000 limit that 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 26. 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. 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 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter, also acts as a principal underwriter to the following investment companies:
AIM 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 its Investor Class
Shares)
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
James E. Stueve Executive Vice President None
Michael A. Bredlau Senior Vice President None
Kevin M. Carome Senior Vice President Senior Vice President,
Chief Legal Officer and
Secretary
Glenda A. Dayton Senior Vice President None
Lawrence E. Manierre 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
William J. Wendel Senior Vice President None
Gary K. Wendler Senior Vice President None
Scott B. Widder Senior Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Rebecca Starling-Klatt Chief Compliance Officer and Assistant None
Vice President
Kathleen J. Pflueger Secretary Assistant Secretary
Lance Rejsek Anti-Money Laundering Compliance Officer Anti-Money Laundering
Compliance Officer
|
(c) None.
Item 28. Location of Accounts and Records
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, will maintain physical possession of each such account, book or other document of the Registrant at its principal executive offices, except for those maintained by the Registrant's Custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, and the Registrant's Transfer Agent and Dividend Paying Agent, AIM Investment Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739.
Item 29. Management Services
None.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 23rd day of August, 2005 .
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 Trustee & President August 23, 2005
---------------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bob R. Baker* Trustee August 23, 2005
-----------------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee August 23, 2005
-----------------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee August 23, 2005
-----------------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Chair & Trustee August 23, 2005
-----------------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee August 23, 2005
-----------------------------------
(Albert R. Dowden)
/s/ Edward K. Dunn, Jr.* Trustee August 23, 2005
-----------------------------------
(Edward K. Dunn, Jr.)
/s/ Jack M. Fields* Trustee August 23, 2005
-----------------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee August 23, 2005
-----------------------------------
(Carl Frischling)
/s/ Gerald J. Lewis* Trustee August 23, 2005
-----------------------------------
(Gerald J. Lewis)
/s/ Prema Mathai-Davis* Trustee August 23, 2005
-----------------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee August 23, 2005
-----------------------------------
(Lewis F. Pennock)
/s/ Ruth H. Quigley* Trustee August 23, 2005
-----------------------------------
(Ruth H. Quigley)
|
/s/ Larry Soll* Trustee August 23, 2005
-----------------------------------
(Larry Soll)
/s/ Mark H. Williamson* Trustee & August 23, 2005
----------------------------------- Executive Vice President
(Mark H. Williamson)
/s/SIDNEY M. DILGREN Vice President & Treasurer August 23, 2005
----------------------------------- (Principal Financial and
(Sidney M. Dilgren) Accounting Officer)
*By /s/ROBERT H. GRAHAM
----------------------------------
Robert H. Graham
Attorney-in-Fact
|
Robert H. Graham, pursuant to powers of attorney dated November 16, 2004.
INDEX
Exhibit Number Description
-------------- --------------------------------------------------------------
a(1)(k) Amendment No. 10, dated August 4, 2005, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002
b(1)(d) Third Amendment adopted effective June 30, 2005, to the
Amended and Restated By-Laws of Registrant, adopted effective
May 15, 2002
d(1)(g) Amendment No. 6, dated March 15, 2005, to Master Investment
Advisory Agreement, dated June 21, 2000, between Registrant
and A I M Advisors, Inc.
d(1)(h) Amendment No. 7, dated July 18, 2005, to Master Investment
Advisory Agreement, dated June 21, 2000, between Registrant
and A I M Advisors, Inc.
e(1)(q) Amendment No. 16 to the Amended and Restated Master
Distribution Agreement dated April 29, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.
e(1)(r) Amendment No. 17 to the Amended and Restated Master
Distribution Agreement dated July 13, 2005, between Registrant
(all classes of shares except Class B shares) and A I M
Distributors, Inc.
e(1)(s) Amendment No. 18 to the Amended and Restated Master
Distribution Agreement dated July 18, 2005, between Registrant
(all classes of shares except Class B shares) and A I M
Distributors, Inc.
e(1)(t) Form of Amendment No. 19 to the Amended and Restated Master
Distribution Agreement dated October 22, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.
e(1)(u) Form of Amendment No. 20 to the Amended and Restated Master
Distribution Agreement dated October 25, 2005, between
Registrant (all classes of shares except Class B shares) and A
I M Distributors, Inc.
e(2)(n) Amendment No. 13 to the Amended and Restated Master
Distribution Agreement, dated as of March 15, 2005, between
Registrant (Class B Shares) and A I M Distributors, Inc.
e(2)(o) Amendment No. 14 to the Amended and Restated Master
Distribution Agreement, dated as of April 29, 2005, between
Registrant (Class B Shares) and A I M Distributors, Inc.
e(2)(p) Amendment No. 15 to the Amended and Restated Master
Distribution Agreement, dated July 18, 2005, between
Registrant (Class B Shares) and A I M Distributors, Inc.
h(3)(d) Amendment No. 3 dated March 15, 2005, to the Amended and
Restated Master Administrative Services Agreement dated July
1, 2004, between Registrant and A I M Advisors, Inc.
h(3)(e) Amendment No. 4 dated July 18, 2005, to the Amended and
Restated Master Administrative Services Agreement dated July
1, 2004, between Registrant and A I M Advisors, Inc.
|
h(5) Memorandum of Agreement, dated July 1, 2005, between
Registrant, on behalf of AIM Diversified Dividend Fund, AIM
Large Cap Basic Value Fund and AIM Large Cap Growth Fund, and
A I M Advisors, Inc.
h(6) Memorandum of Agreement, dated May 5, 2005, between
Registrant, on behalf of each Fund, and A I M Advisors, Inc.
i Opinion and Consent of Ballard Spahr Andrews & Ingersoll LLP
j(1) Consent of Ernst & Young LLP
j(2) Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Core Stock Fund
j(3) Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Dent Demographics Fund
j(4) Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Emerging Growth Fund
j(5) Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Libra Fund
j(6) Opinion of Ballard Spahr Andrews & Ingersoll LLP concerning
federal income tax consequences of the reorganization of AIM
Mid Cap Stock Fund
m(1)(m) Amendment No. 12, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.
m(1)(n) Amendment No. 13, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.
|
m(1)(o) Amendment No. 14, dated July 1, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.
m(1)(p) Amendment No. 15, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan, between Registrant (Class A
Shares) and A I M Distributors, Inc.
m(2)(l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.
m(2)(m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.
m(2)(n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.
m(3)(l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.
m(3)(m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.
m(3)(n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.
m(4)(h) Amendment No. 7, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class R
Shares) and A I M Distributors, Inc.
m(4)(i) Amendment No. 8, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class R
Shares) and A I M Distributors, Inc.
m(5)(d) Amendment No. 3, dated April 29, 2005, 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(5)(e) Amendment No. 4, dated July 18, 2005, 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)(d) Amendment No. 3, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004
m(7) Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Class A Shares)
n(1) Seventh Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R) effective December 12, 2001 as amended and
restated June 30, 2005
n(2) Eighth Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R) effective December 12, 2001 as amended and
restated August 4, 2005
|
AMENDMENT NO. 10
TO AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST OF
AIM EQUITY FUNDS
This Amendment No. 10 to the Amended and Restated Agreement and Declaration of Trust of AIM Equity Funds (this "Amendment") amends, effective August 4, 2005, 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.
WHEREAS, the Trust desires to add Class R Shares to AIM Diversified Dividend Fund;
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 August 4, 2005.
By: /s/ ROBERT H. GRAHAM -------------------------------- Name: Robert H. Graham Title: President |
EXHIBIT 1 TO AMENDMENT NO. 10
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 Diversified Dividend Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares
|
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
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 Weingarten Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares"
|
THIRD AMENDMENT TO
AMENDED AND RESTATED BYLAWS
OF AIM EQUITY FUNDS
Adopted effective June 30, 2005
The Amended and Restated Bylaws of AIM Equity Funds (the "Trust"), adopted effective May 15, 2002, (the "Bylaws"), are hereby amended as follows:
1. Article VIII is hereby amended and restated to read in its entirety as follows:
"ARTICLE VIII
INDEMNIFICATION AND ADVANCEMENT
Section 1. Indemnification. (a) To the maximum extent permitted by law, the Trust (or applicable Portfolio) shall indemnify any person who was or is a party or is threatened to be made a party to, or is involved as a witness in, any proceeding (other than a proceeding by or in the right of the Trust or a Portfolio) by reason of the fact that such person is or was a Covered Person, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding.
(b) To the maximum extent permitted by law, the Trust (or applicable Portfolio) shall indemnify any person who was or is a party or is threatened to be made a party to, or is involved as a witness in, any proceeding by or in the right of the Trust (or such Portfolio) to procure a judgment in its favor by reason of the fact that such person is or was a Covered Person, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of such proceeding.
(c) Notwithstanding any provision to the contrary contained herein, no Covered Person shall be indemnified for any expenses, judgments, fines, amounts paid in settlement, or other liability or loss arising by reason of disabling conduct. The termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the person engaged in disabling conduct.
Section 2. Advance Payment of Indemnification Expenses. To the maximum extent permitted by law, the Trust or applicable Portfolio shall advance to any person who was or is a party or is threatened to be made a party to, or is involved as a witness in, any proceeding by reason of the fact that such person is or was a Trustee or officer of the Trust the expenses actually and reasonably incurred by such person in connection with the defense of such proceeding in advance of its final disposition. To the maximum extent permitted by law, the Trust or applicable Portfolio may advance to any person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a Covered Person (other than a Trustee or officer of the Trust) the expenses actually and reasonably incurred by such person in connection with the defense of such proceeding in advance of its final disposition. Notwithstanding
any provision to the contrary contained herein, the Trust shall not advance expenses to any Covered Person (including a Trustee or officer of the Trust) unless:
(a) the Trust or applicable Portfolio has received an undertaking by or on behalf of such Covered Person that the amount of all expenses so advanced will be paid over by such person to the Trust or applicable Portfolio unless it is ultimately determined that such person is entitled to indemnification for such expenses; and
(b) (i) such Covered Person shall have provided appropriate security for such undertaking, or (ii) such Covered Person shall have insured the Trust or applicable Portfolio against losses arising out of any such advance payments, or (iii) either (1) the Trustees, by the vote of a majority of a quorum of qualifying Trustees, or (2) independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that there is reason to believe that such Covered Person ultimately will be found entitled to indemnification.
Section 3. Determination of Entitlement to Indemnification. Any indemnification required or permitted under this Article VIII (unless ordered by a court) shall be made by the Trust or applicable Portfolio only as authorized in the specific case upon a reasonable determination, based upon a review of the facts, that the Covered Person is entitled to indemnification because (i) he or she is not liable by reason of disabling conduct, or (ii) in cases where there is no liability, he or she has not engaged in disabling conduct. Such determination shall be made by (i) the vote of a majority of a quorum of qualifying Trustees; or (ii) if there are no such Trustees, or if such Trustees so direct, by independent legal counsel in a written opinion. Notwithstanding anything to the contrary in Section 2 of this Article VIII, if a determination that a Covered Person engaged in disabling conduct is made in accordance with this Section 3, no further advances of expenses shall be made, and all prior advances, and insurance premiums paid for by the Trust, if applicable, must be repaid.
Section 4. Contract Rights. With respect to any person who was
or is a party or is threatened to be made a party to, or is involved as
a witness in, any proceeding by reason of the fact that such person is
or was a Covered Person, the rights to indemnification conferred in
Section 1 of this Article VIII, and with respect to any person who was
or is a party or is threatened to be made a party to, or is involved as
a witness in, any proceeding by reason of the fact that such person is
or was a Trustee or officer of the Trust, the advancement of expenses
conferred in Section 2 of this Article VIII shall be contract rights.
Any amendment, repeal, or modification of, or adoption of any provision
inconsistent with, this Article VIII (or any provision hereof) shall
not adversely affect any right to indemnification or advancement of
expenses granted to any such person pursuant hereto with respect to any
act or omission of such person occurring prior to the time of such
amendment, repeal, modification, or adoption (regardless of whether the
proceeding relating to such acts or omissions is commenced before or
after the time of such amendment, repeal, modification, or adoption).
Any amendment or modification of, or adoption of any provision
inconsistent with, this Article VIII (or any provision hereof), that
has the effect of positively affecting any right to indemnification or
advancement of expenses granted to any such person pursuant hereto,
shall not apply retroactively to any person who was not serving as a
Trustee, officer, employee or agent of the Trust at the time of such
amendment, modification or adoption.
Section 5. Claims. (a) If (X) a claim under Section 1 of this Article VIII with respect to any right to indemnification is not paid in full by the Trust or applicable Portfolio within sixty days after a written demand has been received by the Trust or applicable Portfolio or (Y) a claim under Section 2 of this Article VIII with respect to any right to the advancement of expenses is not paid in full by the Trust or applicable Portfolio within thirty days after a written demand has been received by the Trust or applicable Portfolio, then the Covered Person seeking to enforce a right to indemnification or to an advancement of expenses, as the case may be, may at any time thereafter bring suit against the Trust or applicable Portfolio to recover the unpaid amount of the claim.
(b) If successful in whole or in part in any suit brought pursuant to Section 5(a) of this Article VIII, or in a suit brought by the Trust or applicable Portfolio to recover an advancement of expenses (whether pursuant to the terms of an undertaking or otherwise), the Covered Person seeking to enforce a right to indemnification or an advancement of expenses hereunder or the Covered Person from whom the Trust or applicable Portfolio sought to recover an advancement of expenses, as the case may be, shall be entitled to be paid by the Trust or applicable Portfolio the reasonable expenses (including attorneys' fees) of prosecuting or defending such suit.
Section 6. Definitions. For purposes of this Article VIII: (a) references to "Trust" include any domestic or foreign predecessor entity of this Trust in a merger, consolidation, or other transaction in which the predecessor's existence ceased upon consummation of the transaction; (b) the term "disabling conduct" means willful misfeasance, bad faith, gross negligence, or the reckless disregard of the duties involved in the conduct of the Covered Person's office with the Trust or applicable Portfolio; (c) the term "expenses" includes, without limitations, attorneys' fees; (d) the term "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative; and (e) the term "qualifying Trustee" means any Trustee who is not an interested person (as defined in the 1940 Act) of the Trust and is not a party to the proceeding."
2. 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. 6
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of March 15, 2005, 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 delete two portfolios, AIM Core Strategies Fund and AIM U.S. Growth Fund, from the Agreement;
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 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 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 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
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 $350million..................................................................................... 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/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
-------------------------- -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ MARK H. WILLIAMSON
-------------------------- -------------------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AMENDMENT NO. 7
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of July 18, 2005, 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 delete AIM Dent Demographic Trends Fund and AIM Emerging Growth Fund from the Agreement; and
WHEREAS, the parties desire to amend the Agreement to permanently reduce the advisory fee payable by AIM Diversified Dividend Fund effective July 18, 2005;
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 Diversified Dividend Fund December 28, 2001 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 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 DIVERSIFIED DIVIDEND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million................................................................................... 0.60% Next $350 million.................................................................................... 0.55% Next $1.3 billion.................................................................................... 0.50% Next $2 billion...................................................................................... 0.45% Next $2 billion...................................................................................... 0.40% Next $2 billion...................................................................................... 0.375% Over $8 billion...................................................................................... 0.35% |
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 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
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 $350million..................................................................................... 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/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
---------------------------- ----------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ JOHN H. LIVELY By: /s/ MARK H. WILLIAMSON
---------------------------- ----------------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AMENDMENT NO. 16 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:
WHEREAS, the parties desire to amend the Agreement to add AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund, AIM Moderately Conservative Allocation Fund, Institutional Class Shares of AIM Intermediate Government Fund and AIM Small Cap Equity Fund; and Investor Class Shares of AIM Basic Balanced Fund, AIM Diversified Dividend Fund and AIM Global Health Care Fund; and
WHEREAS, the parties desire to amend the Agreement to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation;
NOW, THEREFORE, agree 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
AIM Core Stock Fund - Class A
Class C
Class K
Investor Class
AIM Total Return Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
|
AIM 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 Dent Demographic Trends Fund - Class A
Class C
AIM Diversified Dividend Fund - Class A
Class C
Investor Class
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 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
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Small Company 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
Institutional Class
|
AIM GROWTH SERIES
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 Growth Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Moderately Conservative 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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
Investor Class
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 Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
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
Institutional Class
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
AIM Energy Fund - Class A
Class C
Class K
Investor Class
AIM Financial Services Fund - Class A
Class C
Class K
Investor Class
|
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Health Sciences Fund - Class A
Class C
Class K
Investor Class
AIM Leisure Fund - Class A
Class C
Class K
Investor Class
AIM Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM 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
AIM Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM Mid Cap Stock Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Class K
Investor Class
AIM 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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier Portfolio Investor Class
Premier Tax-Exempt Portfolio Investor Class
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: April 29, 2005
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. 17 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 addition of Institutional Class of AIM Small Company Growth 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
AIM Core Stock Fund - Class A
Class C
Class K
Investor Class
AIM Total Return Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 Dent Demographic Trends Fund - Class A
Class C
AIM Diversified Dividend Fund - Class A
Class C
Investor Class
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 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
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Small Company 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
Institutional Class
|
AIM GROWTH SERIES
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 Growth Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Moderately Conservative 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
4
|
AIM Global Aggressive Growth Fund - Class A
Class C
AIM Global Growth Fund - Class A
Class C
AIM International Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
|
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
Investor Class
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 Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
5
|
AIM Income Fund - Class A
Class C
Class R
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Institutional Class
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
AIM Energy Fund - Class A
Class C
Class K
Investor Class
AIM Financial Services Fund - Class A
Class C
Class K
Investor Class
|
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Health Sciences Fund - Class A
Class C
Class K
Investor Class
AIM Leisure Fund - Class A
Class C
Class K
Investor Class
AIM Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM 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
AIM Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM Mid Cap Stock Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM 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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 13, 2005
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. 18 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 merger of AIM Balanced Fund, AIM Core Stock Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Health Sciences Fund, AIM Libra Fund, AIM Mid Cap Stock Fund and AIM Total Return 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 COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 Diversified Dividend Fund - Class A
Class C
Investor Class
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 Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Small Company Fund - Class A
Class C
2
|
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
Institutional Class
AIM GROWTH SERIES
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 Growth Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Moderately Conservative Allocation Fund - Class A
Class C
3
|
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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
Investor Class
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
4
|
Class R
Institutional Class
AIM INVESTMENT SECURITIES FUNDS
AIM Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
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
Institutional Class
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
AIM Energy Fund - Class A
Class C
Class K
Investor Class
AIM Financial Services Fund - Class A
Class C
Class K
Investor Class
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Leisure Fund - Class A
Class C
Class K
Investor Class
AIM Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM 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
AIM Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM 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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 18, 2005
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. 19 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 removal of Class K Shares of AIM Dynamics Fund, AIM Energy Fund, AIM Financial Services Fund, AIM Leisure Fund, AIM Small Company Growth Fund and AIM Technology 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 COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 Diversified Dividend Fund - Class A
Class C
Investor Class
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 Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
|
AIM International Small Company 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
Institutional Class
AIM GROWTH SERIES
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 Growth Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
|
AIM Moderately Conservative 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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
Investor Class
AIM Trimark Endeavor Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Fund - Class A
Class C
Class R
Institutional Class
4
|
AIM Trimark Small Companies Fund - Class A
Class C
Class R
|
Institutional Class
AIM INVESTMENT SECURITIES FUNDS
AIM Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
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
Institutional Class
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
5
|
AIM Total Return Bond Fund - Class A
Class C
Class R
Institutional Class
AIM SECTOR FUNDS
AIM Energy Fund - Class A
Class C
Investor Class
AIM Financial Services Fund - Class A
Class C
Investor Class
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Leisure Fund - Class A
Class C
Investor Class
AIM Technology Fund -
Class A
Class C
Institutional Class
Investor Class
AIM 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
AIM Dynamics Fund - Class A
Class C
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Institutional Class
Investor Class
AIM S&P 500 Index Fund - Institutional Class
Investor Class
6
|
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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: October 22, 2005
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF OF
THE SHARES OF EACH PORTFOLIO LISTED ON
SCHEDULE A
By:__________________________________________
Robert H. Graham
President
A I M DISTRIBUTORS, INC.
By:__________________________________________
Gene L. Needles
President
AMENDMENT NO. 20 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 addition of Institutional Class Shares to AIM Developing Markets Fund, AIM Diversified Dividend Fund, AIM Global Value Fund, AIM Income Fund, AIM International Small Company Fund and AIM Utilities Fund and Class R Shares to AIM Diversified Dividend Fund, AIM Dynamics Fund, AIM Leisure Fund and AIM Small Company Growth 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 COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 Diversified Dividend Fund - Class A
Class C
Class R
Institutional Class
Investor Class
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 Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
Institutional Class
2
|
AIM International Small Company Fund - Class A
Class C
Institutional Class
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
Institutional Class
AIM GROWTH SERIES
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 Growth Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
3
|
Class C
Class R
Institutional Class
AIM Moderately Conservative 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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
Institutional Class
AIM Global Health Care Fund - Class A
Class C
Investor Class
AIM Trimark Endeavor Fund - Class A
Class C
Class R
Institutional Class
4
|
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 Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
AIM Income Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Institutional Class
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
5
|
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
AIM Energy Fund - Class A
Class C
Investor Class
AIM Financial Services Fund - Class A
Class C
Investor Class
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Leisure Fund - Class A
Class C
Class R
Investor Class
AIM Technology Fund - Class A
Class C
Institutional Class
Investor Class
AIM Utilities Fund - Class A
Class C
Institutional Class
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
AIM Dynamics Fund - Class A
Class C
Class R
Institutional Class
Investor Class
6
|
AIM Small Company Growth Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM 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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: October 25, 2005
EACH FUND (LISTED ON SCHEDULE A) ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A
By: __________________________________
Robert H. Graham
President
A I M DISTRIBUTORS, INC.
By: __________________________________
Gene L. Needles
President
AMENDMENT NO. 13
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:
WHEREAS, the parties desire to amend the Agreement to delete two portfolios, AIM Core Strategies Fund and AIM U.S. Growth Fund;
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 15, 2005
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: Robert H. Graham
Title: President
|
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: Robert H. Graham
Title: President
|
A I M DISTRIBUTORS, INC.
By: /s/ GENE NEEDLES
-----------------------------------------
Name: Gene 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 Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation 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 Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Small Company 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 Equity 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 Core Equity Fund
AIM International Growth 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
AIM Core Stock Fund
AIM Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
AIM Advantage Health Sciences Fund
AIM Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
AIM Energy Fund
AIM Financial Services Fund
AIM Gold & Precious Metals Fund
AIM Health Sciences Fund
AIM Leisure Fund
AIM Technology Fund
AIM Utilities Fund
AIM STOCK FUNDS
AIM Dynamics Fund
AIM Mid Cap Stock Fund
AIM Small Company Growth Fund
AMENDMENT NO. 14
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:
WHEREAS, the parties desire to amend the Agreement to reflect the addition of AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund and to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation Fund;
NOW, THEREFORE, 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 29, 2005
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: Robert H. Graham
Title: President
|
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: Robert H. Graham
Title: President
|
A I M DISTRIBUTORS, INC.
By: /s/ GENE L. NEEDLES
-------------------
Name: Gene 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 Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation 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 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 Small Company 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 Conservative Allocation Fund
AIM Global Equity Fund
AIM Growth Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Moderate Growth Allocation Fund
AIM Moderately Conservative Allocation 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 Core Equity Fund
AIM International Growth 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 Global Real Estate Fund
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
AIM Core Stock Fund
AIM Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
AIM Advantage Health Sciences Fund
AIM Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
AIM Energy Fund
AIM Financial Services Fund
AIM Gold & Precious Metals Fund
AIM Health Sciences Fund
AIM Leisure Fund
AIM Technology Fund
AIM Utilities Fund
AIM STOCK FUNDS
AIM Dynamics Fund
AIM Mid Cap Stock Fund
AIM Small Company Growth Fund
AMENDMENT NO. 15
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:
WHEREAS, the parties desire to amend the Agreement to reflect the merger of AIM Balanced Fund, AIM Core Stock Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Health Sciences Fund, AIM Libra Fund, AIM Mid Cap Stock Fund and AIM Total Return Fund;
NOW, THEREFORE, 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: July 18, 2005
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: Robert H. Graham
Title: President
|
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: Robert H. Graham
Title: President
|
A I M DISTRIBUTORS, INC.
By: /s/ GENE L. NEEDLES
-------------------
Name: Gene 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 Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Diversified Dividend Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM Select Basic Value Fund
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Small Company 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 Conservative Allocation Fund
AIM Global Equity Fund
AIM Growth Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Moderate Growth Allocation Fund
AIM Moderately Conservative Allocation 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 Core Equity Fund
AIM International Growth Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Trimark Fund
AIM Trimark Endeavor Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM Global Real Estate Fund
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 COUNSELOR SERIES TRUST
PORTFOLIOS
AIM Advantage Health Sciences Fund
AIM Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
AIM Energy Fund
AIM Financial Services Fund
AIM Gold & Precious Metals Fund
AIM Leisure Fund
AIM Technology Fund
AIM Utilities Fund
AIM STOCK FUNDS
AIM Dynamics Fund
AIM Small Company Growth Fund
AMENDMENT NO. 3
TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated July 1, 2004, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Equity Funds, a Delaware business trust.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to delete two portfolios, AIM Core Strategies Fund and AIM U.S. Growth Fund, from the Agreement;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM EQUITY FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Aggressive Growth Fund June 1, 2001 AIM Blue Chip Fund June 1, 2001 AIM Capital Development Fund June 1, 2001 AIM Charter Fund June 1, 2001 AIM Constellation Fund June 1, 2001 AIM Dent Demographic Trends Fund June 1, 2001 AIM Diversified Dividend Fund December 28, 2001 AIM Emerging Growth Fund June 1, 2001 AIM Large Cap Basic Value Fund June 1, 2001 AIM Large Cap Growth Fund June 1, 2001 AIM Mid Cap Growth Fund June 1, 2001 AIM Select Basic Value Fund August 29, 2002 AIM Weingarten Fund June 1, 2001" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: March 15, 2005
A I M ADVISORS, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ MARK H. WILLIAMSON
---------------------------------- ------------------------------
Assistant Secretary Mark H. Williamson
President
(SEAL)
AIM EQUITY FUNDS
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
---------------------------------- ------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
AMENDMENT NO. 4
TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated July 1, 2004, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Equity Funds, a Delaware business trust is hereby amended as follows:
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to delete AIM Dent Demographic Trends Fund and AIM Emerging Growth Fund from the Agreement;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM EQUITY FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Aggressive Growth Fund June 1, 2001 AIM Blue Chip Fund June 1, 2001 AIM Capital Development Fund June 1, 2001 AIM Charter Fund June 1, 2001 AIM Constellation Fund June 1, 2001 AIM Diversified Dividend Fund December 28, 2001 AIM Large Cap Basic Value Fund June 1, 2001 AIM Large Cap Growth Fund June 1, 2001 AIM Mid Cap Growth Fund June 1, 2001 AIM Select Basic Value Fund August 29, 2002 AIM Weingarten Fund June 1, 2001" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 18, 2005
A I M ADVISORS, INC.
Attest: /s/ JOHN H. LIVELY By: /s/ MARK H. WILLIAMSON
----------------------------- ----------------------------------
Assistant Secretary Mark H. Williamson
President
(SEAL)
AIM EQUITY FUNDS
Attest: /s/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
----------------------------- ----------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of the Effective Date on the attached exhibits (the "Exhibits"), between AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust (each a "Trust" or, collectively, the "Trusts"), on behalf of the funds listed on the Exhibits to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the Memorandum of Agreement dated April 1, 2005 between AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds and AIM Stock Funds. AIM shall and hereby agrees to waive fees or reimburse expenses of each Fund, on behalf of its respective classes as applicable, severally and not jointly, as indicated in the attached Exhibits.
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 Trusts and AIM agree as follows:
The Trusts and AIM agree until the date set forth on the attached
Exhibits (the "Expiration Date") that AIM will waive its fees or reimburse
expenses to the extent that expenses (excluding (i) interest; (ii) taxes; (iii)
dividend expense on short sales; (iv) extraordinary items (these are expenses
that are not anticipated to arise from each Fund's day-to-day operations), or
items designated as such by the Funds' Board of Trustees; (v) expenses related
to a merger or reorganization, as approved by the Funds' Board of Trustees; and
(vi) expenses that each Fund has incurred but did not actually pay because of an
expense offset arrangement, if applicable) of a class of a Fund exceed the rate,
on an annualized basis, set forth on the Exhibits of the average daily net
assets allocable to such class. The Board of Trustees and AIM may terminate or
modify this Memorandum of Agreement prior to the Expiration Date only by mutual
written consent. AIM will not have any right to reimbursement of any amount so
waived or reimbursed.
Each of the Trusts and AIM agree to review the then-current waivers or expense limitations for each class of each Fund listed on the Exhibits on a date prior to the Expiration Date to determine whether such waivers or limitations should be amended, continued or terminated. The waivers or expense limitations will expire upon the Expiration Date unless the Trust and AIM have agreed to continue them. The Exhibits will be amended to reflect any such agreement.
It is expressly agreed that the obligations of each Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trusts personally, but shall only bind the assets and property of each Fund, as provided in each Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trusts, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trusts acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the Trusts and AIM have entered into this Memorandum of Agreement as of the Effective Date on the attached Exhibits.
AIM COMBINATION STOCK & BOND FUNDS
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM STOCK FUNDS
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
on behalf of the Funds listed in Exhibit
"A" to this Memorandum of Agreement
A I M Advisors, Inc.
EXHIBIT "A"
FUNDS WITH FISCAL YEAR END OF MARCH 31
AIM SECTOR FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
--------------------------------- ------------------ -------------- ---------------
AIM Energy Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Class K Shares 2.10% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Financial Services Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Class K Shares 2.10% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Gold & Precious Metals Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Health Sciences Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Class K Shares 2.10% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Leisure Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Class K Shares 2.10% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A
12b-1 rate.
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ -------------- ---------------
AIM Technology Fund(1)
Class A Shares 1.55% July 1, 2005 June 30, 2006
Class B Shares 2.30% July 1, 2005 June 30, 2006
Class C Shares 2.30% July 1, 2005 June 30, 2006
Class K Shares 1.75% July 1, 2005 June 30, 2006
Investor Class Shares 1.55% July 1, 2005 June 30, 2006
Institutional Class Shares 1.30% July 1, 2005 June 30, 2006
AIM Utilities Fund(1)
Class A Shares 1.90% April 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
|
FUNDS WITH FISCAL YEAR END OF JULY 31
AIM INVESTMENT SECURITIES FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ -------------- ---------------
AIM Global Real Estate Fund(1)
Class A Shares 1.40% July 1, 2005 July 31, 2006
Class B Shares 2.15% April 29, 2005 July 31, 2006
Class C Shares 2.15% April 29, 2005 July 31, 2006
Class R Shares 1.65% April 29, 2005 July 31, 2006
Institutional Class Shares 1.15% April 29, 2005 July 31, 2006
AIM Short Term Bond Fund(1)
Class A Shares 0.85% July 1, 2005 July 31, 2006
Class C Shares 1.20%(2) August 1, 2005 July 31, 2006
Class R Shares 1.10% August 1, 2005 July 31, 2006
Institutional Class Shares 0.60% August 1, 2005 July 31, 2006
AIM Total Return Bond Fund(1)
Class A Shares 1.15% July 1, 2005 July 31, 2006
Class B Shares 1.90% August 1, 2005 July 31, 2006
Class C Shares 1.90% August 1, 2005 July 31, 2006
Class R Shares 1.40% August 1, 2005 July 31, 2006
Institutional Class Shares 0.90% August 1, 2005 July 31, 2006
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A
12b-1 rate.
(2) The expense limit shown is the expense limit after Rule 12b-1 fee waivers by A I M Distributors, Inc.
|
AIM STOCK FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ -------------- ---------------
AIM Dynamics Fund(1)
Class A Shares 1.90% July 1, 2005 July 31, 2006
Class B Shares 2.65% August 1, 2005 July 31, 2006
Class C Shares 2.65% August 1, 2005 July 31, 2006
Class K Shares 2.10% August 1, 2005 July 31, 2006
Investor Class Shares 1.90% August 1, 2005 July 31, 2006
Institutional Class Shares 1.65% August 1, 2005 July 31, 2006
AIM Mid Cap Stock Fund(1)
Class A Shares 1.90% July 1, 2005 July 31, 2006
Class B Shares 2.65% August 1, 2005 July 31, 2006
Class C Shares 2.65% August 1, 2005 July 31, 2006
Class K Shares 2.10% August 1, 2005 July 31, 2006
Investor Class Shares 1.90% August 1, 2005 July 31, 2006
Institutional Class Shares 1.65% August 1, 2005 July 31, 2006
AIM Small Company Growth Fund(1)
Class A Shares 1.90% July 1, 2005 July 31, 2006
Class B Shares 2.65% August 1, 2005 July 31, 2006
Class C Shares 2.65% August 1, 2005 July 31, 2006
Class K Shares 2.10% August 1, 2005 July 31, 2006
Investor Class Shares 1.90% August 1, 2005 July 31, 2006
Institutional Class Shares 1.65% July 13, 2005 July 31, 2006
AIM S&P 500 Index Fund(1)
Investor Class Shares 0.60% July 1, 2005 July 31, 2006
Institutional Class Shares 0.35% July 1, 2005 July 31, 2006
|
FUNDS WITH FISCAL YEAR END OF AUGUST 31
AIM COMBINATION STOCK & BOND FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ---------------- ---------------
AIM Core Stock Fund(1)
Class A Shares 1.90% July 1, 2005 August 31, 2006
Class B Shares 2.65% September 1, 2005 August 31, 2006
Class C Shares 2.65% September 1, 2005 August 31, 2006
Class K Shares 2.10% September 1, 2005 August 31, 2006
Investor Class Shares 1.90% September 1, 2005 August 31, 2006
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A
12b-1 rate.
|
FUND EXPENSE EFFECTIVE DATE EXPIRATION DATE
LIMITATION
------------------------------------ ---------- ----------------- ---------------
AIM Total Return Fund(1)
Class A Shares 1.90% July 1, 2005 August 31, 2006
Class B Shares 2.65% September 1, 2005 August 31, 2006
Class C Shares 2.65% September 1, 2005 August 31, 2006
Class K Shares 2.10% September 1, 2005 August 31, 2006
Investor Class Shares 1.90% September 1, 2005 August 31, 2006
Institutional Class Shares 1.65% September 1, 2005 August 31, 2006
|
AIM COUNSELOR SERIES TRUST
FUND EXPENSE EFFECTIVE DATE EXPIRATION DATE
LIMITATION
------------------------------------ ---------- ----------------- ---------------
AIM Multi-Sector Fund(1)
Class A Shares 1.90% July 1, 2005 August 31, 2006
Class B Shares 2.65% September 1, 2005 August 31, 2006
Class C Shares 2.65% September 1, 2005 August 31, 2006
Institutional Class Shares 1.65% September 1, 2005 August 31, 2006
|
FUNDS WITH FISCAL YEAR END OF OCTOBER 31
AIM EQUITY FUNDS
FUND EXPENSE EFFECTIVE DATE EXPIRATION DATE
LIMITATION
------------------------------------ ---------- ---------------- ----------------
AIM Diversified Dividend Fund(1)
Class A Shares 1.40% July 1, 2005 October 31, 2005
Class B Shares 2.15% November 1, 2004 October 31, 2005
Class C Shares 2.15% November 1, 2004 October 31, 2005
Investor Class Shares 1.40% April 29, 2005 October 31, 2006
AIM Large Cap Basic Value Fund(1)
Class A Shares 1.22% July 1, 2005 June 30, 2006
Class B Shares 1.97% July 1, 2005 June 30, 2006
Class C Shares 1.97% July 1, 2005 June 30, 2006
Class R Shares 1.47% July 1, 2005 June 30, 2006
Investor Class Shares 1.22% July 1, 2005 June 30, 2006
Institutional Class Shares 0.97% July 1, 2005 June 30, 2006
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A
12b-1 rate.
|
FUND EXPENSE EFFECTIVE DATE EXPIRATION DATE
LIMITATION
------------------------------------ ---------- -------------- ---------------
AIM Large Cap Growth Fund(1)
Class A Shares 1.32% July 1, 2005 June 30, 2006
Class B Shares 2.07% July 1, 2005 June 30, 2006
Class C Shares 2.07% July 1, 2005 June 30, 2006
Class R Shares 1.57% July 1, 2005 June 30, 2006
Investor Class Shares 1.32% July 1, 2005 June 30, 2006
Institutional Class Shares 1.07% July 1, 2005 June 30, 2006
|
AIM INTERNATIONAL MUTUAL FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
------------------------------------ ------------------ -------------- ----------------
AIM International Core Equity Fund(1)
Class A Shares 2.00% July 1, 2005 October 31, 2005
Class B Shares 2.75% September 1, 2004 October 31, 2005
Class C Shares 2.75% September 1, 2004 October 31, 2005
Class R Shares 2.25% September 1, 2004 October 31, 2005
Investor Class Shares 2.00% September 1, 2004 October 31, 2005
Institutional Class Shares 1.75% September 1, 2004 October 31, 2005
|
AIM INVESTMENT FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
------------------------------------ ------------------ ----------------- ----------------
AIM Developing Markets Fund(1)
Class A Shares 1.75% July 1, 2005 October 31, 2005
Class B Shares 2.50% September 1, 2004 October 31, 2005
Class C Shares 2.50% September 1, 2004 October 31, 2005
AIM Trimark Endeavor Fund(1)
Class A Shares 1.90% July 1, 2005 October 31, 2005
Class B Shares 2.65% September 1, 2004 October 31, 2005
Class C Shares 2.65% September 1, 2004 October 31, 2005
Class R Shares 2.15% September 1, 2004 October 31, 2005
Institutional Class Shares 1.65% September 1, 2004 October 31, 2005
AIM Trimark Fund(1)
Class A Shares 2.15% July 1, 2005 October 31, 2005
Class B Shares 2.90% September 1, 2004 October 31, 2005
Class C Shares 2.90% September 1, 2004 October 31, 2005
Class R Shares 2.40% September 1, 2004 October 31, 2005
Institutional Class Shares 1.90% September 1, 2004 October 31, 2005
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A 12b-1
rate.
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM Trimark Small Companies Fund(1)
Class A Shares 1.90% July 1, 2005 October 31, 2005
Class B Shares 2.65% September 1, 2004 October 31, 2005
Class C Shares 2.65% September 1, 2004 October 31, 2005
Class R Shares 2.15% September 1, 2004 October 31, 2005
Institutional Class Shares 1.65% September 1, 2004 October 31, 2005
|
FUNDS WITH FISCAL YEAR END OF DECEMBER 31
AIM FUNDS GROUP
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM European Small Company Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
AIM Global Value Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
AIM International Small Company Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
|
AIM GROWTH SERIES
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM Global Equity Fund(1)
Class A Shares 1.75% July 1, 2005 December 31, 2005
Class B Shares 2.50% January 1, 2005 December 31, 2005
Class C Shares 2.50% January 1, 2005 December 31, 2005
Institutional Class Shares 1.50% January 1, 2005 December 31, 2005
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be
limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A
12b-1 rate.
|
EXHIBIT "B"
AIM GROWTH SERIES
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM Conservative Allocation Fund
Class A Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
AIM Growth Allocation Fund
Class A Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
AIM Moderate Allocation Fund
Class A Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
AIM Moderate Growth Allocation Fund
Class A Shares Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
Class B Shares Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
Class C Shares Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
Class R Shares Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
Institutional Class Shares Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
AIM Moderately Conservative Allocation
Fund
Class A Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class B Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class C Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class R Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Institutional Class Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Other Expenses are defined as all normal operating expenses of the fund, excluding management fees and 12b-1 expenses. The expense
limitation is subject to the exclusions as listed in the Memorandum of Agreement.
|
EXHIBIT "C"
FUNDS WITH FISCAL YEAR END OF MARCH 31
TAX-FREE INVESTMENTS TRUST
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
Tax-Free Cash Reserve Portfolio(1,2)
Cash Management Class 0.22% June 30, 2005 March 31, 2007
Corporate Class 0.22% June 30, 2005 March 31, 2007
Institutional Class 0.22% June 30, 2005 March 31, 2007
Personal Investment Class 0.22% June 30, 2005 March 31, 2007
Private Investment Class 0.22% June 30, 2005 March 31, 2007
Reserve Class 0.22% June 30, 2005 March 31, 2007
Resource Class 0.22% June 30, 2005 March 31, 2007
|
FUNDS WITH FISCAL YEAR END OF AUGUST 31
SHORT-TERM INVESTMENTS TRUST
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
Government & Agency Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
Government TaxAdvantage Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
Liquid Assets Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
(1) The expense limit shown excludes Rule 12b-1 fee waivers by Fund Management Company.
(2) The expense limitation also excludes Trustees' fees and federal registration expenses.
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
STIC Prime Portfolio(1) 0.12% June 30, 2005 August 31, 2006
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class
Treasury Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
(1) The expense limit shown excludes Rule 12b-1 fee waivers by Fund Management Company.
|
EXHIBIT "D"
AIM VARIABLE INSURANCE FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM V.I. Aggressive Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Balanced Fund
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
AIM V.I. Basic Value Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Blue Chip Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Capital Appreciation Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Capital Development Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Core Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Core Stock Fund
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM V.I. Dent Demographic Trends Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Diversified Income Fund
Series I Shares 0.75% July 1, 2005 June 30, 2006
Series II Shares 1.00% July 1, 2005 June 30, 2006
AIM V.I. Dynamics Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Financial Services Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Government Securities Fund
Series I Shares 0.73% July 1, 2005 June 30, 2006
Series II Shares 0.98% July 1, 2005 June 30, 2006
AIM V.I. Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Health Sciences Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. High Yield Fund
Series I Shares 0.95% July 1, 2005 June 30, 2006
Series II Shares 1.20% July 1, 2005 June 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM V.I. International Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Large Cap Growth Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Leisure Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Mid Cap Core Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Money Market Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Premier Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Real Estate Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Small Cap Equity Fund
Series I Shares 1.15% July 1, 2005 June 30, 2006
Series II Shares 1.40% July 1, 2005 June 30, 2006
AIM V.I. Small Company Growth Fund
Series I Shares 1.20% July 1, 2005 June 30, 2006
Series II Shares 1.45% July 1, 2005 June 30, 2006
AIM V.I. Technology Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---- ------------------ -------------- ---------------
AIM V.I. Total Return Fund
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
AIM V.I. Utilities Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
|
AMENDED AND RESTATED
MEMORANDUM OF AGREEMENT
This Amended and Restated Memorandum of Agreement is entered into as of this 5th day of May, 2005 and amends and restates the Memorandum of Agreement dated as of the 1st day of January, 2005 between the AIM Funds ("Trust" or "Trusts"), on behalf of the funds 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 Trusts and AIM agree as follows:
The Trusts and AIM agree until the "Committed Until" date set forth on the attached Exhibit "A" (the "Expiration Date") that AIM will waive its advisory fees payable under the current investment advisory agreement as set forth under the column "Current Advisory Fee Schedule" in Exhibit "A" ("Current Fee Schedule") to the extent that application of the advisory fees rates set forth in Exhibit "A" under the column "Proposed Advisory Fee Schedule (Applied When Proposed Schedule Results in Fees Lower than the Current Fee Schedule)" ("Agreed Upon Schedule") of the average daily net assets of the Fund results in a lower advisory fee. The Board of Trustees and AIM may terminate or modify this Memorandum of Agreement prior to the Expiration Date only by mutual written consent. AIM will not have any right to reimbursement of any amount so waived or reimbursed. All expense limitation commitments are not superseded by this agreement
The Trust and AIM agree to review the then-current waivers of each Fund listed on Exhibit "A" on a date prior to the Expiration Date to determine whether such waivers should be amended, continued or terminated. The waivers will expire upon the Expiration Date unless the Trust and AIM have agreed to continue them. Exhibit "A" will be amended to reflect any such agreement.
It is expressly agreed that the obligations of a Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust personally, but shall only bind the assets and property of the Funds, as provided in the Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of each Trust, and this Memorandum of Agreement has been executed and delivered by an authorized officer of each Trust acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the Trusts and AIM have entered into this Memorandum of Agreement as of the date first above written.
AIM Combination Stock & Bond Funds AIM Counselor Series Trust AIM Equity Funds AIM Funds Group AIM Growth Series AIM International Mutual Funds AIM Investment Funds AIM Investment Securities Funds AIM Sector Funds AIM Stock Funds AIM Summit Fund AIM Variable Insurance Funds, on behalf of each Fund listed in Exhibit "A" to this Memorandum of Agreement
By: /s/ ROBERT H. GRAHAM
--------------------
Title: President
|
A I M Advisors, Inc.
By: /s/ MARK H. WILLIAMSON
----------------------
Title: President
|
EXHIBIT "A"
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Combination Stock (Applied When Schedule Results in Committed
& Bond Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Core Stock Fund 0.60% of the first $350M The current advisory fee schedule 6/30/2006
0.55% of the next $350M is lower than the uniform fee
0.50% of the next $1.3B schedule at all asset levels.
0.45% of the next $2B
0.40% of the next $2B
0.375% of the next $2B
0.35% of the excess over $8B
AIM Total Return Fund 0.75% of the first $500M 0.62% of the first $250M 6/30/2006
0.65% of the next $500M 0.605% of the next $250M
0.50% of the next $1B 0.59% of the next $500M
0.45% of the next $2B 0.575% of the next $1.5B
0.40% of the next $2B 0.56% of the next $2.5B
0.375% of the next $2B 0.545% of the next $2.5B
0.35% of the excess over $8B 0.53% of the next $2.5B
0.515% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Counselor Series (Applied When Schedule Results in Committed
Trust Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Multi-Sector Fund 0.75% of average daily net assets 0.695% of the first $250M 12/31/2009
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Equity Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Aggressive 0.80% of the first $150M 0.745% of the first $250M 6/30/2006
Growth Fund 0.625% of the excess over $150M 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Blue Chip Fund 0.75% of the first $350M 0.695% of the first $250M 12/31/2009
0.625% of the excess over $350M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Capital 0.75% of the first $350M 0.745% of the first $250M 6/30/2006
Development Fund 0.625% of the excess over $350M 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Charter Fund 1.00% of the first $30M 0.75% of the first $150M 12/31/2009
0.75% of the next $120M 0.615% of the next $4.85B
0.625% of the excess over $150M 0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Equity Funds (Applied When Schedule Results in Committed
- continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Constellation 1.00% of the first $30M 0.75% of the first $150M 12/31/2009
Fund 0.75% of the next $120M 0.615% of the next $4.85B
0.625% of the excess over $150M 0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Dent Demographic 0.77% of the first $2B 0.695% of the first $250M 12/31/2009
Trends Fund 0.72% of the excess over $2B 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Diversified 0.75% of the first $1B 0.695% of the first $250M 6/30/2006
Dividend Fund 0.70% of the next $1B 0.67% of the next $250M
0.625% of the excess over $2B 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Equity Funds (Applied When Schedule Results in Committed
- continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Emerging Growth 0.85% of the first $1B 0.745% of the first $250M 12/31/2009
Fund 0.80% of the excess over $1B 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Large Cap Basic 0.60% of the first $1B The current advisory fee schedule 6/30/2006
Value Fund 0.575% of the next $1B is lower than the uniform fee
0.55% of the excess over $2B schedule at all asset levels.
AIM Large Cap Growth 0.75% of the first $1B 0.695% of the first $250M 12/31/2009
Fund 0.70% of the next $1B 0.67% of the next $250M
0.625% of the excess over $2B 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Mid Cap Growth 0.80% of the first $1B 0.745% of the first $250M 12/31/2009
Fund 0.75% of the excess over $1B 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Equity Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Select Basic 0.75% of the first $1B 0.695% of the first $250M 6/30/2006
Value Fund 0.70% of the next $1B 0.67% of the next $250M
0.65% of the excess over $2B 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Weingarten Fund 1.00% of the first $30M 0.695% of the first $250M 12/31/2009
0.75% of the next $320M 0.67% of the next $250M
0.625% of the excess over $350M 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Equity Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Balanced Fund 0.75% of the first $150M 0.62% of the first $250M 6/30/2006
0.50% of the excess over $150M 0.605% of the next $250M
0.59% of the next $500M
0.575% of the next $1.5B
0.56% of the next $2.5B
0.545% of the next $2.5B
0.53% of the next $2.5B
0.515% of the excess over $10B
AIM Basic Balanced 0.65% of the first $1B 0.62% of the first $250M 12/31/2009
Fund 0.60% of the next $4B 0.605% of the next $250M
0.55% of the excess over $5B 0.59% of the next $500M
0.575% of the next $1.5B
0.56% of the next $2.5B
0.545% of the next $2.5B
0.53% of the next $2.5B
0.515% of the excess over $10B
AIM European Small 0.95% of average daily net assets 0.935% of the first $250M 6/30/2006
Company Fund 0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Value Fund 0.85% of the first $1B 0.80% of the first $250M 6/30/2006
0.80% of the excess over $1B 0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Funds Group - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM International 0.95% of average daily net assets 0.935% of the first $250M 12/31/2009
Small Company Fund 0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Mid Cap Basic 0.80% of the first $1B 0.745% of the first $250M 12/31/2009
Value Fund 0.75% of the next $4B 0.73% of the next $250M
0.70% of the excess over $5B 0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Premier Equity 0.80% of the first $150M 0.75% of the first $150M 12/31/2009
Fund 0.625% of the excess over $150M 0.615% of the next $4.85B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Select Equity 0.80% of the first $150M 0.695% of the first $250M 6/30/2006
Fund 0.625% of the excess over $150M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Funds Group - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Small Cap Equity 0.85% of average daily net assets 0.745% of the first $250M 12/31/2009
Fund 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Growth Series Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Basic Value Fund 0.725% of the first $500M 0.695% of the first $250M 12/31/2009
0.70% of the next $500M 0.67% of the next $250M
0.675% of the next $500M 0.645% of the next $500M
0.65% of the excess over $1.5B 0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Global Equity 0.975% of the first $500M 0.80% of the first $250M 12/31/2009
Fund 0.95% of the next $500M 0.78% of the next $250M
0.925% of the next $500M 0.76% of the next $500M
0.90% of the excess over $1.5B 0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
AIM Mid Cap Core 0.725% of the first $500M The current advisory fee schedule 6/30/2006
Equity Fund 0.70% of the next $500M is lower than the uniform fee
0.675% of the next $500M schedule at all asset levels.
0.65% of the excess over $1.5B
AIM Small Cap Growth 0.725% of the first $500M The current advisory fee schedule 6/30/2006
Fund 0.70% of the next $500M is lower than the uniform fee
0.675% of the next $500M schedule at all asset levels.
0.65% of the excess over $1.5B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM International (Applied When Schedule Results in Committed
Mutual Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Asia Pacific 0.95% of the first $500M 0.935% of the first $250M 6/30/2006
Growth Fund 0.90% of the excess over $500M 0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM European Growth 0.95% of the first $500M 0.935% of the first $250M 12/31/2009
Fund 0.90% of the excess over $500M 0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Aggressive 0.90% of the first $1B 0.80% of the first $250M 12/31/2009
Growth Fund 0.85% of the excess over $1B 0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
AIM Global Growth 0.85% of the first $1B 0.80% of the first $250M 12/31/2009
Fund 0.80% of the excess over $1B 0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
AIM International Advisory Fee Reduction Schedule
Mutual Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM International 0.75% of the first $500M The current advisory fee schedule 6/30/2006
Core Equity Fund 0.65% of the next $500M is lower than the uniform fee
0.55% of the next $1B schedule at all asset levels.
0.45% of the next $2B
0.40% of the next $2B
0.375% of the next $2B
0.35% of the excess over $8B
AIM International 0.95% of the first $1B 0.935% of the first $250M 12/31/2009
Growth Fund 0.90% of the excess over $1B 0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Investment Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Developing 0.975% of the first $500M 0.935% of the first $250M 6/30/2006
Markets Fund 0.95% of the next $500M 0.91% of the next $250M
0.925% of the next $500M 0.885% of the next $500M
0.90% of the excess over $1.5B 0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Health 0.975% of the first $500M 0.75% of the first $250M 12/31/2009
Care Fund 0.95% of the next $500M 0.74% of the next $250M
0.925% of the next $500M 0.73% of the next $500M
0.90% of the excess over $1.5B 0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Libra Fund 0.85% of the first $1B 0.745% of the first $250M 6/30/2006
0.80% of the excess over $1B 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Trimark 0.80% of the first $1B 0.745% of the first $250M 6/30/2006
Endeavor Fund 0.75% of the excess over $1B 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Investment (Applied When Schedule Results in Committed
Funds - continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Trimark Fund 0.85% of the first $1B 0.80% of the first $250M 6/30/2006
0.80% of the excess over $1B 0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
AIM Trimark Small 0.85% of the first $1B 0.745% of the first $250M 6/30/2006
Companies Fund 0.80% of the excess over $1B 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Investment (Applied When Schedule Results in Committed
Securities Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Real Estate Fund 0.90% of average daily net assets 0.75% of the first $250M 12/31/2009
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Sector Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Energy Fund 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Financial 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
Services Fund 0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Gold & Precious 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
Metals Fund 0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Sector Funds (Applied When Schedule Results in Committed
- continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM Health Sciences 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
Fund 0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Leisure Fund 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Technology Fund 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Sector Funds (Applied When Schedule Results in Committed
- continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM Utilities Fund 0.75% of the first $350M 0.75% of the first $250M 6/30/2006
0.65% of the next $350M 0.74% of the next $250M
0.55% of the next $1.3B 0.73% of the next $500M
0.45% of the next $2B 0.72% of the next $1.5B
0.40% of the next $2B 0.71% of the next $2.5B
0.375% of the next $2B 0.70% of the next $2.5B
0.35% of the excess over $8B 0.69% of the next $2.5B
0.68% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Stock Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM Dynamics Fund 0.60% of the first $350M The current advisory fee schedule 6/30/2006
0.55% of the next $350M is lower than the uniform fee
0.50% of the next $1.3B schedule at all asset levels.
0.45% of the next $2B
0.40% of the next $2B
0.375% of the next $2B
0.35% of the excess over $8B
AIM Mid Cap Stock 1.00% of average daily net assets 0.745% of the first $250M 6/30/2006
Fund 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM S&P 500 Index 0.25% of average daily net assets 0.25% of the first $250M 6/30/2006
Fund 0.24% of the next $250M
0.23% of the next $500M
0.22% of the next $1.5B
0.21% of the next $2.5B
0.20% of the next $2.5B
0.19% of the next $2.5B
0.18% of the excess over $10B
AIM Small Company 0.75% of the first $350M 0.745% of the first $250M 6/30/2006
Growth Fund 0.65% of the next $350M 0.73% of the next $250M
0.55% of the next $1.3B 0.715% of the next $500M
0.45% of the next $2B 0.70% of the next $1.5B
0.40% of the next $2B 0.685% of the next $2.5B
0.375% of the next $2B 0.67% of the next $2.5B
0.35% of the excess over $8B 0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
(Applied When Schedule Results in Committed
AIM Summit Fund Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM Summit Fund 1.00% of the first $10M 0.695% of the first $250M 6/30/2006
0.75% of the next $140M 0.67% of the next $250M
0.625% of the excess over $150M 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
Advisory Fee Reduction Schedule
AIM Variable (Applied When Schedule Results in Committed
Insurance Funds Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM V. I. Aggressive 0.80% of the first $150M 0.75% of the first $150M 12/31/2009
Growth Fund 0.625% of the excess over $150M 0.625% of the next $4.85B
0.60% of the next $5B
0.575% of the excess over $10B
AIM V. I. Balanced 0.75% of the first $150M 0.62% of the first $150M 12/31/2009
Fund 0.50% of the excess over $150M 0.50% of the next $4.85B
0.475% of the next $5B
0.45% of the excess over $10B
AIM V. I. Basic Value 0.725% of the first $500M 0.695% of the first $250M 12/31/2009
Fund 0.70% of the next $500M 0.67% of the next $250M
0.675% of the next $500M 0.645% of the next $500M
0.65% of the excess over $1.5B 0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Blue Chip 0.75% of the first $350M 0.695% of the first $250M 12/31/2009
Fund 0.625% of the excess over $350M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
AIM Variable Advisory Fee Reduction Schedule
Insurance Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM V. I. Capital 0.65% of the first $250M 0.695% of the first $250M 6/30/2006
Appreciation Fund 0.60% of the excess over $250M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Capital 0.75% of the first $350M 0.745% of the first $250M 6/30/2006
Development Fund 0.625% of the excess over $350M 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM V. I. Core Equity 0.65% of the first $250M 0.695% of the first $250M 6/30/2006
Fund 0.60% of the excess over $250M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Core Stock 0.75% of average daily net assets 0.695% of the first $250M 12/31/2009
Fund 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
----------------------------------------------------------------------------------------------------------
AIM Variable Advisory Fee Reduction Schedule
Insurance Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
----------------------------------------------------------------------------------------------------------
AIM V. I. Dent 0.77% of the first $2B 0.695% of the first $250M 12/31/2009
Demographic Trends 0.72% of the excess over $2B 0.67% of the next $250M
Fund 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Dynamics 0.75% of average daily net assets 0.745% of the first $250M 6/30/2006
Fund 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM V. I. Financial 0.75% of average daily net assets 0.75% of the first $250M 6/30/2006
Services Fund 0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Growth Fund 0.65% of the first $250M 0.695% of the first $250M 6/30/2006
0.60% of the excess over $250M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
AIM Variable Advisory Fee Reduction Schedule
Insurance Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM V. I. Health 0.75% of average daily net assets 0.75% of the first $250M 6/30/2006
Sciences Fund 0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. 0.75% of the first $250M The current advisory fee schedule 6/30/2006
International 0.70% of the excess over $250M is lower than the uniform fee
Growth Fund schedule at all asset levels.
AIM V. I. Large Cap 0.75% of the first $1B 0.695% of the first $250M 6/30/2006
Growth Fund 0.70% of the next $1B 0.67% of the next $250M
0.625% of the excess over $2B 0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Leisure 0.75% of average daily net assets 0.75% of the first $250M 6/30/2006
Fund 0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
AIM Variable Advisory Fee Reduction Schedule
Insurance Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM V. I. Mid Cap 0.725% of the first $500M The current advisory fee schedule 6/30/2006
Core Equity Fund 0.70% of the next $500M is lower than the uniform fee
0.675% of the next $500M schedule at all asset levels.
0.65% of the excess over $1.5B
AIM V. I. Premier 0.65% of the first $250M 0.695% of the first $250M 6/30/2006
Equity Fund 0.60% of the excess over $250M 0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Real Estate 0.90% of average daily net assets 0.75% of the first $250M 6/30/2006
Fund 0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Small Cap 0.85% of average daily net assets 0.745% of the first $250M 6/30/2006
Equity Fund 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
Exhibit to Uniform Advisory Fee MOA
---------------------------------------------------------------------------------------------------------
AIM Variable Advisory Fee Reduction Schedule
Insurance Funds - (Applied When Schedule Results in Committed
continued Current Advisory Fee Schedule Fees Lower than the Current Fee) Until
---------------------------------------------------------------------------------------------------------
AIM V. I. Small 0.75% of average daily net assets 0.745% of the first $250M 6/30/2006
Company Growth Fund 0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM V. I. Technology 0.75% of average daily net assets 0.75% of the first $250M 6/30/2006
Fund 0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Total 0.75% of average daily net assets 0.62% of the first $250M 6/30/2006
Return Fund 0.605% of the next $250M
0.59% of the next $500M
0.575% of the next $1.5B
0.56% of the next $2.5B
0.545% of the next $2.5B
0.53% of the next $2.5B
0.515% of the excess over $10B
AIM V. I. Utilities 0.60% of average daily net assets The current advisory fee schedule 6/30/2006
Fund is lower than the uniform fee
schedule at all asset levels.
|
August 19, 2005
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. 85 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and Amendment No. 85 to such Registration Statement under the 1940 Act (collectively, the "Registration Statement") relating to the registration of an indefinite number of Class R and Institutional Class shares of beneficial interest, par value $.001 per share (the "Shares"), of AIM Diversified Dividend Fund, a series portfolio of the Trust (the "Fund").
In connection with our giving this opinion, we have examined copies of the Trust's Restated Certificate of Trust, Amended and Restated Agreement and Declaration of Trust, as amended (the "Trust Agreement"), and resolutions of the Board of Trustees adopted December 10, 2003 and August 4, 2005, and originals or copies, certified or otherwise identified to our satisfaction, of such other documents, records and other instruments as we have deemed necessary or advisable for purposes of this opinion. We have also examined the prospectuses for the Fund, which are included in the Registration Statement, substantially in the form in which they are to be filed (the "Prospectuses"). As to various questions of fact material to our opinion, we have relied upon information provided by officers of the Trust.
The Prospectuses provide for issuance of the Shares from time to time at the net asset value thereof, plus any applicable sales charge. In connection with our giving this opinion, we assume that upon sale of the Shares the Trust will receive the net asset value thereof.
Based on the foregoing, we are of the opinion that the Shares to be offered for sale pursuant to the Prospectuses are duly authorized and, when sold, issued and paid for as described in the Prospectuses, will be validly issued, fully paid and nonassessable.
AIM Equity Funds
August 19, 2005
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 Statements of Additional Information for the Fund, which are included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP |
CONSENT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
We consent to the references to our firm under the caption "Financial Highlights" in the Prospectuses and "Auditors" in the Statements of Additional Information and to the use of our reports dated December 15, 2004, on the financial statements and financial highlights of AIM Aggressive Growth Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Diversified Dividend Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid Cap Growth Fund, AIM Select Basic Value Fund, and AIM Weingarten Fund as of and for the year ended October 31, 2004 in the Post-Effective Amendment Number 85 to the Registration Statement (Form N-1A No. 2-25469).
/s/ ERNST & YOUNG LLP
Houston, Texas
August 17, 2005
|
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
July 18, 2005
AIM Equity Funds
11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
RE: FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
OF AIM EMERGING GROWTH FUND
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Emerging Growth Fund ("Selling Fund") to AIM Aggressive Growth Fund ("Buying Fund"), each an investment portfolio of AIM Equity Funds ("Trust"), a Delaware statutory trust, in exchange for shares of beneficial interest of Buying Fund ("Buying Fund Shares") issued by Trust directly to Selling Fund Shareholders, and Buying FundSection s assumption of Selling FundSection s liabilities, and the termination of Selling Fund as a designated series of shares of Trust, all pursuant to the Plan of Reorganization that was adopted by the Board of Trustees of Trust as of March 22, 2005 (the "Plan") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Plan.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Plan, the exhibits attached thereto, the Registration Statement on Form N-14 filed by Trust on April 1, 2005 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have
assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations, warranties and covenants made by Trust in the Plan as well as on a letter of representation of even date that we have received from an officer of Trust, a copy of which is attached as Exhibit A hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of the knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Selling Fund to Buying Fund in exchange for Buying Fund Shares distributed directly to Selling Fund Shareholders, as provided in the Plan, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and Selling Fund and Buying Fund each will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Sections 357(a), 361(a) and 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund in exchange for Buying Fund Shares and the assumption of Selling Fund's liabilities, or on the distribution of Buying Fund Shares to Selling Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for their shares of Selling Fund.
5. In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his basis for the shares of Selling Fund exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such
Selling Fund Shareholder's holding period for the shares of Selling Fund exchanged therefor, provided that the Selling Fund Shareholder held such shares of Selling Fund as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund immediately prior to the Reorganization.
9. In accordance with Sections 381(a) and (b) of the Code and Sections 1.381(a)-1 and 1.381(b)-1 of the Income Tax Regulations, the tax year of Selling Fund will end on the date the Reorganization is consummated and Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code, and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Selling Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Selling Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.1(j) of the Plan, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent. We expressly authorize the Trust to file this opinion with the Securities and Exchange Commission as a post-effective amendment to the Registration Statement as required by the Plan.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
s/BSAI, LLP |
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
July 18, 2005
AIM Investment Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AIM Equity Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: Federal Income Tax Consequences of the Reorganization of AIM Libra Fund
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Libra Fund ("Selling Fund"), an investment portfolio of AIM Investment Funds ("Seller"), a Delaware statutory trust, to AIM Aggressive Growth Fund ("Buying Fund"), an investment portfolio of AIM Equity Funds ("Buyer"), a Delaware statutory trust, in exchange for shares of beneficial interest of Buying Fund ("Buying Fund Shares") issued by Buyer directly to Selling Fund Shareholders, and Buying Fund's assumption of Selling Fund's liabilities, and the termination of Selling Fund as a designated series of shares of Seller, all pursuant to the Agreement and Plan of Reorganization that was adopted by the Boards of Trustees of Seller and Buyer as of March 22, 2005 (the "Plan") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Plan.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Plan, the exhibits attached thereto, the Registration Statement on Form N-14 filed by Buyer on April 1, 2005 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have
assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations, warranties and covenants made by Seller and Buyer in the Plan as well as on letters of representation of even date that we have received from officers of Seller and Buyer, copies of which are attached as Exhibits A and B hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of the knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Selling Fund to Buying Fund in exchange for Buying Fund Shares distributed directly to Selling Fund Shareholders, as provided in the Plan, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and Selling Fund and Buying Fund each will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Sections 357(a), 361(a) and 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund in exchange for Buying Fund Shares and the assumption of Selling Fund's liabilities, or on the distribution of Buying Fund Shares to Selling Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for their shares of Selling Fund.
5. In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his basis for the shares of Selling Fund exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such Selling Fund
Shareholder's holding period for the shares of Selling Fund exchanged therefor, provided that the Selling Fund Shareholder held such shares of Selling Fund as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund immediately prior to the Reorganization.
9. In accordance with Sections 381(a) and (b) of the Code and Sections 1.381(a)-1 and 1.381(b)-1 of the Income Tax Regulations, the tax year of Selling Fund will end on the date the Reorganization is consummated and Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code, and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Selling Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Selling Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Plan, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent. We expressly authorize Buyer to file this opinion with the Securities and Exchange Commission as a post-effective amendment to the Registration Statement as required by the Plan.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
s/BSAI, LLP |
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
July 18, 2005
AIM Stock Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AIM Equity Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: Federal Income Tax Consequences of the Reorganization of AIM Mid Cap Stock Fund
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Mid Cap Stock Fund ("Selling Fund"), an investment portfolio of AIM Stock Funds ("Seller"), a Delaware statutory trust, to AIM Capital Development Fund ("Buying Fund"), an investment portfolio of AIM Equity Funds ("Buyer"), a Delaware statutory trust, in exchange for shares of beneficial interest of Buying Fund ("Buying Fund Shares") issued by Buyer directly to Selling Fund Shareholders, and Buying Fund's assumption of Selling Fund's liabilities, and the termination of Selling Fund as a designated series of shares of Seller, all pursuant to the Agreement and Plan of Reorganization that was adopted by the Boards of Trustees of Seller and Buyer as of March 22, 2005 (the "Plan") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Plan.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Plan, the exhibits attached thereto, the Registration Statement on Form N-14 filed by Buyer on April 1, 2005 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have
assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations, warranties and covenants made by Seller and Buyer in the Plan as well as on letters of representation of even date that we have received from officers of Seller and Buyer, copies of which are attached as Exhibits A and B hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of the knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Selling Fund to Buying Fund in exchange for Buying Fund Shares distributed directly to Selling Fund Shareholders, as provided in the Plan, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and Selling Fund and Buying Fund each will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Sections 357(a), 361(a) and 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund in exchange for Buying Fund Shares and the assumption of Selling Fund's liabilities, or on the distribution of Buying Fund Shares to Selling Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for their shares of Selling Fund.
5. In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his basis for the shares of Selling Fund exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such Selling Fund
Shareholder's holding period for the shares of Selling Fund exchanged therefor, provided that the Selling Fund Shareholder held such shares of Selling Fund as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund immediately prior to the Reorganization.
9. In accordance with Sections 381(a) and (b) of the Code and Sections 1.381(a)-1 and 1.381(b)-1 of the Income Tax Regulations, the tax year of Selling Fund will end on the date the Reorganization is consummated and Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code, and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Selling Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Selling Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Plan, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent. We expressly authorize Buyer to file this opinion with the Securities and Exchange Commission as a post-effective amendment to the Registration Statement as required by the Plan.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
s/BSAI, LLP |
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
July 18, 2005
AIM Equity Funds
11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
RE: FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
OF AIM DENT DEMOGRAPHIC TRENDS FUND
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Dent Demographic Trends Fund ("Selling Fund") to AIM Weingarten Fund ("Buying Fund"), each an investment portfolio of AIM Equity Funds ("Trust"), a Delaware statutory trust, in exchange for shares of beneficial interest of Buying Fund ("Buying Fund Shares") issued by Trust directly to Selling Fund Shareholders, and Buying FundSection s assumption of Selling FundSection s liabilities, and the termination of Selling Fund as a designated series of shares of Trust, all pursuant to the Plan of Reorganization that was adopted by the Board of Trustees of Trust as of March 22, 2005 (the "Plan") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Plan.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Plan, the exhibits attached thereto, the Registration Statement on Form N-14 filed by Trust on April 1, 2005 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have
assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations, warranties and covenants made by Trust in the Plan as well as on a letter of representation of even date that we have received from an officer of Trust, a copy of which is attached as Exhibit A hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of the knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Selling Fund to Buying Fund in exchange for Buying Fund Shares distributed directly to Selling Fund Shareholders, as provided in the Plan, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and Selling Fund and Buying Fund each will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Sections 357(a), 361(a) and 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund in exchange for Buying Fund Shares and the assumption of Selling Fund's liabilities, or on the distribution of Buying Fund Shares to Selling Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for their shares of Selling Fund.
5. In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his basis for the shares of Selling Fund exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such
Selling Fund Shareholder's holding period for the shares of Selling Fund exchanged therefor, provided that the Selling Fund Shareholder held such shares of Selling Fund as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund immediately prior to the Reorganization.
9. In accordance with Sections 381(a) and (b) of the Code and Sections 1.381(a)-1 and 1.381(b)-1 of the Income Tax Regulations, the tax year of Selling Fund will end on the date the Reorganization is consummated and Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code, and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Selling Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Selling Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.1(j) of the Plan, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent. We expressly authorize the Trust to file this opinion with the Securities and Exchange Commission as a post-effective amendment to the Registration Statement as required by the Plan.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
s/BSAI, LLP |
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
July 18, 2005
AIM Combination Stock & Bond Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AIM Equity Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: Federal Income Tax Consequences of the Reorganization of AIM Core Stock Fund
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Core Stock Fund ("Selling Fund"), an investment portfolio of AIM Combination Stock & Bond Funds ("Seller"), a Delaware statutory trust, to AIM Diversified Dividend Fund ("Buying Fund"), an investment portfolio of AIM Equity Funds ("Buyer"), a Delaware statutory trust, in exchange for shares of beneficial interest of Buying Fund ("Buying Fund Shares") issued by Buyer directly to Selling Fund Shareholders, and Buying Fund's assumption of Selling Fund's liabilities, and the termination of Selling Fund as a designated series of shares of Seller, all pursuant to the Agreement and Plan of Reorganization that was adopted by the Boards of Trustees of Seller and Buyer as of March 22, 2005 (the "Plan") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Plan.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Plan, the exhibits attached thereto, the Registration Statement on Form N-14 filed by Buyer on April 1, 2005 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have
assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
In rendering this opinion, we are relying upon the representations, warranties and covenants made by Seller and Buyer in the Plan as well as on letters of representation of even date that we have received from officers of Seller and Buyer, copies of which are attached as Exhibits A and B hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of the knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Selling Fund to Buying Fund in exchange
for Buying Fund Shares distributed directly to Selling Fund Shareholders, as
provided in the Plan, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and Selling Fund and Buying Fund each will be "a
party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Sections 357(a), 361(a) and 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund in exchange for Buying Fund Shares and the assumption of Selling Fund's liabilities, or on the distribution of Buying Fund Shares to Selling Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for their shares of Selling Fund.
5. In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his basis for the shares of Selling Fund exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such Selling Fund
Shareholder's holding period for the shares of Selling Fund exchanged therefor, provided that the Selling Fund Shareholder held such shares of Selling Fund as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund immediately prior to the Reorganization.
9. In accordance with Sections 381(a) and (b) of the Code and Sections 1.381(a)-1 and 1.381(b)-1 of the Income Tax Regulations, the tax year of Selling Fund will end on the date the Reorganization is consummated and Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code, and the regulations thereunder.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Selling Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Selling Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Plan, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent. We expressly authorize Buyer to file this opinion with the Securities and Exchange Commission as a post-effective amendment to the Registration Statement as required by the Plan.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
s/BSAI, LLP |
AMENDMENT NO. 12
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 15, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to delete two portfolios, AIM Core Strategies Fund and AIM U.S. Growth Fund;
NOW THEREFORE, 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
------ ------- ---------
AIM Core Stock Fund 0.10% 0.25% 0.35%
AIM 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
------ ------- ---------
AIM Advantage Health Sciences Fund 0.10% 0.25% 0.35%
AIM 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 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 Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
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 Select Basic Value 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 Small Company 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 0.10% 0.25% 0.35%
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 0.10% 0.25% 0.35%
AIM Global Growth Fund 0.10% 0.25% 0.35%
AIM International Core Equity Fund 0.10% 0.25% 0.35%
AIM International Growth Fund 0.05% 0.25% 0.30%
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.10% 0.25% 0.35%
AIM Global Health Care Fund 0.10% 0.25% 0.35%
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
------- ------- ---------
AIM Energy Fund 0.10% 0.25% 0.35%
AIM Financial Services Fund 0.10% 0.25% 0.35%
AIM Gold & Precious Metals Fund 0.10% 0.25% 0.35%
AIM Health Sciences Fund 0.10% 0.25% 0.35%
AIM Leisure Fund 0.10% 0.25% 0.35%
AIM Technology Fund 0.10% 0.25% 0.35%
AIM 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
------- ------- ---------
AIM Dynamics Fund 0.10% 0.25% 0.35%
AIM Mid Cap Stock Fund 0.10% 0.25% 0.35%
AIM 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 15, 2005
AMENDMENT NO. 13
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 29, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the addition of AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund; and to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation Fund;
NOW THEREFORE, 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
------ --- ---
AIM Core Stock Fund 0.10% 0.25% 0.35%
AIM 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
------ --- ---
AIM Advantage Health Sciences Fund 0.10% 0.25% 0.35%
AIM 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 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% |
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
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 Select Basic Value 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 Small Company 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 Conservative Allocation Fund 0.10% 0.25% 0.35%
AIM Global Equity Fund 0.10% 0.25% 0.35%
AIM Growth Allocation Fund 0.10% 0.25% 0.35%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Moderate Allocation Fund 0.10% 0.25% 0.35%
AIM Moderate Growth Allocation Fund 0.10% 0.25% 0.35%
AIM Moderately Conservative 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 0.10% 0.25% 0.35%
AIM Global Growth Fund 0.10% 0.25% 0.35%
AIM International Core Equity Fund 0.10% 0.25% 0.35%
AIM International Growth Fund 0.05% 0.25% 0.30%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Developing Markets Fund 0.10% 0.25% 0.35%
AIM Global Health Care Fund 0.10% 0.25% 0.35%
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 Global Real Estate Fund 0.10% 0.25% 0.35%
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
------ --- ---
AIM Energy Fund 0.10% 0.25% 0.35%
AIM Financial Services Fund 0.10% 0.25% 0.35%
AIM Gold & Precious Metals Fund 0.10% 0.25% 0.35%
AIM Health Sciences Fund 0.10% 0.25% 0.35%
AIM Leisure Fund 0.10% 0.25% 0.35%
AIM Technology Fund 0.10% 0.25% 0.35%
AIM 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
------ --- ---
AIM Dynamics Fund 0.10% 0.25% 0.35%
AIM Mid Cap Stock Fund 0.10% 0.25% 0.35%
AIM 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 29, 2005
AMENDMENT NO. 14
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 July 1, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to (i) reduce the Rule
12b-1 fee for each of AIM Core Stock Fund, AIM Total Return Fund, AIM Advantage
Health Sciences Fund, AIM Multi-Sector Fund, AIM Blue Chip Fund, AIM Capital
Development 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 Fund, AIM Basic
Balanced Fund, AIM European Small Company Fund, AIM Global Value Fund, AIM
International Small Company Fund, AIM Mid Cap Basic Value Fund, AIM Small Cap
Equity Fund, AIM Basic Value Fund, AIM Conservative Allocation Fund, AIM Global
Equity Fund, AIM Growth Allocation Fund, AIM Mid Cap Core Equity Fund, AIM
Moderate Allocation Fund, AIM Moderate Growth Allocation Fund, AIM Moderately
Conservative Allocation Fund, AIM Small Cap Growth Fund, AIM Asia Pacific Growth
Fund, AIM European Growth Fund, AIM Global Aggressive Growth Fund, AIM Global
Growth Fund, AIM International Core Equity Fund, 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 Global Real Estate Fund, AIM
Real Estate Fund, AIM Short Term Bond Fund, AIM Total Return Bond Fund, AIM
Energy Fund, AIM Financial Services Fund, AIM Gold & Precious Metals Fund, AIM
Health Sciences Fund, AIM Leisure Fund, AIM Technology Fund, AIM Opportunities I
Fund, AIM Opportunities II Fund, AIM Opportunities III Fund, AIM Dynamics Fund,
AIM Mid Cap Stock Fund and AIM Small Company Growth Fund from 0.35% to 0.25%;
(ii) reduce the minimum asset-based sales charge for such portfolios from 0.10%
to 0.00%; (iii) reduce the Rule 12b-1 fee for each of AIM Charter Fund, AIM
Constellation Fund, AIM Weingarten Fund and AIM International Growth Fund from
0.30% to 0.25%; and (iv) reduce the minimum asset-based sales charge for such
portfolios from 0.05% to 0.00%.
NOW THEREFORE, 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
------ --- ---
AIM Core Stock Fund 0.00% 0.25% 0.25%
AIM Total Return Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Advantage Health Sciences Fund 0.00% 0.25% 0.25%
AIM Multi-Sector Fund 0.00% 0.25% 0.25%
|
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 Blue Chip Fund 0.00% 0.25% 0.25%
AIM Capital Development Fund 0.00% 0.25% 0.25%
AIM Charter Fund 0.00% 0.25% 0.25%
AIM Constellation Fund 0.00% 0.25% 0.25%
AIM Dent Demographic Trends Fund 0.00% 0.25% 0.25%
AIM Diversified Dividend Fund 0.00% 0.25% 0.25%
AIM Emerging Growth Fund 0.00% 0.25% 0.25%
AIM Large Cap Basic Value Fund 0.00% 0.25% 0.25%
AIM Large Cap Growth Fund 0.00% 0.25% 0.25%
AIM Mid Cap Growth Fund 0.00% 0.25% 0.25%
AIM Select Basic Value Fund 0.00% 0.25% 0.25%
AIM Weingarten Fund 0.00% 0.25% 0.25%
|
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 0.00% 0.25% 0.25%
AIM European Small Company Fund 0.00% 0.25% 0.25%
AIM Global Value Fund 0.00% 0.25% 0.25%
AIM International Small Company Fund 0.00% 0.25% 0.25%
AIM Mid Cap Basic Value Fund 0.00% 0.25% 0.25%
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 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Basic Value Fund 0.00% 0.25% 0.25%
AIM Conservative Allocation Fund 0.00% 0.25% 0.25%
AIM Global Equity Fund 0.00% 0.25% 0.25%
AIM Growth Allocation Fund 0.00% 0.25% 0.25%
AIM Mid Cap Core Equity Fund 0.00% 0.25% 0.25%
AIM Moderate Allocation Fund 0.00% 0.25% 0.25%
AIM Moderate Growth Allocation Fund 0.00% 0.25% 0.25%
AIM Moderately Conservative Allocation Fund 0.00% 0.25% 0.25%
AIM Small Cap Growth Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Asia Pacific Growth Fund 0.00% 0.25% 0.25%
AIM European Growth Fund 0.00% 0.25% 0.25%
AIM Global Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Global Growth Fund 0.00% 0.25% 0.25%
AIM International Core Equity Fund 0.00% 0.25% 0.25%
AIM International Growth Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Developing Markets Fund 0.00% 0.25% 0.25%
AIM Global Health Care Fund 0.00% 0.25% 0.25%
AIM Libra Fund 0.00% 0.25% 0.25%
AIM Trimark Endeavor Fund 0.00% 0.25% 0.25%
AIM Trimark Fund 0.00% 0.25% 0.25%
AIM Trimark Small Companies Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Global Real Estate Fund 0.00% 0.25% 0.25%
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 0.00% 0.25% 0.25%
AIM Short Term Bond Fund 0.00% 0.25% 0.25%
AIM Total Return Bond Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Energy Fund 0.00% 0.25% 0.25%
AIM Financial Services Fund 0.00% 0.25% 0.25%
AIM Gold & Precious Metals Fund 0.00% 0.25% 0.25%
AIM Health Sciences Fund 0.00% 0.25% 0.25%
AIM Leisure Fund 0.00% 0.25% 0.25%
AIM Technology Fund 0.00% 0.25% 0.25%
AIM 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 0.00% 0.25% 0.25%
AIM Opportunities II Fund 0.00% 0.25% 0.25%
AIM Opportunities III Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Dynamics Fund 0.00% 0.25% 0.25%
AIM Mid Cap Stock Fund 0.00% 0.25% 0.25%
AIM Small Company Growth Fund 0.00% 0.25% 0.25%
|
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: July 1, 2005
AMENDMENT NO. 15
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 July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Balanced Fund, AIM Core Stock Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Health Sciences Fund, AIM Libra Fund, AIM Mid Cap Stock Fund and AIM Total Return Fund.
NOW THEREFORE, 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 COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Advantage Health Sciences Fund 0.00% 0.25% 0.25%
AIM Multi-Sector Fund 0.00% 0.25% 0.25%
|
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 Blue Chip Fund 0.00% 0.25% 0.25%
AIM Capital Development Fund 0.00% 0.25% 0.25%
AIM Charter Fund 0.00% 0.25% 0.25%
AIM Constellation Fund 0.00% 0.25% 0.25%
AIM Diversified Dividend Fund 0.00% 0.25% 0.25%
AIM Large Cap Basic Value Fund 0.00% 0.25% 0.25%
AIM Large Cap Growth Fund 0.00% 0.25% 0.25%
AIM Mid Cap Growth Fund 0.00% 0.25% 0.25%
AIM Select Basic Value Fund 0.00% 0.25% 0.25%
AIM Weingarten Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Basic Balanced Fund 0.00% 0.25% 0.25%
AIM European Small Company Fund 0.00% 0.25% 0.25%
AIM Global Value Fund 0.00% 0.25% 0.25%
AIM International Small Company Fund 0.00% 0.25% 0.25%
AIM Mid Cap Basic Value Fund 0.00% 0.25% 0.25%
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 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Basic Value Fund 0.00% 0.25% 0.25%
AIM Conservative Allocation Fund 0.00% 0.25% 0.25%
AIM Global Equity Fund 0.00% 0.25% 0.25%
AIM Growth Allocation Fund 0.00% 0.25% 0.25%
AIM Mid Cap Core Equity Fund 0.00% 0.25% 0.25%
AIM Moderate Allocation Fund 0.00% 0.25% 0.25%
AIM Moderate Growth Allocation Fund 0.00% 0.25% 0.25%
AIM Moderately Conservative Allocation Fund 0.00% 0.25% 0.25%
AIM Small Cap Growth Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Asia Pacific Growth Fund 0.00% 0.25% 0.25%
AIM European Growth Fund 0.00% 0.25% 0.25%
AIM Global Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Global Growth Fund 0.00% 0.25% 0.25%
AIM International Core Equity Fund 0.00% 0.25% 0.25%
AIM International Growth Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Developing Markets Fund 0.00% 0.25% 0.25%
AIM Global Health Care Fund 0.00% 0.25% 0.25%
AIM Trimark Endeavor Fund 0.00% 0.25% 0.25%
AIM Trimark Fund 0.00% 0.25% 0.25%
AIM Trimark Small Companies Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Global Real Estate Fund 0.00% 0.25% 0.25%
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 0.00% 0.25% 0.25%
AIM Short Term Bond Fund 0.00% 0.25% 0.25%
AIM Total Return Bond Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Energy Fund 0.00% 0.25% 0.25%
AIM Financial Services Fund 0.00% 0.25% 0.25%
AIM Gold & Precious Metals Fund 0.00% 0.25% 0.25%
AIM Leisure Fund 0.00% 0.25% 0.25%
AIM Technology Fund 0.00% 0.25% 0.25%
AIM 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 0.00% 0.25% 0.25%
AIM Opportunities II Fund 0.00% 0.25% 0.25%
AIM Opportunities III Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------ --- ---
AIM Dynamics Fund 0.00% 0.25% 0.25%
AIM Small Company Growth Fund 0.00% 0.25% 0.25%
|
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: July 18, 2005
AMENDMENT NO. 11
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 15, 2005, as follows:
WHEREAS, on February 25, 2005, the Board of Trustees of AIM Equity Funds approved the liquidation of AIM Core Strategies Fund and AIM U.S. Growth Fund;
NOW THEREFORE, 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 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 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 Select Basic Value 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 Small Company 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 Equity 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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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
------ ------- ---------
AIM Core Stock Fund 0.75% 0.25% 1.00%
AIM 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
------ ------- ---------
AIM Advantage Health Sciences Fund 0.75% 0.25% 1.00%
AIM Multi-Sector Fund 0.75% 0.25% 1.00%
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------ ------- ---------
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Health Sciences Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM Utilities Fund 0.75% 0.25% 1.00%
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------ ------- ---------
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Mid Cap Stock Fund 0.75% 0.25% 1.00%
AIM Small Company Growth Fund 0.75% 0.25% 1.00%"
|
AMENDMENT NO. 12
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 29, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the addition of AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund and to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation Fund;
NOW THEREFORE, 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 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 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 Select Basic Value 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 Small Company 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 Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Growth 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 Moderate Growth Allocation Fund 0.75% 0.25% 1.00%
AIM Moderately Conservative 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
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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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 Global Real Estate Fund 0.75% 0.25% 1.00%
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
--------- ------ --- ---
AIM Core Stock Fund 0.75% 0.25% 1.00%
AIM 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
--------- ------ --- ---
AIM Advantage Health
Sciences Fund 0.75% 0.25% 1.00%
AIM Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
--------- ------ --- ---
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Health Sciences Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
--------- ------ --- ---
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Mid Cap Stock Fund 0.75% 0.25% 1.00%
AIM Small Company Growth Fund 0.75% 0.25% 1.00%"
|
AMENDMENT NO. 13
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 July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Balanced Fund, AIM Core Stock Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Health Sciences Fund, AIM Libra Fund, AIM Mid Cap Stock Fund and AIM Total Return Fund;
NOW THEREFORE, 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 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 Diversified Dividend 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 Select Basic Value 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 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 Small Company 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 Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Growth 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 Moderate Growth Allocation Fund 0.75% 0.25% 1.00%
AIM Moderately Conservative 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
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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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 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 Global Real Estate Fund 0.75% 0.25% 1.00%
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%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------ --- ---
AIM Advantage Health
Sciences Fund 0.75% 0.25% 1.00%
AIM Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------ --- ---
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------ --- ---
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Small Company Growth Fund 0.75% 0.25% 1.00%"
|
AMENDMENT NO. 11
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 15, 2005, as follows:
WHEREAS, on February 25, 2005, the Board of Trustees of AIM Equity Funds approved the liquidation of AIM Core Strategies Fund and AIM U.S. Growth Fund;
NOW THEREFORE, 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
------ ------- ---------
AIM Core Stock Fund 0.75% 0.25% 1.00%
AIM 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
------ ------- ---------
AIM Advantage Health Sciences Fund 0.75% 0.25% 1.00%
AIM 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 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 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 Select Basic Value 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 Small Company 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%
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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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
------- ------- ---------
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Health Sciences Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM 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
------- ------- ---------
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Mid Cap Stock Fund 0.75% 0.25% 1.00%
AIM 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 15, 2005
AMENDMENT NO. 12
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 29, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the addition of AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund and to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation Fund;
NOW THEREFORE, 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
------- ------- ---------
AIM Core Stock Fund 0.75% 0.25% 1.00%
AIM 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
------- ------- ---------
AIM Advantage Health Sciences Fund 0.75% 0.25% 1.00%
AIM 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 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 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 Select Basic Value 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 Small Company 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 Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Growth 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 Moderate Growth Allocation Fund 0.75% 0.25% 1.00%
AIM Moderately Conservative Allocation 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 Core Equity Fund 0.75% 0.25% 1.00%
|
AIM International Growth 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 Global Real Estate Fund 0.75% 0.25% 1.00%
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
------- ------- ---------
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Health Sciences Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM 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
------- ------- ---------
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Mid Cap Stock Fund 0.75% 0.25% 1.00%
AIM 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 29, 2005
AMENDMENT NO. 13
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 July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Balanced Fund, AIM Core Stock Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund, AIM Health Sciences Fund, AIM Libra Fund, AIM Mid Cap Stock Fund and AIM Total Return Fund;
NOW THEREFORE, 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 COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------ --- ---
AIM Advantage Health Sciences Fund 0.75% 0.25% 1.00%
AIM 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 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 Diversified Dividend 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 Select Basic Value 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 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 Small Company 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 Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Growth 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 Moderate Growth Allocation Fund 0.75% 0.25% 1.00%
AIM Moderately Conservative Allocation 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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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 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 Global Real Estate Fund 0.75% 0.25% 1.00%
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
------ --- ---
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM 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
------ --- ---
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM 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: July 18, 2005
AMENDMENT NO. 7
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 29, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the addition of AIM Global Real Estate Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund and to change the name of AIM Aggressive Allocation Fund to AIM Growth Allocation Fund;
NOW THEREFORE, 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 Basic Value Fund 0.25% 0.25% 0.50%
AIM Conservative Allocation Fund 0.25% 0.25% 0.50%
AIM Growth 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 Moderate Growth Allocation Fund 0.25% 0.25% 0.50%
AIM Moderately Conservative 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 Core Equity Fund 0.25% 0.25% 0.50%
AIM International Growth 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 Global Real Estate Fund 0.25% 0.25% 0.50%
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%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 29, 2005
AMENDMENT NO. 14
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 October 17, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the addition of AIM Summit Fund;
NOW THEREFORE, 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 COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------ --- ---
AIM Advantage Health Sciences Fund 0.75% 0.25% 1.00%
AIM 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 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 Diversified Dividend 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 Select Basic Value 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 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 Small Company 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 Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Growth 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 Moderate Growth Allocation Fund 0.75% 0.25% 1.00%
AIM Moderately Conservative Allocation 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 Core Equity Fund 0.75% 0.25% 1.00%
AIM International Growth 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 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 Global Real Estate Fund 0.75% 0.25% 1.00%
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
------ --- ---
AIM Energy Fund 0.75% 0.25% 1.00%
AIM Financial Services Fund 0.75% 0.25% 1.00%
AIM Gold & Precious Metals Fund 0.75% 0.25% 1.00%
AIM Leisure Fund 0.75% 0.25% 1.00%
AIM Technology Fund 0.75% 0.25% 1.00%
AIM 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
------ --- ---
AIM Dynamics Fund 0.75% 0.25% 1.00%
AIM Small Company Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
AIM SUMMIT FUND CHARGE FEE FEE
------ --- ---
Class C Shares 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: October 17, 2005
AMENDMENT NO. 3
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 April 29, 2005, as follows:
WHEREAS, on February 25, 2005, the Board of Trustees of AIM Investment Funds approved the addition of AIM Global Health Care Fund to the Plan;
NOW THEREFORE, 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
------ --- ---
AIM International Core Equity Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------ --- ---
AIM Global Health Care 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
------ --- ---
AIM Energy Fund 0.00% 0.25% 0.25%
AIM Financial Services Fund 0.00% 0.25% 0.25%
AIM Gold & Precious Metals Fund 0.00% 0.25% 0.25%
AIM Health Sciences Fund 0.00% 0.25% 0.25%
AIM Leisure Fund 0.00% 0.25% 0.25%
AIM 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
------ --- ---
AIM Mid Cap Stock Fund 0.00% 0.25% 0.25%
AIM 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: April 29, 2005
AMENDMENT NO. 4
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 July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Health Sciences Fund and AIM Mid Cap Stock Fund;
NOW THEREFORE, 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
------ ------- ---------
AIM International Core Equity Fund 0.00% 0.25% 0.25%
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - INVESTOR CLASS SHARES CHARGE FEE FEE
------ ------- ---------
AIM Global Health Care 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
------ ------- ---------
AIM Energy Fund 0.00% 0.25% 0.25%
AIM Financial Services Fund 0.00% 0.25% 0.25%
AIM Gold & Precious Metals Fund 0.00% 0.25% 0.25%
AIM Leisure Fund 0.00% 0.25% 0.25%
AIM 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
------ --- ---
AIM 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: July 18, 2005
AMENDMENT NO. 3
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 July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Core Stock Fund and AIM Total Return Fund;
NOW THEREFORE, 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)
AIM EQUITY FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Diversified Dividend Fund
AIM Large Cap Growth Fund
AIM FUNDS GROUP
PORTFOLIO - INVESTOR CLASS SHARES
AIM Basic Balanced Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM SECTOR FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Technology Fund
AIM STOCK FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: July 18, 2005
[AIM INVESTMENTS LOGO] MASTER RELATED AGREEMENT TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A 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 Class A 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 (Class A 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: Gene L. Needles
Title: President
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: President
EFFECTIVE AUGUST 18, 2003. FUND (LISTED IN SCHEDULE A)
on behalf of the Class A Shares of each
Portfolio listed on Schedule A
By:
------------------------------------------
Name: Robert H. Graham
Title: President
|
SCHEDULE "A" TO
MASTER RELATED AGREEMENT
Maximum Aggregate
Fund Fee Rate* Plan Calculation Date
---- --------- ---------------------
AIM EQUITY FUNDS
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Blue Chip Fund A Shares 0.25(1) June 3, 1996
AIM Capital Development Fund A Shares 0.25(1) June 17, 1996
AIM Charter Fund A Shares 0.25(2) November 18, 1986
AIM Constellation Fund A Shares 0.25(2) September 9, 1986
AIM Diversified Dividend Fund A Shares 0.25(1) December 31, 2001
AIM Large Cap Basic Value Fund A Shares 0.25(1) July 15, 1999
AIM Large Cap Growth Fund A Shares 0.25(1) March 1, 1999
AIM Mid Cap Growth Fund A Shares 0.25(1) November 1, 1999
AIM Weingarten Fund A Shares 0.25(2) September 9, 1986
AIM FUNDS GROUP
AIM Basic Balanced Fund A Shares 0.25(1) September 28, 2001
AIM European Small Company Fund A Shares(4) 0.25(1) August 31, 2000
AIM Global Value Fund A Shares 0.25(1) December 29, 2000
AIM International Small Company Fund A Shares(4) 0.25(1) August 31, 2000
AIM Mid Cap Basic Value Fund A Shares 0.25(1) December 31, 2001
AIM Premier Equity Fund A Shares 0.25 July 1, 1992
AIM Select Equity Fund A Shares 0.25 July 1, 1992
AIM Small Cap Equity Fund A Shares 0.25(1) August 31, 2000
AIM GROWTH SERIES
AIM Basic Value Fund A Shares 0.25(1) May 29, 1998
AIM Conservative Allocation Fund A Shares 0.25(1) April 30, 2004
AIM Global Equity Fund A Shares 0.25(1,3) May 29, 1998
AIM Growth Allocation Fund A Shares 0.25(1) April 30, 2004
AIM Mid Cap Core Equity Fund A Shares(4) 0.25(1) May 29, 1998
AIM Moderate Allocation Fund A Shares 0.25(1) April 30, 2004
AIM Moderate Growth Allocation Fund A Shares 0.25(1) April 29, 2005
AIM Moderately Conservative Allocation Fund A Shares 0.25(1) April 29, 2005
AIM Small Cap Growth Fund A Shares(4) 0.25(1) May 29, 1998
|
(2) Effective July 1, 2005, this fee rate was reduced from 0.30% to 0.25%.
(3) Effective January 1, 2005, this fee rate was reduced from 0.50% to 0.35%.
(4) AIM European Small Company Fund, AIM International Small Company Fund, AIM Mid Cap Core Equity Fund, AIM Small Cap Growth Fund and AIM Real Estate Fund are closed to new investors.
Maximum Aggregate
Fund Fee Rate* Plan Calculation Date
---- --------- ---------------------
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund A Shares 0.25(1) November 1, 1997
AIM European Growth Fund A Shares 0.25(1) November 1, 1997
AIM Global Aggressive Growth Fund A Shares 0.25(1,3) September 15, 1994
AIM Global Growth Fund A Shares 0.25(1,3) September 15, 1994
AIM International Core Equity Fund A Shares 0.25(1) March 29, 2002
AIM International Growth Fund A Shares 0.25(2) May 21, 1992
AIM INVESTMENT FUNDS
AIM Developing Markets Fund A Shares 0.25(1,3) May 29, 1998
AIM Global Health Care Fund A Shares 0.25(1,3) May 29, 1998
AIM Trimark Endeavor Fund A Shares 0.25(1) November 4, 2003
AIM Trimark Fund A Shares 0.25(1) November 4, 2003
AIM Trimark Small Companies Fund A Shares 0.25(1) November 4, 2003
AIM INVESTMENT SECURITIES FUNDS
AIM Global Real Estate Fund A Shares 0.25(1) April 29, 2005
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Limited Maturity Treasury Fund A Shares 0.15 December 2, 1987
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Real Estate Fund A Shares(4) 0.25(1) August 4, 1997
AIM Short Term Bond Fund 0.25(1) April 30, 2004
AIM Total Return Bond Fund A Shares 0.25(1) December 31, 2001
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund A Shares 0.25(1) June 29, 1998
AIM Opportunities II Fund A Shares 0.25(1) December 30, 1998
AIM Opportunities III Fund A Shares 0.25(1) December 30, 1999
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund A Shares 0.25 December 22, 1997
AIM Tax-Exempt Cash Fund A Shares 0.25 July 1, 1992
|
(1) Effective July 1, 2005, this fee rate was reduced from 0.35% to 0.25%.
(2) Effective July 1, 2005, this fee rate was reduced from 0.30% to 0.25%.
(3) Effective January 1, 2005, this fee rate was reduced from 0.50% to 0.35%.
(4) AIM European Small Company Fund, AIM International Small Company Fund, AIM Mid Cap Core Equity Fund, AIM Small Cap Growth Fund and AIM Real Estate Fund are closed to new investors.
SCHEDULE "A" TO
RELATED AGREEMENT
Maximum Aggregate
Fund Fee Rate* Plan Calculation Date
---- --------- ---------------------
AIM COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund A Shares 0.25(1) May 15, 2001
AIM Multi-Sector Fund A Shares 0.25(1) August 30, 2002
AIM SECTOR FUNDS
AIM Energy Fund A Shares 0.25(1) March 29, 2002
AIM Financial Services Fund A Shares 0.25(1) March 29, 2002
AIM Gold & Precious Metals Fund A Shares 0.25(1) March 29, 2002
AIM Leisure Fund A Shares 0.25(1) March 29, 2002
AIM Technology Fund A Shares 0.25(1) March 29, 2002
AIM Utilities Fund A Shares 0.25(5) March 29, 2002
AIM STOCK FUNDS
AIM Dynamics Fund A Shares 0.25(1) March 29, 2002
AIM Small Company Growth Fund A Shares 0.25(1) March 29, 2002
|
* Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder is paid as an asset based sales charge, as these terms are defined under the rules of the NASD, Inc.
(5) Effective July 10, 2003, this fee rate was reduced from 0.35% to 0.25%.
AMENDMENT NO. 2
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 April 29, 2005, as follows:
WHEREAS, on February 25, 2005, the Boards of Trustees of AIM Funds Group and AIM Equity Funds approved the addition of AIM Basic Balanced Fund and AIM Diversified Dividend Fund, respectively, to the Plan;
NOW THEREFORE, 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)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Core Stock Fund
AIM Total Return Fund
AIM EQUITY FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Diversified Dividend Fund
AIM Large Cap Growth Fund
AIM FUNDS GROUP
PORTFOLIO - INVESTOR CLASS SHARES
AIM Basic Balanced Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM SECTOR FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Technology Fund
AIM STOCK FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 29, 2005
EIGHTH 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 P Shares -- shall mean those Shares designated as Class P Shares in the Fund's organizing documents.
(l) Class R Shares -- shall mean those Shares designated as Class R Shares in the Fund's organizing documents.
(m) 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.
(n) Distribution Fee -- a fee paid to the Distributor and/or financial intermediaries for Distribution Expenses.
(o) Distributor -- A I M Distributors, Inc. or Fund Management Company, as applicable.
(p) Fund -- those investment companies advised by A I M Advisors, Inc. which have adopted this Plan.
(q) 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.
(r) Institutional Money Market Fund Shares -- shall mean those Shares designated as Cash Management Class Shares, Corporate 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.
(s) Investor Class Shares -- shall mean those Shares designated as Investor Class Shares in the Fund's organizing documents.
(t) 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.
(u) Portfolio -- a series of the Shares of a Fund constituting a separate investment portfolio of the Fund.
(v) Prospectus -- the then currently effective prospectus and statement of additional information of a Portfolio.
(w) Service Fee -- a fee paid to the Distributor and/or financial intermediaries for the ongoing provision of personal services to Fund shareholders and/or the maintenance of shareholder accounts.
(x) Share -- a share of common stock or beneficial interest in a Fund, as applicable.
(y) 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 -- Class P Shares -- The Class P 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 -- 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.
(d) Transfer Agency and Shareholder Recordkeeping Fees -- All Shares except Class P Shares and Institutional Class Shares -- Each Class of Shares, except Class P Shares and 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.
(e) 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.
(f) 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.
(g) 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 Equity Fund (formerly AIM Global Trends Fund) acquired prior to June 1, 1998 which are continuously held in AIM Global Equity 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) if so provided in the Prospectus, 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), (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, and (iv) converted (the "Class K
Conversion") to Class A Shares on October 21 2005 at 5:00 p.m.
Eastern time, or such later date and time as the officers of the
Trust shall determine (the "Effective Time").
(g) Class P Shares. Class P Shares shall be (i) offered at net asset value, and (ii) 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) 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.
(i) 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.
(j) 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.
(k) 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, Class K 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 that are subject to a CDSC 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, Class K 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 and/or agreements relating thereto 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. Conversion of Class K Shares.
(a) Conversions on Basis of Relative Net Asset Value -- The Class K Conversion 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.
(b) Amendments to Plan of Distribution for Class A Shares -- If, prior to the Effective Time, 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 K Shares shall convert into Class A Shares of that Fund until the holders of Class K Shares of that Fund have also approved the proposed amendment. If the holders of such Class K 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.
10. 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.
11. 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 10 above.
12. 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 further amended and restated October 31, 2002, as further amended and restated effective July 21, 2003, as further amended and restated effective August 18, 2003, as further amended and restated May 12, 2004, as further amended and restated February 25, 2005, as further amended and restated June 30, 2005 and as further amended and restated August 4, 2005.