-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RHzUiQfz4iLE2xODi2EGmEkx7gtehuk4w97kHMjG6rIG5lQhvQfDss6YnWIuVD90 P9CAJ7X4XJmR0UyqMqK7Zw== 0000950129-03-006294.txt : 20031224 0000950129-03-006294.hdr.sgml : 20031224 20031223213308 ACCESSION NUMBER: 0000950129-03-006294 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20031224 EFFECTIVENESS DATE: 20031224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM EQUITY FUNDS CENTRAL INDEX KEY: 0000105377 IRS NUMBER: 132576643 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-01424 FILM NUMBER: 031072597 BUSINESS ADDRESS: STREET 1: ELEVEN GREENWAY PLZ STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7136261919 MAIL ADDRESS: STREET 1: 11 GREENWAY PLAZA STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: AIM EQUITY FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WEINGARTEN EQUITY FUND INC DATE OF NAME CHANGE: 19880929 FORMER COMPANY: FORMER CONFORMED NAME: COMPUFUND INC DATE OF NAME CHANGE: 19880616 N-CSR 1 h10324nvcsr.txt AIM EQUITY FUNDS - OCTOBER 31, 2003 OMB APPROVAL ------------------------- OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-1424 -------------------------------------------------------------------------- AIM Equity Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 11 Greenway Plaza, Suite 100 Houston, Texas 77046 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Robert H. Graham 11 Greenway Plaza, Suite 100 Houston, Texas 77046 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (713) 626-1919 ----------------------------- Date of fiscal year end: 10/31 ----------------- Date of reporting period: 10/31/03 ----------------- AIM AGGRESSIVE GROWTH FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. AIM LOGO --Servicemark-- ================================================================================ AIM AGGRESSIVE GROWTH FUND SEEKS TO PROVIDE GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Class R shares are available only to o The unmanaged Standard & Poor's presented is as of 10/31/03 and is based certain retirement plans. Please see the Composite Index of 500 Stocks (the S&P on total net assets. prospectus for more information. They 500--Registered Trademark--) is an index of are sold at net asset value, that is, common stocks frequently used as a general o AIM Aggressive Growth Fund's without up-front sales charges. measure of U.S. stock market performance. performance figures are historical, and they reflect fund expenses, the o The fund's investment return and o Bloomberg, Inc. is a well-known reinvestment of distributions, and principal value will fluctuate, so an independent financial research and changes in net asset value. investor's shares, when redeemed, may be reporting firm. worth more or less than their original o Had the advisor not waived fees and/or cost. o A direct investment cannot be made in reimbursed expenses in the past, returns an index. Unless otherwise indicated, for Class A and Class R shares would o Investing in small and mid-size index results include reinvested have been lower. companies may involve risks not dividends, and they do not reflect sales associated with investing in more charges or fund expenses. o When sales charges are included in established companies. Also, small performance figures, Class A share companies may have business risk, A description of the policies and performance reflects the maximum 5.50% significant stock price fluctuations and procedures that the fund uses to sales charge, and Class B and Class C illiquidity. determine how to vote proxies relating share performance reflects the to portfolio securities is available applicable contingent deferred sales o Industry classifications used in this without charge, upon request, by calling charge (CDSC) for the period involved. report are generally according to the 800-959-4246, or on the AIM Web site, The CDSC on Class B shares declines from Global Industry Classification Standard, AIMinvestments.com. 5% beginning at the time of purchase to which was developed by and is the 0% at the beginning of the seventh year. exclusive property and a service mark of The CDSC on Class C shares is 1% for the Morgan Stanley Capital International first year after purchase. The Inc. and Standard & Poor's. performance of the fund's share classes will differ due to different sales o The unmanaged Russell 2500TM Index charge structures and class expenses. measures the performance of the 2,500 smallest companies in the Russell o Effective 9/30/03, Class B shares are 3000(--Registered Trademark--) Index, not available as an investment for which measures the performance of the retirement plans maintained pursuant to 3,000 largest companies based on market Section 401 of the Internal Revenue capitalization. Code, including 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.
===================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to persons who have received a current prospectus of the fund. =====================================================
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--registered harmful short-term trading. These steps include: Trademark--: o Strengthening daily monitoring of trading activities. [PHOTO OF As you may be aware, there has been a ROBERT H. great deal of media coverage recently o Imposing redemption fees on additional funds we GRAHAM] about the mutual fund industry and believe may be vulnerable to harmful short-term allegations of improper activities by trading activity. ROBERT H. GRAHAM certain individuals and companies. As part of these widespread investigations, o Implementing an enhanced exchange policy (effective on INVESCO Funds Group (IFG), the former or about March 1, 2004) designed to limit exchanges [PHOTO OF adviser to certain INVESCO Funds, was between funds. MARK H. recently named as a defendant in WILLIAMSON] separate civil enforcement actions by o Employing an enhanced fair value pricing policy on the U.S. Securities and Exchange certain foreign securities as well as certain illiquid MARK H. WILLIAMSON Commission (SEC), the Office of the New securities. York Attorney General and the State of Colorado over an issue known as "market timing." A number of None of these tools alone, nor all of them taken private class or derivative actions also were filed in the together, eliminate the possibility of short-term trading wake of the regulators' actions. strategies that may be detrimental to a fund. Moreover, each of these tools involves judgments that are inherently Investors are understandably concerned and frustrated subjective. We have always sought and continue to seek to about these reports, and we would like to take this make these judgments to the best of our abilities and in a opportunity to assure you that, based on an investigation manner that we believe is consistent with the best interests conducted by an outside firm, IFG and its parent company, of our fund shareholders. And we remain committed to being AMVESCAP PLC, believe that these civil actions are without as vigilant as possible in the future to identify and merit. IFG is contesting the charges. address any harmful market timing investors who have the potential to harm our long-term fund shareholders. We encourage you to continue to monitor this situation, particularly as IFG has the opportunity to address the We sincerely hope these developments and the media allegations that have been made. Current information will be coverage surrounding them do not result in you or other posted on our Web site at AIMinvestments.com. We will shareholders losing confidence in AIM or INVESCO Funds. continue to communicate to you on our Web site about our Amidst this storm of controversy in the mutual fund finding, and the actions we are taking to protect and industry, we believe we can find encouragement in the promote the interests of our shareholders. The independent recovering economy and rising equity markets. As we write trustees of the funds are receiving regular reports from this letter, for instance, the S&P 500(--Registered Trademark--) their independent counsel and outside counsel hired by Index is up approximately 23% year-to-date. Although past AMVESCAP PLC, the parent of AIM and IFG, to perform an performance is no guarantee of future results, there appear to be ongoing investigation of market timing. indicators that the economy and stock markets are showing signs of welcomed improvement. We encourage you to read the A COMPLEX ISSUE enclosed discussion of your fund's performance during this past reporting period. Market timing is an investment technique not defined in any regulation that involves frequent short-term trading of OUR UNWAVERING COMMITMENT mutual fund shares, sometimes with a goal to exploit inefficiencies in the way mutual funds price their shares. At AIM Investments, we have never wavered in our commitment We recognize that fund management companies have tried to to helping you build solutions for your financial goals. Our deal with this complex issue in various ways and believe company was founded on a core principle of integrity, and we that industry-wide guidance is in order. To that end, we have always worked hard to earn the trust of our welcome SEC Chairman William Donaldson's pledge to adopt new shareholders. We are committed to doing all we can to rules designed to curb market timing abuses. Comprehensive maintain your trust and confidence. rulemaking is necessary and is the best way to establish new industry responsibilities designed to protect shareholders. Thank you for your continued participation in AIM We support practical rule changes and structural Investments. Please call your financial advisor or one of modifications that are fair, enforceable and, most our Client Service representatives at 800-959-4246 if you importantly, beneficial for investors. have any further questions or concerns about your AIM Investments account. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Sincerely, activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND DELIVERS POSITIVE RETURN weakest-performing sectors. This report covers the fiscal year ended generally considered the broadest measure While the performance of large-cap October 31, 2003. During this period, of economic activity, expanded at an growth and large-cap value stocks was your fund recorded positive returns. At annualized rate of 3.3% in the second similar, mid- and small-cap growth stocks net asset value, Class A shares produced quarter and 8.2% in the third quarter of generally outperformed their value a total return of 23.32%. By comparison, 2003. As of the close of the fiscal year, counterparts by wider margins. the Russell 2500 Index and the S&P 500 405 companies in the S&P 500 had reported Index returned 41.69% and 20.79%, third-quarter earnings. A total of 65.4% ========================================= respectively, over the same period. The of those companies reported earnings that fund's focus on mid-cap stocks helped it exceeded expectations compared to 60.2% WITHIN THE FINANCIAL outperform the S&P 500, which is composed for the third quarter of 2002, according mostly of large-cap stocks. We believe to Bloomberg. The job market remained SECTOR, FOR EXAMPLE, WE the fund underperformed the Russell 2500 weak, however, as the nation's Index because of the more defensive unemployment rate stood at 6.0% at the FOCUSED ON THE STOCKS positioning of the portfolio earlier in close of the reporting period. the fiscal year. OF BROKERAGE FIRMS AND For most of the fiscal year, the MARKET CONDITIONS Federal Reserve (the Fed) kept the INVESTMENT COMPANIES, short-term federal funds rate at 1.25%. Amid a backdrop of generally improving On June 25, 2003, it lowered that rate to WHICH GENERALLY PERFORM economic conditions, the S&P 500 produced 1.00%, its lowest level since 1958. At positive returns for the year ended the time, the Fed said it favored a more BETTER WHEN MARKETS October 31, 2003. The index rose in expansive monetary policy because the November 2002, then declined over the economy had not yet exhibited sustainable ARE RISING. next three months, dropping to its lowest growth. By October, the Fed reported that level for the fiscal year on March 11, economic expansion had increased and ========================================= 2003. The index then rallied, posting a consumer spending was generally stronger, gain of 32.67% from its low on March 11 although the job market remained weak. YOUR FUND through the end of the reporting period. During this rally, the United States and All sectors of the S&P 500 recorded At close of the fiscal year, the its allies took military action against gains for the fiscal year. Information portfolio's three largest sector Iraq and ousted the regime of Saddam technology, materials and utilities were weightings were in information Hussein. The nation's gross domestic the top-performing sectors while technology, consumer discretionary and product, telecommunication services, consumer health care. By comparison, consumer staples and health care were the discretionary, industrials and health care were the fund's three largest sector weightings at the beginning of the reporting period. The sectors that contributed the most to fund performance were information technology, consumer discretionary and health care while those that
================================================================================================================================= TOP 10 HOLDINGS* TOP 10 INDUSTRIES* 1. Legg Mason, Inc. 2.3% 1. Data Processing Services 8.4% 2. Zimmer Holdings, Inc. 2.2 2. Specialty Stores 6.0 3. Fisher Scientific International Inc. 2.2 3. Health Care Equipment 5.8 4. Danaher Corp. 2.1 4. Asset Management & Custody Banks 5.3 5. Fiserv, Inc. 2.0 5. Semiconductors 5.1 6. CDW Corp. 1.9 6. Oil & Gas Drilling 3.8 7. Fastnel Co. 1.9 7. Communications Equipment 3.7 8. Investors Financial Services Corp. 1.9 8. Application Software 3.6 9. ResMed Inc. 1.8 9. Investment Banking & Brokerage 3.3 10. Lehman Brothers Holdings Inc. 1.7 10. Health Care Services 3.0 *Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. =================================================================================================================================
2 contributed the least were materials, represented in the portfolio. KARL FARMER energy and financials. The portfolio was [PHOTO OF Prior to joining overweight in health care compared to the Stocks that enhanced performance KARL AIM in July of Russell 2500 Index and the S&P 500, so included UTStarcom, a producer of FARMER] 1998, Mr. Farmer its contribution to fund performance was telecommunications equipment, and Jacobs spent six years greater. Although materials was one of Engineering, a global technical services as a pension actuary with William M. the better-performing sectors, the company. In October, UTStarcom reported Mercer, Inc., focusing on retirement portfolio had little exposure to this its 15th consecutive quarter of record plans and other benefit programs. He sector, so its impact on performance was earnings. Jacobs Engineering also earned a B.S. in economics from Texas minimal. reported record earnings for its 2003 A&M University, graduating magna cum fiscal year. laude. He subsequently earned his M.B.A. At the beginning of market rally, the in finance from The Wharton School at fund was more defensively positioned, Detracting from performance was the University of Pennsylvania. He is a with a larger weighting in health care AmerisourceBergen, a pharmaceutical Chartered Financial Analyst. than the Russell 2500 Index. On the other supply company. Although the firm hand, the index had greater exposure to reported record earnings for the 2003 ROBERT M. KIPPES financials and information technology, fiscal year, we believe its stock was [PHOTO OF Mr. Kippes is lead two sectors that performed better than adversely affected by the general ROBERT M. portfolio manager of AIM health care at the outset of the market decline in value of KIPPES] Aggressive Growth Fund. rally. Consequently, the fund lagged the pharmaceutical-company stocks. The fund He joined AIM in 1989 as index. no longer owns this stock. a research assistant. In 1992, he was named head of equity research and became In response to improving economic IN CLOSING a portfolio manager later that year. In conditions, we increased the number of 1994 he was promoted to senior portfolio holdings in the portfolio, concentrating We continue to work diligently to meet manager. A Chicago native, Mr. Kippes on the stocks of more economically the fund's investment objective of received a B.B.A. in finance from sensitive companies. These stocks tend to growth of capital. Regardless of market Stephen F. Austin State University. perform better in an improving economic trends, we will adhere to the fund's environment. Within the financial sector, strategy as outlined in its prospectus. JAY K. RUSHIN for example, we focused on the stocks of We will continue to focus on the stocks [PHOTO OF Mr. Rushin began his brokerage firms and investment companies, of companies that we believe have JAY K. investment career in 1994 which generally perform better when favorable growth prospects. RUSHIN] when he joined AIM as a markets are rising. However, core-growth portfolio administrator. holdings, the stocks of companies with See important fund and index In 1996, he left AIM to work as an long-term records of attractive earnings, disclosures inside front cover. associate equity analyst at Prudential continued to be well Securities. He returned to AIM as an equity analyst on AIM's small-cap funds in 1998 and was promoted to senior analyst in 2000. He assumed his current duties as portfolio manager in 2001. A native of Gaithersburg, MD, Mr. Rushin holds a B.A. in English from Florida State University. He is a Chartered Financial Analyst. Assisted by Mid-Cap Growth Team
FUND VS. INDEXES - ---------------------------------------- Total Returns 10/31/02-10/31/03, excluding sales charge ======================================== CLASS A SHARES 23.32% PORTFOLIO COMPOSITION BY INVESTMENT TYPE CLASS B SHARES 22.44 ------------------------ Total Number of Holdings* 115 CLASS C SHARES 22.44 TOTAL NET ASSETS $2.33 Billion CLASS R SHARES 22.91 RUSSELL 2500 INDEX 41.69 Source: Lipper, Inc. *Excludes money market fund. ======================================== [GRAPHIC] For More Information Visit AIMinvestments.com 3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 5/1/84-10/31/03
DATE AIM AGGRESSIVE GROWTH FUND RUSSELL 2500 CLASS A SHARES INDEX 5/1/1984 9450 10000 10/31/1984 9584 10391 10/31/1985 10680 12368 10/31/1986 12467 15869 10/31/1987 10038 14274 10/31/1988 12099 18023 10/31/1989 14280 21324 10/31/1990 11410 16218 [MOUNTAIN CHART] 10/31/1991 21333 25594 10/31/1992 23382 28425 10/31/1993 35285 36336 10/31/1994 41974 36994 10/31/1995 59377 44906 10/31/1996 68138 53343 10/31/1997 79962 68877 10/31/1998 66885 63574 10/31/1999 93434 75017 10/31/2000 137878 92475 10/31/2001 82050 81227 10/31/2002 68908 73805 10/31/2003 84949 104573 Source: Lipper, Inc.
Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. ================================================================================================================================= AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------- In addition to returns as of the close ----------------------------------------- including sales charges, as of 10/31/03 of the fiscal year, industry regulations including sales charges, as of 9/30/03 require us to provide average annual CLASS A SHARES total returns as of 9/30/03, the most CLASS A SHARES 10 Years 8.57% recent calendar quarter-end. 10 Years 7.94% 5 Years 3.72 5 Years 2.90 1 Year 16.60 *The returns shown for these periods are 1 Year 12.72 the blended returns of the historical CLASS B SHARES performance of the fund's Class R shares CLASS B SHARES Inception (3/1/99) 2.19% since their inception and the restated Inception (3/1/99) 0.56% 1 Year 17.44 historical performance of the fund's 1 Year 13.37 Class A shares (for the periods prior to inception of the Class R shares) at net CLASS C SHARES asset value, adjusted to reflect the CLASS C SHARES Inception (3/1/99) 2.51% higher Rule 12b-1 fees applicable to the Inception (3/1/99) 0.87% 1 Year 21.44 Class R shares. The inception date of 1 Year 17.37 Class A shares is 5/1/84. The inception CLASS R SHARES* date of the fund's Class R shares is CLASS R SHARES* 10 Years 8.92% 6/3/02. Calculation of blended returns 10 Years 8.27% 5 Years 4.64 as of 10/31/03 is from 10/31/93. 5 Years 3.80 1 Year 22.91 Calculation of blended returns as of 1 Year 19.08 9/30/03 is from 9/30/93. =================================================================================================================================
4 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM AGGRESSIVE GROWTH FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (3/15/02) -2.92% those shown. All returns assume shareholders with a performance overview 1 Year 24.04 reinvestment of distributions at net specific to their holdings. asset value. Investment return and Institutional Class shares are offered principal value will fluctuate so your exclusively to institutional investors, AVERAGE ANNUAL TOTAL RETURNS shares, when redeemed, may be worth more including defined contribution plans For periods ended 9/30/03 or less than their original cost. See that meet certain criteria. Performance (most recent calendar quarter-end) full report for information on of Institutional Class shares will comparative benchmarks. If you have differ from performance of Class A INCEPTION (3/15/02) -7.84% questions, please consult your fund shares due to differing sales charges 1 Year 20.00 prospectus or call 800-451-4246. A I M and class expenses. Distributors, Inc.
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com AGRO-INS-1 10/03 AGGRESSIVE GROWTH FUND FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - --------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-97.79% AEROSPACE & DEFENSE-0.25% L-3 Communications Holdings, Inc.(a) 125,000 $ 5,842,500 =========================================================================== AIR FREIGHT & LOGISTICS-1.65% C.H. Robinson Worldwide, Inc. 500,000 19,590,000 - --------------------------------------------------------------------------- Expeditors International of Washington, Inc. 500,000 18,770,000 =========================================================================== 38,360,000 =========================================================================== APPAREL RETAIL-2.06% Aeropostale, Inc.(a) 200,000 6,170,000 - --------------------------------------------------------------------------- Chico's FAS, Inc.(a) 200,000 7,508,000 - --------------------------------------------------------------------------- Men's Wearhouse, Inc. (The)(a) 575,000 16,939,500 - --------------------------------------------------------------------------- Pacific Sunwear of California, Inc.(a) 750,000 17,317,500 =========================================================================== 47,935,000 =========================================================================== APPLICATION SOFTWARE-3.58% Cognos, Inc. (Canada)(a) 500,000 17,235,000 - --------------------------------------------------------------------------- Fair Isaac Corp.(a) 400,000 25,512,000 - --------------------------------------------------------------------------- Macromedia, Inc.(a) 600,000 11,466,000 - --------------------------------------------------------------------------- Mercury Interactive Corp.(a) 300,000 13,932,000 - --------------------------------------------------------------------------- PeopleSoft, Inc.(a) 575,000 11,937,000 - --------------------------------------------------------------------------- Reynolds & Reynolds Co. (The)-Class A 126,550 3,437,098 =========================================================================== 83,519,098 =========================================================================== ASSET MANAGEMENT & CUSTODY BANKS-5.28% Investors Financial Services Corp. 1,250,000 44,162,500 - --------------------------------------------------------------------------- Legg Mason, Inc. 650,000 54,112,500 - --------------------------------------------------------------------------- T. Rowe Price Group Inc. 600,000 24,690,000 =========================================================================== 122,965,000 =========================================================================== AUTO PARTS & EQUIPMENT-2.05% Gentex Corp. 927,000 36,199,350 - --------------------------------------------------------------------------- Lear Corp.(a) 200,000 11,618,000 =========================================================================== 47,817,350 =========================================================================== BIOTECHNOLOGY-0.61% Invitrogen Corp.(a) 225,000 14,307,750 =========================================================================== BROADCASTING & CABLE TV-0.88% Univision Communications Inc.-Class A(a) 425,000 14,428,750 - --------------------------------------------------------------------------- Westwood One, Inc.(a) 200,000 5,986,000 =========================================================================== 20,414,750 =========================================================================== COMMUNICATIONS EQUIPMENT-3.72% Avocent Corp.(a) 600,000 22,680,000 - ---------------------------------------------------------------------------
MARKET SHARES VALUE - ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED) Comverse Technology, Inc.(a) 1,000,000 $ 18,040,000 - --------------------------------------------------------------------------- Polycom, Inc.(a) 325,000 6,509,750 - --------------------------------------------------------------------------- QLogic Corp.(a) 225,000 12,611,250 - --------------------------------------------------------------------------- UTStarcom, Inc.(a) 850,000 26,775,000 =========================================================================== 86,616,000 =========================================================================== COMPUTER & ELECTRONICS RETAIL-1.50% Best Buy Co., Inc. 600,000 34,986,000 =========================================================================== CONSTRUCTION & ENGINEERING-1.69% Jacobs Engineering Group Inc.(a) 850,000 39,372,000 =========================================================================== CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.93% AGCO Corp.(a) 1,200,000 21,600,000 =========================================================================== CONSUMER ELECTRONICS-0.55% Harman International Industries, Inc. 100,000 12,820,000 =========================================================================== DATA PROCESSING & OUTSOURCED SERVICES-8.39% Affiliated Computer Services, Inc.-Class A(a) 500,000 24,465,000 - --------------------------------------------------------------------------- Alliance Data Systems Corp.(a) 850,000 23,613,000 - --------------------------------------------------------------------------- CheckFree Corp.(a) 500,000 13,765,000 - --------------------------------------------------------------------------- DST Systems, Inc.(a) 300,000 11,346,000 - --------------------------------------------------------------------------- Fiserv, Inc.(a) 1,300,000 45,916,000 - --------------------------------------------------------------------------- Iron Mountain Inc.(a) 500,000 19,120,000 - --------------------------------------------------------------------------- Paychex, Inc. 750,000 29,190,000 - --------------------------------------------------------------------------- SunGard Data Systems Inc.(a) 1,000,000 28,050,000 =========================================================================== 195,465,000 =========================================================================== DIVERSIFIED COMMERCIAL SERVICES-1.83% Apollo Group, Inc.-Class A(a) 400,000 25,412,000 - --------------------------------------------------------------------------- Corporate Executive Board Co. (The)(a) 300,000 15,303,000 - --------------------------------------------------------------------------- CoStar Group Inc.(a) 52,100 1,961,565 =========================================================================== 42,676,565 =========================================================================== ELECTRICAL COMPONENTS & EQUIPMENT-0.67% Rockwell Automation, Inc. 500,000 15,525,000 =========================================================================== ELECTRONIC EQUIPMENT MANUFACTURERS-0.96% National Instruments Corp. 250,000 10,645,000 - --------------------------------------------------------------------------- Waters Corp.(a) 375,000 11,786,250 =========================================================================== 22,431,250 ===========================================================================
F-1
MARKET SHARES VALUE - --------------------------------------------------------------------------- EMPLOYMENT SERVICES-1.22% Robert Half International Inc.(a) 1,200,000 $ 28,332,000 =========================================================================== GENERAL MERCHANDISE STORES-0.50% 99 Cents Only Stores(a) 200,000 5,954,000 - --------------------------------------------------------------------------- Dollar Tree Stores, Inc.(a) 150,000 5,727,000 =========================================================================== 11,681,000 =========================================================================== HEALTH CARE DISTRIBUTORS-2.47% Omnicare, Inc. 1,000,000 38,340,000 - --------------------------------------------------------------------------- Patterson Dental Co.(a) 300,000 19,194,000 =========================================================================== 57,534,000 =========================================================================== HEALTH CARE EQUIPMENT-5.80% ResMed Inc.(a) 1,000,000 41,770,000 - --------------------------------------------------------------------------- St. Jude Medical, Inc.(a) 400,000 23,264,000 - --------------------------------------------------------------------------- Varian Medical Systems, Inc.(a) 300,000 19,182,000 - --------------------------------------------------------------------------- Zimmer Holdings, Inc.(a) 800,000 51,048,000 =========================================================================== 135,264,000 =========================================================================== HEALTH CARE FACILITIES-1.19% Health Management Associates, Inc.-Class A 1,250,000 27,687,500 =========================================================================== HEALTH CARE SERVICES-3.02% Caremark Rx, Inc.(a) 1,250,000 31,312,500 - --------------------------------------------------------------------------- Express Scripts, Inc.(a) 500,000 27,460,000 - --------------------------------------------------------------------------- Lincare Holdings Inc.(a) 300,000 11,682,000 =========================================================================== 70,454,500 =========================================================================== HEALTH CARE SUPPLIES-2.86% Coopers Cos., Inc. (The) 375,000 16,293,750 - --------------------------------------------------------------------------- Fisher Scientific International Inc.(a) 1,250,000 50,312,500 =========================================================================== 66,606,250 =========================================================================== INDUSTRIAL CONGLOMERATES-0.22% Carlisle Cos. Inc. 88,300 5,064,005 =========================================================================== INDUSTRIAL MACHINERY-2.78% Danaher Corp. 600,000 49,710,000 - --------------------------------------------------------------------------- Eaton Corp. 150,000 15,036,000 =========================================================================== 64,746,000 =========================================================================== INTERNET RETAIL-0.24% eBay Inc.(a) 100,000 5,594,000 =========================================================================== INVESTMENT BANKING & BROKERAGE-3.34% Bear Stearns Cos. Inc. (The) 500,000 38,125,000 - --------------------------------------------------------------------------- Lehman Brothers Holdings Inc. 550,000 39,600,000 =========================================================================== 77,725,000 =========================================================================== IT CONSULTING & OTHER SERVICES-0.96% CACI International Inc.-Class A(a) 450,000 22,288,500 ===========================================================================
MARKET SHARES VALUE - ---------------------------------------------------------------------------
LEISURE PRODUCTS-0.84% Marvel Enterprises, Inc.(a) 666,200 $ 19,619,590 =========================================================================== MANAGED HEALTH CARE-0.25% Aetna Inc. 100,000 5,741,000 =========================================================================== MULTI-LINE INSURANCE-0.21% HCC Insurance Holdings, Inc. 167,600 4,883,864 =========================================================================== OFFICE SERVICES & SUPPLIES-0.61% Moore Wallace Inc. (Canada)(a) 1,000,000 14,300,000 =========================================================================== OIL & GAS DRILLING-3.77% ENSCO International Inc. 1,000,000 26,350,000 - --------------------------------------------------------------------------- Nabors Industries, Ltd. (Bermuda)(a) 700,000 26,460,000 - --------------------------------------------------------------------------- Patterson-UTI Energy, Inc.(a) 800,000 22,872,000 - --------------------------------------------------------------------------- Pride International, Inc.(a) 750,000 12,285,000 =========================================================================== 87,967,000 =========================================================================== OIL & GAS EQUIPMENT & SERVICES-2.24% Cooper Cameron Corp.(a) 450,000 19,269,000 - --------------------------------------------------------------------------- National-Oilwell, Inc.(a) 750,000 14,302,500 - --------------------------------------------------------------------------- Smith International, Inc.(a) 500,000 18,615,000 =========================================================================== 52,186,500 =========================================================================== OIL & GAS EXPLORATION & PRODUCTION-1.33% Newfield Exploration Co.(a) 425,000 16,885,250 - --------------------------------------------------------------------------- XTO Energy, Inc. 600,000 14,202,000 =========================================================================== 31,087,250 =========================================================================== PHARMACEUTICALS-1.91% Medicis Pharmaceutical Corp.-Class A 500,000 31,675,000 - --------------------------------------------------------------------------- Taro Pharmaceutical Industries Ltd. (Israel)(a) 200,000 12,850,000 =========================================================================== 44,525,000 =========================================================================== PUBLISHING-1.64% Belo Corp.-Class A 500,000 13,630,000 - --------------------------------------------------------------------------- Getty Images, Inc.(a) 550,000 24,585,000 =========================================================================== 38,215,000 =========================================================================== REGIONAL BANKS-0.74% Southwest Bancorp. of Texas, Inc. 300,000 10,773,000 - --------------------------------------------------------------------------- TCF Financial Corp. 125,000 6,522,500 =========================================================================== 17,295,500 =========================================================================== RESTAURANTS-2.35% Brinker International, Inc.(a) 500,000 15,915,000 - --------------------------------------------------------------------------- CBRL Group, Inc. 71,500 2,770,625 - --------------------------------------------------------------------------- Cheesecake Factory Inc. (The)(a) 300,000 11,982,000 - --------------------------------------------------------------------------- Sonic Corp.(a) 300,050 8,344,391 - ---------------------------------------------------------------------------
F-2
MARKET SHARES VALUE - --------------------------------------------------------------------------- RESTAURANTS-(CONTINUED) Starbucks Corp.(a) 500,000 $ 15,800,000 =========================================================================== 54,812,016 =========================================================================== SEMICONDUCTORS-5.13% Altera Corp.(a) 750,000 15,172,500 - --------------------------------------------------------------------------- AMIS Holdings, Inc.(a) 343,300 6,917,495 - --------------------------------------------------------------------------- Broadcom Corp.-Class A(a) 350,000 11,182,500 - --------------------------------------------------------------------------- Integrated Circuit Systems, Inc.(a) 350,000 11,749,500 - --------------------------------------------------------------------------- Intersil Corp.-Class A 500,000 12,895,000 - --------------------------------------------------------------------------- Linear Technology Corp. 575,000 24,500,750 - --------------------------------------------------------------------------- Marvell Technology Group Ltd. (Bermuda)(a) 400,000 17,548,000 - --------------------------------------------------------------------------- Microchip Technology Inc. 600,000 19,626,000 =========================================================================== 119,591,745 =========================================================================== SPECIALIZED FINANCE-1.60% Chicago Mercantile Exchange (The) 250,000 16,987,500 - --------------------------------------------------------------------------- Moody's Corp. 350,000 20,240,500 =========================================================================== 37,228,000 =========================================================================== SPECIALTY CHEMICALS-0.72% Valspar Corp. (The) 350,000 16,695,000 =========================================================================== SPECIALTY STORES-5.99% Bed Bath & Beyond Inc.(a) 750,000 31,680,000 - --------------------------------------------------------------------------- CarMax, Inc.(a) 300,000 9,453,000 - --------------------------------------------------------------------------- Pep Boys-Manny, Moe & Jack 150,000 2,884,500 - --------------------------------------------------------------------------- Regis Corp. 303,000 11,520,060 - --------------------------------------------------------------------------- Staples, Inc.(a) 1,300,000 34,866,000 - --------------------------------------------------------------------------- Tractor Supply Co.(a) 500,000 20,955,000 - --------------------------------------------------------------------------- Williams-Sonoma, Inc.(a) 800,000 28,264,000 =========================================================================== 139,622,560 =========================================================================== SYSTEMS SOFTWARE-1.42% Adobe Systems Inc. 300,000 13,152,000 - --------------------------------------------------------------------------- Symantec Corp.(a) 300,000 19,995,000 =========================================================================== 33,147,000 ===========================================================================
MARKET SHARES VALUE
- --------------------------------------------------------------------------- TECHNOLOGY DISTRIBUTORS-1.93% CDW Corp. 750,000 $ 45,037,500 =========================================================================== THRIFTS & MORTGAGE FINANCE-2.01% Doral Financial Corp. (Puerto Rico) 350,000 17,675,000 - --------------------------------------------------------------------------- New York Community Bancorp, Inc. 400,000 14,480,000 - --------------------------------------------------------------------------- Radian Group Inc. 278,600 14,737,940 =========================================================================== 46,892,940 =========================================================================== TRADING COMPANIES & DISTRIBUTORS-1.91% Fastenal Co. 1,000,000 44,470,000 =========================================================================== Total Common Stocks & Other Equity Interests (Cost $1,724,243,328) 2,278,947,483 =========================================================================== MONEY MARKET FUNDS-3.24% STIC Liquid Assets Portfolio(b) 37,783,111 37,783,111 - --------------------------------------------------------------------------- STIC Prime Portfolio(b) 37,783,111 37,783,111 =========================================================================== Total Money Market Funds (Cost $75,566,222) 75,566,222 =========================================================================== TOTAL INVESTMENTS-101.03% (excluding investments purchased with cash collateral from securities loaned) (Cost $1,799,809,550) 2,354,513,705 =========================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-22.43% STIC Liquid Assets Portfolio(b)(c) 261,330,936 261,330,936 - --------------------------------------------------------------------------- STIC Prime Portfolio(b)(c) 261,330,936 261,330,936 =========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $522,661,872) 522,661,872 =========================================================================== TOTAL INVESTMENTS-123.46% (Cost $2,322,471,422) 2,877,175,577 =========================================================================== OTHER ASSETS LESS LIABILITIES-(23.46%) (546,645,008) =========================================================================== NET ASSETS-100.00% $2,330,530,569 ___________________________________________________________________________ ===========================================================================
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $1,724,243,328)* $ 2,278,947,483 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $598,228,094) 598,228,094 - ------------------------------------------------------------ Cash 1,198,825 - ------------------------------------------------------------ Receivables for: Investments sold 49,660,832 - ------------------------------------------------------------ Fund shares sold 1,158,837 - ------------------------------------------------------------ Dividends 324,508 - ------------------------------------------------------------ Investment for deferred compensation plan 102,238 - ------------------------------------------------------------ Other assets 65,615 ============================================================ Total assets 2,929,686,432 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 68,040,705 - ------------------------------------------------------------ Fund shares reacquired 5,872,672 - ------------------------------------------------------------ Deferred compensation plan 102,238 - ------------------------------------------------------------ Collateral upon return of securities loaned 522,661,872 - ------------------------------------------------------------ Accrued distribution fees 697,507 - ------------------------------------------------------------ Accrued trustees' fees 133,783 - ------------------------------------------------------------ Accrued transfer agent fees 1,310,137 - ------------------------------------------------------------ Accrued operating expenses 336,949 ============================================================ Total liabilities 599,155,863 ============================================================ Net assets applicable to shares outstanding $ 2,330,530,569 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 2,823,914,593 - ------------------------------------------------------------ Undistributed net investment income (loss) (235,341) - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities (1,047,852,838) - ------------------------------------------------------------ Unrealized appreciation of investment securities 554,704,155 ============================================================ $ 2,330,530,569 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 1,983,599,801 ____________________________________________________________ ============================================================ Class B $ 262,098,347 ____________________________________________________________ ============================================================ Class C $ 81,079,129 ____________________________________________________________ ============================================================ Class R $ 1,164,264 ____________________________________________________________ ============================================================ Institutional Class $ 2,589,028 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 220,535,728 ____________________________________________________________ ============================================================ Class B 30,408,663 ____________________________________________________________ ============================================================ Class C 9,408,893 ____________________________________________________________ ============================================================ Class R 129,953 ____________________________________________________________ ============================================================ Institutional Class 285,210 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 8.99 - ------------------------------------------------------------ Offering price per share: (Net asset value of $8.99 divided by 94.50%) $ 9.51 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 8.62 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 8.62 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 8.96 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 9.08 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $513,411,417 were on loan to brokers. See Notes to Financial Statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $25,050) $ 5,010,187 - -------------------------------------------------------------------------- Dividends from affiliated money market funds 966,680 - -------------------------------------------------------------------------- Securities lending 1,187,469 ========================================================================== Total investment income 7,164,336 ========================================================================== EXPENSES: Advisory fees 13,458,191 - -------------------------------------------------------------------------- Administrative services fees 453,825 - -------------------------------------------------------------------------- Custodian fees 148,987 - -------------------------------------------------------------------------- Distribution fees -- Class A 4,512,997 - -------------------------------------------------------------------------- Distribution fees -- Class B 2,320,962 - -------------------------------------------------------------------------- Distribution fees -- Class C 720,696 - -------------------------------------------------------------------------- Distribution fees -- Class R 2,722 - -------------------------------------------------------------------------- Transfer agent fees 7,339,962 - -------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 69 - -------------------------------------------------------------------------- Trustees' fees 45,972 - -------------------------------------------------------------------------- Other 767,241 ========================================================================== Total expenses 29,771,624 ========================================================================== Less: Fees waived and expense offset arrangements (51,005) ========================================================================== Net expenses 29,720,619 ========================================================================== Net investment income (loss) (22,556,283) ========================================================================== REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES: Net realized gain from investment securities 61,969,001 - -------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities 408,592,565 ========================================================================== Net gain from investment securities 470,561,566 ========================================================================== Net increase in net assets resulting from operations $448,005,283 __________________________________________________________________________ ==========================================================================
See Notes to Financial Statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (22,556,283) $ (29,737,807) - ---------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities 61,969,001 (454,400,428) - ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities 408,592,565 70,396,760 ============================================================================================== Net increase (decrease) in net assets resulting from operations 448,005,283 (413,741,475) ============================================================================================== Share transactions-net: Class A (198,927,862) (368,156,521) - ---------------------------------------------------------------------------------------------- Class B (13,011,938) (19,209,543) - ---------------------------------------------------------------------------------------------- Class C (6,417,966) (8,446,307) - ---------------------------------------------------------------------------------------------- Class R 879,113 133,795 - ---------------------------------------------------------------------------------------------- Institutional Class 1,928,983 145,043 ============================================================================================== Net increase (decrease) in net assets resulting from share transactions (215,549,670) (395,533,533) ============================================================================================== Net increase (decrease) in net assets 232,455,613 (809,275,008) ============================================================================================== NET ASSETS: Beginning of year 2,098,074,956 2,907,349,964 ============================================================================================== End of year (including undistributed net investment income (loss) of $(235,341) and $(208,878) for 2003 and 2002, respectively) $2,330,530,569 $2,098,074,956 ______________________________________________________________________________________________ ==============================================================================================
NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to achieve long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and F-6 commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $150 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $16,521 The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $453,825 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") formerly known as A I M Funds Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $3,664,649 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $4,512,997, $2,320,962 $720,696 and $2,722, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $247,028 in front-end sales commissions from the sale of Class A shares and $54,841, $0, $8,182 and $0 from Class A, F-7 Class B and Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $33,957 and reductions in custodian fees of $527 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $34,484. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $5,599 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $513,411,417 were on loan to brokers. The loans were secured by cash collateral of $522,661,872 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $1,187,469 for securities lending. NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: - ------------------------------ There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: - ----------------------------- As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 547,008,172 - ------------------------------------------------------------ Temporary book/tax differences (235,341) - ------------------------------------------------------------ Capital loss carryforward (1,040,156,855) - ------------------------------------------------------------ Shares of beneficial interest 2,823,914,593 ============================================================ Total net assets $ 2,330,530,569 ____________________________________________________________ ============================================================
F-8 The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ------------------------------------------------------------ October 31, 2009 $ 576,417,831 - ------------------------------------------------------------ October 31, 2010 463,739,024 ============================================================ Total capital loss carryforward $1,040,156,855 ____________________________________________________________ ============================================================
NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $1,591,626,604 and $1,744,731,182, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ----------------------------------------------------------- Aggregate unrealized appreciation of investment securities $554,050,882 - ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (7,042,710) =========================================================== Net unrealized appreciation of investment securities $547,008,172 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $2,330,167,405.
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES As a result of differing book/tax treatment of the disallowance of net operating losses on October 31, 2003, undistributed net investment income (loss) was increased by $22,529,820, undistributed net realized gains remained unchanged and shares of beneficial interest decreased by $22,529,820. This reclassification had no effect on the net assets of the Fund. NOTE 10--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2003 2002 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 35,791,336 $ 277,895,468 44,066,976 $ 384,377,775 - -------------------------------------------------------------------------------------------------------------------------- Class B 4,508,173 33,128,293 6,507,666 55,189,130 - -------------------------------------------------------------------------------------------------------------------------- Class C 2,072,120 15,430,661 2,934,855 24,752,456 - -------------------------------------------------------------------------------------------------------------------------- Class R* 162,296 1,283,289 18,814 133,820 - -------------------------------------------------------------------------------------------------------------------------- Institutional Class** 275,456 2,002,058 18,865 145,043 ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 337,998 2,617,107 182,647 1,563,408 - -------------------------------------------------------------------------------------------------------------------------- Class B (351,540) (2,617,107) (188,487) (1,563,408) ========================================================================================================================== Reacquired: Class A (62,095,032) (479,440,437) (87,574,389) (754,097,704) - -------------------------------------------------------------------------------------------------------------------------- Class B (5,947,043) (43,523,124) (8,963,129) (72,835,265) - -------------------------------------------------------------------------------------------------------------------------- Class C (2,982,429) (21,848,627) (4,058,002) (33,198,763) - -------------------------------------------------------------------------------------------------------------------------- Class R* (51,154) (404,176) (3) (25) - -------------------------------------------------------------------------------------------------------------------------- Institutional Class** (9,111) (73,075) -- -- ========================================================================================================================== (28,288,930) $(215,549,670) (47,054,187) $(395,533,533) __________________________________________________________________________________________________________________________ ==========================================================================================================================
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. F-9 NOTE 11--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A(a) --------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.30 $ 8.68 $ 18.41 $ 13.90 $ 10.04 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.07)(b) (0.09)(b) (0.09)(b) (0.13) (0.09) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.76 (1.29) (6.34) 11.08 4.05 ================================================================================================================================= Total from investment operations 1.69 (1.38) (6.43) 10.95 3.96 ================================================================================================================================= Less distributions: Distributions from net realized gains -- -- (3.30) (6.44) (0.10) ================================================================================================================================= Net asset value, end of period $ 8.99 $ 7.30 $ 8.68 $ 18.41 $ 13.90 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(c) 23.15% (15.90)% (40.51)% 47.53% 39.73% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,983,600 $1,798,318 $2,516,407 $4,444,515 $2,808,451 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 1.30%(d) 1.32% 1.17% 1.04% 1.09% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.96)%(d) (1.00)% (0.79)% (0.77)% (0.69)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 78% 68% 89% 79% 75% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Per share information and distributions prior to October 31, 1999 have been restated to reflect a 4 for 1 stock split, effected in the form of a 300% stock dividend, on July 14, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $1,805,198,791.
CLASS B(a) ---------------------------------------------------------------- MARCH 1, 1999 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 7.04 $ 8.45 $ 18.12 $ 13.81 $ 10.85 - ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.13)(b) (0.15)(b) (0.17)(b) (0.29) (0.07) - ------------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.71 (1.26) (6.20) 11.04 3.03 ============================================================================================================================== Total from investment operations 1.58 (1.41) (6.37) 10.75 2.96 ============================================================================================================================== Less distributions: Distributions from net realized gains -- -- (3.30) (6.44) -- ============================================================================================================================== Net asset value, end of period $ 8.62 $ 7.04 $ 8.45 $ 18.12 $ 13.81 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Total return(c) 22.44% (16.69)% (40.90)% 46.29% 27.27% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $262,098 $226,806 $294,303 $374,010 $24,914 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratio of expenses to average net assets 2.05%(d) 2.07% 1.94% 1.86% 2.08%(e) ============================================================================================================================== Ratio of net investment income (loss) to average net assets (1.71)%(d) (1.75)% (1.55)% (1.59)% (1.68)%(e) ______________________________________________________________________________________________________________________________ ============================================================================================================================== Portfolio turnover rate(f) 78% 68% 89% 79% 75% ______________________________________________________________________________________________________________________________ ==============================================================================================================================
(a) Per share information and distributions prior to October 31, 1999 have been restated to reflect a 4 for 1 stock split, effected in the form of a 300% stock dividend, on July 14, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (d) Ratios are based on average daily net assets of $232,096,158. (e) Annualized. (f) Not annualized for periods less than one year. F-10 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C(a) ------------------------------------------------------------- MARCH 1, 1999 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO -------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.04 $ 8.45 $ 18.11 $ 13.81 $10.85 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.13)(b) (0.15)(b) (0.17)(b) (0.29) (0.07) - --------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.71 (1.26) (6.19) 11.03 3.03 =========================================================================================================================== Total from investment operations 1.58 (1.41) (6.36) 10.74 2.96 =========================================================================================================================== Less distributions: Distributions from net realized gains -- -- (3.30) (6.44) -- =========================================================================================================================== Net asset value, end of period $ 8.62 $ 7.04 $ 8.45 $ 18.11 $13.81 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Total return(c) 22.44% (16.69)% (40.86)% 46.21% 27.27% ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $81,079 $72,676 $96,640 $120,591 $6,807 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratio of expenses to average net assets 2.05%(d) 2.07% 1.94% 1.86% 2.08%(e) =========================================================================================================================== Ratio of net investment income (loss) to average net assets (1.71)%(d) (1.75)% (1.55)% (1.59)% (1.68)%(e) ___________________________________________________________________________________________________________________________ =========================================================================================================================== Portfolio turnover rate(f) 78% 68% 89% 79% 75% ___________________________________________________________________________________________________________________________ ===========================================================================================================================
(a) Per share information and distributions prior to October 31, 1999 have been restated to reflect a 4 for 1 stock split, effected in the form of a 300% stock dividend, on July 14, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (d) Ratios are based on average daily net assets of $72,069,646. (e) Annualized. (f) Not annualized for periods less than one year.
CLASS R ------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.29 $ 8.89 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.10)(a) (0.04)(a) - --------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.77 (1.56) ============================================================================================= Total from investment operations 1.67 (1.60) ============================================================================================= Net asset value, end of period $ 8.96 $ 7.29 _____________________________________________________________________________________________ ============================================================================================= Total return(b) 22.91% (18.00)% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,164 $ 137 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets 1.55%(c) 1.62%(d) ============================================================================================= Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)%(d) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(e) 78% 68% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are annualized and based on average daily net assets of $544,422. (d) Annualized. (e) Not annualized for periods less than one year. F-11 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS -------------------------------- MARCH 15, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.32 $ 9.53 - ---------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.02)(a) - ---------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.79 (2.19) ============================================================================================== Total from investment operations 1.76 (2.21) ============================================================================================== Net asset value, end of period $ 9.08 $ 7.32 ______________________________________________________________________________________________ ============================================================================================== Total return(b) 24.04% (23.19)% ______________________________________________________________________________________________ ============================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $2,589 $ 138 ______________________________________________________________________________________________ ============================================================================================== Ratio of expenses to average net assets 0.71%(c) 0.81%(d) ============================================================================================== Ratio of net investment income (loss) to average net assets (0.37)%(c) (0.49)%(d) ______________________________________________________________________________________________ ============================================================================================== Portfolio turnover rate(e) 78% 68% ______________________________________________________________________________________________ ==============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are annualized and based on average daily net assets of $1,401,489. (d) Annualized. (e) Not annualized for periods less than one year. F-12 NOTE 12--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-13 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Aggressive Growth Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Aggressive Growth Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Aggressive Growth Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 F-14 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-15 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust") is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND Ballard Spahr COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Andrews & Ingersoll, LLP Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and 1735 Market Street Frankel LLP P.O. Box 4739 Trust Company Philadelphia, PA 19103 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com AGRO-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------ MUTUAL RETIREMENT ANNUITIES COLLEGE SEPARATELY OFFSHORE ALTERNATIVE CASH [AIM INVESTMENTS LOGO APPEARS HERE] FUNDS PRODUCTS SAVINGS MANAGED PRODUCTS INVESTMENTS MANAGEMENT --Servicemark-- PLANS ACCOUNTS
AIM BLUE CHIP FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM BLUE CHIP FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL AND, SECONDARILY, CURRENT INCOME. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o The fund's investment return and In addition to fund returns as of the presented is as of 10/31/03 and is principal value will fluctuate, so an close of the fiscal year, industry based on total net assets. investor's shares, when redeemed, may regulations require us to provide be worth more or less than their average annual total returns o AIM Blue Chip Fund's performance original cost. (including sales charges) for figures are historical, and they periods ended 9/30/03, the most reflect fund expenses, the reinvestment o The unmanaged Standard & Poor's recent calendar quarter-end, of distributions, and changes in net Composite Index of 500 Stocks (the which were as follows. asset value. S&P 500--Registered Trademark--) is an index of common stocks AVERAGE ANNUAL TOTAL RETURNS o When sales charges are included in frequently used as a general measure performance figures, Class A share of U.S. stock market performance. As of 9/30/03, including sales charges performance reflects the maximum 5.50% sales charge, and Class B and o The unmanaged Russell 1000 Class A Shares Class C share performance reflects the --Registered Trademark-- Index Inception (2/4/87) 8.39% applicable contingent deferred sales represents the performance of the 10 Years 7.84 charge (CDSC) for the period involved. stocks of large-capitalization 5 Years -2.88 The CDSC on Class B shares declines companies. 1 Year 13.14 from 5% beginning at the time of purchase to 0% at the beginning of the o The unmanaged Lipper Large-Cap Core Class B Shares seventh year. The CDSC on Class C Fund Index represents an average of Inception (10/1/96) 3.48% shares is 1% for the first year after the performance of the 30 largest 5 Years -2.83 purchase. The performance of the large-capitalization core equity 1 Year 13.83 fund's share classes will differ due funds tracked by Lipper, Inc., an to different sales charge structures independent mutual fund performance Class C Shares and class expenses. monitor. Inception (8/4/87) -1.00% 5 Years -2.43 o Effective 9/30/03, Class B shares o A direct investment cannot be made 1 Year 17.83 are not available as an investment in an index. Unless otherwise for retirement plans maintained indicated, index results include Class R Shares* pursuant to Section 401 of the reinvested dividends, and they do not 10 Years 8.30% Internal Revenue Code, including reflect sales charges. Performance of 5 Years -1.90 401(k) plans, money purchase pension an index of funds reflects fund 1 Year 17.83 plans and profit sharing plans. Plans expenses; performance of a market that have existing accounts invested index does not. Investor Class Shares** in Class B shares will continue to 10 Years 8.45% be allowed to make additional A description of the policies and 5 Years -1.77 purchases. procedures that the fund uses to 1 Year 19.67 determine how to vote proxies o Class R shares are available only to relating to portfolio securities certain retirement plans. Please see the is available without charge, upon *The returns shown for these periods prospectus for more information. Class R request, by calling 800-959-4246, are the blended returns of the historical shares are sold at net asset value, that or on the AIM Web site, performance of the fund's Class R shares is, without up-front sales charges. n AIMinvestments.com. since their inception and the restated Investor Class shares are closed to most historical performance of the fund's investors. For more information on who Class A shares (for the periods prior to may continue to invest in the Investor the inception of the Class R shares) at Class shares, please see the appropriate net asset value, adjusted to reflect the prospectus. higher Rule 12b-1 fees applicable to the Class R shares. The inception date of o Industry classifications used in this Class A shares is 2/4/87. The inception report are generally according to the date of the fund's Class R shares is Global Industry Classification Standard, 6/3/02. Calculation of blended returns which was developed by and is the as of 10/31/03 is from 10/31/93. exclusive property and a service mark of Calculation of blended returns as of Morgan Stanley Capital International 9/30/03 is from 9/30/93. Inc. and Standard & Poor's. **The returns shown for these periods are the blended returns of the historical performance of Investor Class shares since their inception and the restated historical performance of the fund's Class A shares (for the periods prior to inception of the Investor Class shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date of the fund's Class A shares is 2/4/87. The inception date of the fund's Investor Class shares is 9/30/03. Calculation of blended returns as of 10/31/03 is from 10/31/93. Calculation of returns as of 9/30/03 is the restated historical performance of the fund's Class A shares as described. Past performance cannot guarantee comparable future results. Due to significant market volatility, results of an investment made today may differ substantially from the historical performance shown. Call your financial advisor for more current performance.
===================================================== Not FDIC Insured MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to persons who have received a current prospectus of the fund. =====================================================
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS harmful short-term trading. These steps include: --Registered Trademark--: o Strengthening daily monitoring of trading activities. As you may be aware, there has been a [PHOTO OF great deal of media coverage recently o Imposing redemption fees on additional funds we believe ROBERT H. about the mutual fund industry and may be vulnerable to harmful short-term trading activity. GRAHAM allegations of improper activities by certain individuals and companies. As o Implementing an enhanced exchange policy (effective on ROBERT H. GRAHAM part of these widespread investigations, or about March 1, 2004) designed to limit exchanges FINVESCO Funds Group (IFG), the former between funds. [PHOTO OF adviser to certain INVESCO Funds, was MARK H. recently named as a defendant in o Employing an enhanced fair value pricing policy on WILLIAMSON separate civil enforcement actions by certain foreign securities as well as certain illiquid the U.S. Securities and Exchange securities. MARK H. WILLIAMSON Commission (SEC), the Office of the New York Attorney General and the State of None of these tools alone, nor all of them taken Colorado over an issue known as "market timing." A number together, eliminate the possibility of short-term trading of private class or derivative actions also were filed in strategies that may be detrimental to a fund. Moreover, each the wake of the regulators' actions. of these tools involves judgments that are inherently subjective. We have always sought and continue to seek to Investors are understandably concerned and frustrated make these judgments to the best of our abilities and in a about these reports, and we would like to take this manner that we believe is consistent with the best interests opportunity to assure you that, based on an investigation of our fund shareholders. And we remain committed to being conducted by an outside firm, IFG and its parent company, as vigilant as possible in the future to identify and AMVESCAP PLC, believe that these civil actions are without address any harmful market timing investors who have the merit. IFG is contesting the charges. We encourage you to potential to harm our long-term fund shareholders. continue to monitor this situation, particularly as IFG has the opportunity to address the allegations that have been We sincerely hope these developments and the media made. Current information will be posted on our Web site at coverage surrounding them do not result in you or other AIMinvestments.com. We will continue to communicate to you shareholders losing confidence in AIM or INVESCO Funds. on our Web site about our finding, and the actions we are Amidst this storm of controversy in the mutual fund taking to protect and promote the interests of our industry, we believe we can find encouragement in the shareholders. The independent trustees of the funds are recovering economy and rising equity markets. As we write receiving regular reports from their independent counsel and this letter, for instance, the S&P 500--Registered Trademark-- outside counsel hired by AMVESCAP PLC, the parent of AIM and Index is up approximately 23% year-to-date. Although past IFG, to perform an ongoing investigation of market timing. performance is no guarantee of future results, there appear to be indicators that the economy and stock markets are A COMPLEX ISSUE showing signs of welcomed improvement. We encourage you to read the enclosed discussion of your fund's performance Market timing is an investment technique not defined in any during this past reporting period. regulation that involves frequent short-term trading of mutual fund shares, sometimes with a goal to exploit OUR UNWAVERING COMMITMENT inefficiencies in the way mutual funds price their shares. We recognize that fund management companies have tried to At AIM Investments, we have never wavered in our commitment deal with this complex issue in various ways and believe to helping you build solutions for your financial goals. Our that industry-wide guidance is in order. To that end, we company was founded on a core principle of integrity, and we welcome SEC Chairman William Donaldson's pledge to adopt new have always worked hard to earn the trust of our rules designed to curb market timing abuses. Comprehensive shareholders. We are committed to doing all we can to rulemaking is necessary and is the best way to establish new maintain your trust and confidence. industry responsibilities designed to protect shareholders. We support practical rule changes and structural Thank you for your continued participation in AIM modifications that are fair, enforceable and, most Investments. Please call your financial advisor or one of importantly, beneficial for investors. our Client Service representatives at 800-959-4246 if you have any further questions or concerns about your AIM AIM Investments has policies in place designed to Investments account. identify, prevent and eliminate harmful trading or other activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE BLUE-CHIP COMPANIES BENEFIT FROM SIGNS OF ECONOMIC RECOVERY This report covers the fiscal year ended it lowered that rate to 1.00%, its lowest low debt and a high return on equity October 31, 2003. Class A shares of AIM level since 1958. The Fed met three times relative to its competitors. Blue Chip Fund returned 15.94% at net between June 25 and the close of the asset value for the year. This return is fiscal year, but it did not change the Our target allocation to any one of slightly less than the return for the federal funds rate. the 10 market sectors was a range from same period of the fund's peer-group 50% to 150% of the sector's weighting in index, the Lipper Large-Cap Core Fund The job market was comparatively weak the Russell 1000. If we found a number of Index, which returned 16.86%. throughout the period, with the U.S. stocks that met our selection criteria, unemployment rate measuring 6.0% for the we were overweight in that sector. At MARKET CONDITIONS last two months of 2002, reaching a high times when our stock-selection process for the reporting period of 6.4% in June, identified only a few qualifying stocks The growth of the gross domestic product and declining in August and October to within a particular sector, we were (GDP) improved over the reporting period. end the period at 6.0%. underweight in that sector. The annualized GDP growth for both the last quarter of 2002 and the first YOUR FUND Companies that we have identified as quarter of 2003 was 1.4%. For market leaders often have already second-quarter 2003, it was 3.3%, AIM Blue Chip Fund continued to focus captured sales leadership, acquired or annualized. On November 25, after the on market-leading companies. developed preferred technologies, and close of the reporting period, the Market-leading companies are defined by established strong cash flow. Therefore preliminary estimate for third-quarter prospectus as large and medium-sized we can take a long-term investment GDP growth was announced as 8.2%, companies having certain market and perspective, which tends to result in annualized. financial characteristics. The market long holding periods and relatively low characteristics of a market leader within fund turnover. Six of the top-10 holdings The S&P 500 Index, frequently cited as an industry include sales leadership, that were listed in the fund's annual a measure of the performance of the U.S. superior growth prospects, and ownership report dated October 31, 2002, can be stock market in general, returned 20.79% of proprietary technology that could found in the top-10 list in this report. for the year ended October 31, 2003. All impact the industry. The financial The fund's turnover rate remains sectors of the S&P 500 recorded gains for characteristics of a market leader relatively low. As of October 31, 2003, the year. include faster earnings growth and/or the annual turnover rate was 27.8%. higher profit margins than its For most of the fiscal year, the competitors, strong cash flow, and a During the fiscal year covered by this Federal Reserve Board (the Fed) kept the balance sheet with relatively report, we have made some changes to the short-term federal funds rate at 1.25%. sector weightings within the portfolio. On June 25, 2003, Through both the appreciation of the fund's holdings and additional purchases, the fund's technology holdings have increased. Applying current GICS industry and sector classifications to the fund's
================================================================================================================================== TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* 1. Citigroup Inc. 3.9% 1. Semiconductors 6.9% 2. Microsoft Corp. 3.5 2. Pharmaceuticals 6.7 3. Wal-Mart Stores, Inc. 3.3 3. Systems Software 6.5 4. Cisco Systems, Inc. 2.9 4. Investment Banking & Brokerage 4.8 5. Intel Corp. 2.8 5. Health Care Equipment 4.7 6. Pfizer Inc. 2.5 6. Other Diversified Financial Services 3.9 7. General Electric Co. 2.5 7. Hypermarkets & Super Centers 3.3 8. Exxon Mobil Corp. 2.3 8. Industrial Conglomerates 3.0 9. Procter & Gamble Co. (The) 2.1 9. Semiconductor Equipment 2.9 10. Home Depot, Inc. (The) 1.9 10. Communications Equipment 2.9 * Excludes money market funds. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ==================================================================================================================================
2 holdings as of October 31, 2002, 16.9% or 25 cents per share for the quarter MONIKA DEGAN was in technology, but at the end of ended September 30, 2003. This compared [PHOTO OF Monika Degan is the lead this fiscal year, technology accounted to $686 million, or 10 cents per share, MONIKA manager of AIM Blue Chip for 24.5%. Technology was the for the same quarter of the previous H. DEGAN] Fund. Ms. Degan joined best-performing sector in the S&P 500 year. AIM in 1995 as an for the period. investment officer and portfolio analyst Stocks that lagged the market during for equity securities and was promoted Our focus on earnings fundamentals the period included Lockheed Martin (an to her current position in 1997. She has led us to consciously reduce the aerospace and defense holding in the been in the investment business since percentage of the fund's holdings in industrials sector), and Johnson & 1991. health care. Of the remaining eight Johnson (a pharmaceutical company). We sectors in the index, four are weighted have reduced our holdings in both of Ms. Degan received a B.B.A. in similarly to the index weighting. These these stocks. finance and an M.B.A. in finance and sectors include consumer staples, international business, both from the consumer discretionary, energy and IN CLOSING University of Houston. She is a financials. The fund remains underweight Chartered Financial Analyst. in four sectors--materials, We are encouraged by the recent earnings telecommunications, and reports and some of the economic news of KIRK L. ANDERSON utilities--because fewer stocks in these late. We are pleased to be able to [PHOTO OF Kirk Anderson is a portfolio sectors meet our selection criteria. For report positive, double-digit returns KIRK L. manager of AIM Blue Chip the year ended October 31, 2003, for the fiscal year. We believe that ANDERSON] Fund. He joined AIM in 1994 telecommunications was the market volatility will continue to be a and assumed his current position in 2003. worst-performing sector in the S&P 500. factor and that complete recovery may be slow. However, we feel the fund is well Mr. Anderson earned a B.A. in The fund's holdings in the health positioned, and we strongly believe political science from Texas A&M care and technology sectors were the that, for most investors, the inclusion University and an M.S. in finance from strongest contributors to fund of an actively managed, the University of Houston. performance during the fiscal year. sector-diversified fund that invests in Within technology, the most important market leaders can be an important part Assisted by the Large Cap Growth Team. contributors to the fund's return were of a diversified investment portfolio. Cisco and Intel. Both companies far We appreciate your continued investment exceeded the returns of the S&P 500's in AIM Blue Chip Fund. technology sector. Cisco, the dominant provider of equipment that powers the See important fund and index Internet and connects networks, posted disclosures inside front cover. an 89% increase in one-year net income growth as of its fiscal year-end in July 2003. Intel, the world's largest maker of semiconductors, reported earnings of $1.7 billion,
For Information Visit AIMinvestments.com
================================================================================================================================== FUND VS. INDEXES TOTAL NUMBER OF HOLDINGS* 87 PORTFOLIO COMPOSITION BY SECTOR* Total returns 10/31/02-10/31/03, excluding sales charges TOTAL NET ASSETS $2.96 billion Consumer Discretionary 12.0% Class A Shares 15.94% *Excludes money market funds. Consumer Staples 8.8 Class B Shares 15.09 ** The one-year return shown for Investor Class shares is the Energy 4.0 Class C Shares 15.09 blended return of Investor Class shares since their Financials 20.8 Class R Shares 15.62 inception and the restated one-year performance of the Health Care 14.7 Investor Class Shares** 15.94 fund's Class A shares at the net asset value, adjusted to Industrials 7.8 S&P 500 Index reflect the higher Rule 12b-1 (Broad Market and Style-Specific Index) 20.79 fees applicable to Class A Information Technology 24.5 shares. Investor Class shares Lipper Large-Cap Core Fund Index would have different returns Materials 1.5 (Peer Group Index) 16.86 because, although the shares are invested in the same Telecommunication Services 1.6 portfolio of securities, the Investor Class has a Utilities 1.6 different expense structure. The inception date of the fund's Class A shares is 2/4/87. The inception date of the fund's Investor Class shares is 9/30/03. SOURCE: LIPPER, INC. ==================================================================================================================================
[GRAPHIC] 3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 10/31/93-10/31/03 [MOUNTAIN CHART]
DATE AIM BLUE CHIP FUND RUSSELL 1000 LIPPER LARGE-CAP S&P 500 CLASS A SHARES INDEX CORE FUND INDEX INDEX 10/31/1993 9450 10000 10000 10000 1/31/1994 9830 10349 10392 10365 4/30/1994 9456 9762 9822 9769 7/31/1994 9873 9941 9927 10003 10/31/1994 10228 10311 10228 10386 1/31/1995 10378 10342 10135 10419 4/30/1995 11375 11333 10981 11472 7/31/1995 12296 12542 12030 12611 10/31/1995 12659 13096 12441 13128 1/31/1996 13570 14338 13508 14443 4/30/1996 14383 14878 13998 14934 7/31/1996 14301 14516 13714 14698 10/31/1996 15934 16098 15046 16290 1/31/1997 17459 18015 16585 18245 4/30/1997 17647 18204 16735 18686 7/31/1997 21359 21823 19983 22358 10/31/1997 20665 21224 19327 21519 1/31/1998 22040 22762 20522 23153 4/30/1998 25074 25878 23297 26360 7/31/1998 25437 25939 23793 26674 10/31/1998 24666 25408 22831 26256 1/31/1999 29492 29723 26697 30681 4/30/1999 30176 31132 27634 32114 7/31/1999 30266 31034 27569 32063 10/31/1999 31820 31908 28175 32993 1/31/2000 34504 33280 29541 33853 4/30/2000 36504 35008 31051 35364 7/31/2000 36661 34391 30879 34937 10/31/2000 35512 34798 30889 34999 1/31/2001 33030 33050 29325 33549 4/30/2001 28552 30225 26860 30779 7/31/2001 26497 29336 25913 29934 10/31/2001 23043 25737 23067 26288 1/31/2002 24437 27658 24465 28135 4/30/2002 22712 26604 23573 26896 7/31/2002 19262 22616 20166 22865 10/31/2002 18933 21979 19784 22319 1/31/2003 17843 21416 19065 21663 4/30/2003 19423 23023 20369 23317 7/31/2003 20861 25147 21907 25297 10/31/2003 21951 26884 23120 26959 Source: Lipper, Inc.
Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. Since the last reporting period, the fund has elected to use the S&P 500 as its broad-based market index since the S&P 500 is such a widely recognized gauge of the U.S. equity market. The fund will no longer measure its performance against the Russell 1000 Index, the index published in previous reports to shareholders. Because this is the first reporting period since we have adopted the new index, SEC guidelines require that we compare the fund's performance to both the old and the new index. In addition, the unmanaged Lipper Large-Cap Core Fund Index, which may or may not include AIM Blue Chip Fund, is included for comparison to a peer group. Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the indexes does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. ================================================================================ AVERAGE ANNUAL TOTAL RETURNS As of 10/31/03, including sales charges Class A Shares Class R Shares* Inception (2/4/87) 8.67% 10 Years 8.62% 10 Years 8.18 5 Years -2.46 5 Years -3.40 1 Year 15.62 1 Year 9.53 Investor Class Shares** Class B Shares 10 Years 8.80% Inception (10/1/96) 4.17% 5 Years -2.30 5 Years -3.36 1 Year 15.94 1 Year 10.09 Class C Shares Inception (8/4/97) -0.18% 5 Years -2.96 1 Year 14.09 ================================================================================
*The returns shown for these periods are the blended returns of the historical performance of the fund's Class R shares since their inception and the restated historical performance of the fund's Class A shares (for the periods prior to the inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. The inception date of Class A shares is 2/4/87. The inception date of the fund's Class R shares is 6/3/02. Calculation of blended returns as of 10/31/03 is from 10/31/93. **The returns shown as of 10/31/03 are the blended returns of the historical performance of Investor Class shares since their inception and the restated historical performance of the fund's Class A shares (for the periods prior to inception of the Investor Class shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date of the fund's Class A shares is 2/4/87. The inception date of the fund's Investor Class shares is 9/30/03. Calculation of blended returns as of 10/31/03 is from 10/31/93. 4 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM BLUE CHIP FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (3/15/02) -6.82% those shown. All returns assume shareholders with a performance overview 1 Year 16.74 reinvestment of distributions at net specific to their holdings. asset value. Investment return and Institutional Class shares are offered principal value will fluctuate so your exclusively to institutional investors, AVERAGE ANNUAL TOTAL RETURNS shares, when redeemed, may be worth more including defined contribution plans For periods ended 9/30/03 or less than their original cost. See that meet certain criteria. Performance (most recent calendar quarter-end) full report for information on of Institutional Class shares will comparative benchmarks. If you have differ from performance of Class A INCEPTION (3/15/02) -10.21% questions, please consult your fund shares due to differing sales charges 1 Year 20.54 prospectus or call 800-451-4246. A I M and class expenses. Distributors, Inc.
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com BCH-INS-1 10/03 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-97.27% ADVERTISING-1.08% Omnicom Group Inc. 400,000 $ 31,920,000 ========================================================================== AEROSPACE & DEFENSE-1.94% Lockheed Martin Corp. 325,000 15,067,000 - -------------------------------------------------------------------------- United Technologies Corp. 500,000 42,345,000 ========================================================================== 57,412,000 ========================================================================== ALUMINUM-0.64% Alcoa Inc. 600,000 18,942,000 ========================================================================== APPAREL RETAIL-0.61% Gap, Inc. (The) 950,000 18,126,000 ========================================================================== ASSET MANAGEMENT & CUSTODY BANKS-0.48% Franklin Resources, Inc. 300,000 14,226,000 ========================================================================== BIOTECHNOLOGY-1.88% Amgen Inc.(a) 900,000 55,584,000 ========================================================================== BREWERS-0.50% Anheuser-Busch Cos., Inc. 300,000 14,778,000 ========================================================================== BROADCASTING & CABLE TV-0.52% Clear Channel Communications, Inc. 375,000 15,307,500 ========================================================================== CASINOS & GAMING-0.69% International Game Technology 625,000 20,468,750 ========================================================================== COMMUNICATIONS EQUIPMENT-2.91% Cisco Systems, Inc.(a) 4,100,000 86,018,000 ========================================================================== COMPUTER & ELECTRONICS RETAIL-0.99% Best Buy Co., Inc. 500,000 29,155,000 ========================================================================== COMPUTER HARDWARE-2.76% Dell Inc.(a) 1,450,000 52,374,000 - -------------------------------------------------------------------------- International Business Machines Corp. 325,000 29,081,000 ========================================================================== 81,455,000 ========================================================================== COMPUTER STORAGE & PERIPHERALS-0.84% EMC Corp.(a) 1,800,000 24,912,000 ========================================================================== CONSUMER FINANCE-2.90% American Express Co. 900,000 42,237,000 - -------------------------------------------------------------------------- MBNA Corp. 850,000 21,037,500 - -------------------------------------------------------------------------- SLM Corp. 575,000 22,517,000 ========================================================================== 85,791,500 ==========================================================================
MARKET SHARES VALUE - --------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-1.68% First Data Corp. 850,000 $ 30,345,000 - -------------------------------------------------------------------------- Fiserv, Inc.(a) 550,000 19,426,000 ========================================================================== 49,771,000 ========================================================================== DIVERSIFIED BANKS-2.66% Bank of America Corp. 425,000 32,185,250 - -------------------------------------------------------------------------- Wells Fargo & Co. 825,000 46,464,000 ========================================================================== 78,649,250 ========================================================================== DIVERSIFIED CAPITAL MARKETS-1.76% J.P. Morgan Chase & Co. 1,450,000 52,055,000 ========================================================================== DIVERSIFIED CHEMICALS-0.27% E. I. du Pont de Nemours & Co. 200,000 8,080,000 ========================================================================== DIVERSIFIED COMMERCIAL SERVICES-1.61% Apollo Group, Inc.-Class A(a) 525,000 33,353,250 - -------------------------------------------------------------------------- H&R Block, Inc. 300,000 14,127,000 ========================================================================== 47,480,250 ========================================================================== ELECTRIC UTILITIES-1.56% Dominion Resources, Inc. 250,000 15,400,000 - -------------------------------------------------------------------------- FPL Group, Inc. 250,000 15,935,000 - -------------------------------------------------------------------------- Southern Co. (The) 500,000 14,900,000 ========================================================================== 46,235,000 ========================================================================== FOOD DISTRIBUTORS-0.85% Sysco Corp. 750,000 25,245,000 ========================================================================== FOOTWEAR-0.54% NIKE, Inc.-Class B 250,000 15,975,000 ========================================================================== GENERAL MERCHANDISE STORES-0.74% Target Corp. 550,000 21,857,000 ========================================================================== HEALTH CARE EQUIPMENT-4.70% Boston Scientific Corp.(a) 700,000 47,404,000 - -------------------------------------------------------------------------- Medtronic, Inc. 850,000 38,734,500 - -------------------------------------------------------------------------- St. Jude Medical, Inc.(a) 275,000 15,994,000 - -------------------------------------------------------------------------- Zimmer Holdings, Inc.(a) 575,000 36,690,750 ========================================================================== 138,823,250 ========================================================================== HOME IMPROVEMENT RETAIL-1.94% Home Depot, Inc. (The) 1,550,000 57,458,500 ========================================================================== HOTELS, RESORTS & CRUISE LINES-0.56% Carnival Corp. (Panama) 475,000 16,582,250 ==========================================================================
F-1
MARKET SHARES VALUE - -------------------------------------------------------------------------- HOUSEHOLD PRODUCTS-2.89% Colgate-Palmolive Co. 450,000 $ 23,935,500 - -------------------------------------------------------------------------- Procter & Gamble Co. (The) 625,000 61,431,250 ========================================================================== 85,366,750 ========================================================================== HYPERMARKETS & SUPER CENTERS-3.29% Wal-Mart Stores, Inc. 1,650,000 97,267,500 ========================================================================== INDUSTRIAL CONGLOMERATES-3.02% 3M Co. 195,000 15,379,650 - -------------------------------------------------------------------------- General Electric Co. 2,550,000 73,975,500 ========================================================================== 89,355,150 ========================================================================== INDUSTRIAL GASES-0.54% Air Products & Chemicals, Inc. 350,000 15,893,500 ========================================================================== INDUSTRIAL MACHINERY-0.52% Danaher Corp. 185,000 15,327,250 ========================================================================== INTEGRATED OIL & GAS-2.29% Exxon Mobil Corp. 1,850,000 67,673,000 ========================================================================== INTEGRATED TELECOMMUNICATION SERVICES-0.61% SBC Communications Inc. 750,000 17,985,000 ========================================================================== INTERNET RETAIL-0.76% eBay Inc.(a) 400,000 22,376,000 ========================================================================== INVESTMENT BANKING & BROKERAGE-4.77% Goldman Sachs Group, Inc. (The) 500,000 46,950,000 - -------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 800,000 47,360,000 - -------------------------------------------------------------------------- Morgan Stanley 850,000 46,639,500 ========================================================================== 140,949,500 ========================================================================== LIFE & HEALTH INSURANCE-0.75% Prudential Financial, Inc. 575,000 22,218,000 ========================================================================== MANAGED HEALTH CARE-1.46% UnitedHealth Group Inc. 850,000 43,248,000 ========================================================================== MOVIES & ENTERTAINMENT-1.48% Viacom Inc.-Class B 1,100,000 43,857,000 ========================================================================== MULTI-LINE INSURANCE-1.75% American International Group, Inc. 850,000 51,705,500 ========================================================================== OIL & GAS DRILLING-1.00% ENSCO International Inc. 550,000 14,492,500 - -------------------------------------------------------------------------- Nabors Industries, Ltd. (Bermuda)(a) 400,000 15,120,000 ========================================================================== 29,612,500 ==========================================================================
MARKET SHARES VALUE - --------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-0.76% Schlumberger Ltd. (Netherlands) 475,000 $ 22,310,750 ========================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-3.85% Citigroup Inc. 2,400,000 113,760,000 ========================================================================== PHARMACEUTICALS-6.69% Allergan, Inc. 325,000 24,576,500 - -------------------------------------------------------------------------- Johnson & Johnson 750,000 37,747,500 - -------------------------------------------------------------------------- Pfizer Inc. 2,350,000 74,260,000 - -------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd.-ADR (Israel) 375,000 21,333,750 - -------------------------------------------------------------------------- Wyeth 900,000 39,726,000 ========================================================================== 197,643,750 ========================================================================== RAILROADS-0.66% Canadian National Railway Co. (Canada) 325,000 19,565,000 ========================================================================== REGIONAL BANKS-0.74% Fifth Third Bancorp 375,000 21,735,000 ========================================================================== RESTAURANTS-0.34% McDonald's Corp. 400,000 10,004,000 ========================================================================== SEMICONDUCTOR EQUIPMENT-2.93% Applied Materials, Inc.(a) 1,500,000 35,055,000 - -------------------------------------------------------------------------- KLA-Tencor Corp.(a) 450,000 25,798,500 - -------------------------------------------------------------------------- Novellus Systems, Inc.(a) 625,000 25,806,250 ========================================================================== 86,659,750 ========================================================================== SEMICONDUCTORS-6.94% Analog Devices, Inc.(a) 650,000 28,814,500 - -------------------------------------------------------------------------- Intel Corp. 2,500,000 82,625,000 - -------------------------------------------------------------------------- Linear Technology Corp. 650,000 27,696,500 - -------------------------------------------------------------------------- Microchip Technology Inc. 800,000 26,168,000 - -------------------------------------------------------------------------- Texas Instruments Inc. 500,000 14,460,000 - -------------------------------------------------------------------------- Xilinx, Inc.(a) 800,000 25,360,000 ========================================================================== 205,124,000 ========================================================================== SOFT DRINKS-1.28% Coca-Cola Co. (The) 400,000 18,560,000 - -------------------------------------------------------------------------- PepsiCo, Inc. 400,000 19,128,000 ========================================================================== 37,688,000 ========================================================================== SPECIALTY STORES-1.79% Bed Bath & Beyond Inc.(a) 725,000 30,624,000 - -------------------------------------------------------------------------- Staples, Inc.(a) 825,000 22,126,500 ========================================================================== 52,750,500 ========================================================================== SYSTEMS SOFTWARE-6.47% Computer Associates International, Inc. 675,000 15,876,000 - -------------------------------------------------------------------------- Microsoft Corp. 3,900,000 101,985,000 - --------------------------------------------------------------------------
F-2
MARKET SHARES VALUE - -------------------------------------------------------------------------- SYSTEMS SOFTWARE-(CONTINUED) Oracle Corp.(a) 2,500,000 $ 29,900,000 - -------------------------------------------------------------------------- VERITAS Software Corp.(a) 1,200,000 43,380,000 ========================================================================== 191,141,000 ========================================================================== THRIFTS & MORTGAGE FINANCE-1.09% Fannie Mae 450,000 32,260,500 ========================================================================== WIRELESS TELECOMMUNICATION SERVICES-0.99% AT&T Wireless Services Inc.(a) 1,100,000 7,975,000 - -------------------------------------------------------------------------- Vodafone Group PLC-ADR (United Kingdom) 1,000,000 21,150,000 ========================================================================== 29,125,000 ========================================================================== Total Common Stocks & Other Equity Interests (Cost $2,273,576,585) 2,874,909,150 ========================================================================== MONEY MARKET FUNDS-2.18% STIC Liquid Assets Portfolio(b) 32,255,406 32,255,406 - -------------------------------------------------------------------------- STIC Prime Portfolio(b) 32,255,406 32,255,406 ========================================================================== Total Money Market Funds (Cost $64,510,812) 64,510,812 ========================================================================== TOTAL INVESTMENTS-99.45% (excluding investments purchased with cash collateral from securities loaned) (Cost $2,338,087,397) 2,939,419,962 ==========================================================================
MARKET SHARES VALUE
- -------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-0.02% STIC Liquid Assets Portfolio(b)(c) 447,700 $ 447,700 ========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $447,700) 447,700 ========================================================================== TOTAL INVESTMENTS-99.47% (Cost $2,338,535,097) 2,939,867,662 ========================================================================== OTHER ASSETS LESS LIABILITIES-0.53% 15,680,944 ========================================================================== NET ASSETS-100.00% $2,955,548,606 __________________________________________________________________________ ==========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $2,273,576,585)* $2,874,909,150 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $64,958,512) 64,958,512 - ------------------------------------------------------------ Receivables for: Investments sold 24,683,025 - ------------------------------------------------------------ Fund shares sold 2,304,821 - ------------------------------------------------------------ Dividends 3,002,219 - ------------------------------------------------------------ Investment for deferred compensation plan 85,703 - ------------------------------------------------------------ Other assets 89,262 ============================================================ Total assets 2,970,032,692 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 2,960,690 - ------------------------------------------------------------ Fund shares reacquired 6,778,210 - ------------------------------------------------------------ Deferred compensation plan 85,703 - ------------------------------------------------------------ Collateral upon return of securities loaned 447,700 - ------------------------------------------------------------ Accrued distribution fees 1,754,494 - ------------------------------------------------------------ Accrued trustees' fees 113,708 - ------------------------------------------------------------ Accrued transfer agent fees 1,879,182 - ------------------------------------------------------------ Accrued operating expenses 464,399 ============================================================ Total liabilities 14,484,086 ============================================================ Net assets applicable to shares outstanding $2,955,548,606 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $4,174,409,315 - ------------------------------------------------------------ Undistributed net investment income (loss) (193,930) - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities, foreign currencies and futures contracts (1,819,999,344) - ------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies and futures contracts 601,332,565 ============================================================ $2,955,548,606 ____________________________________________________________ ============================================================ NET ASSETS: Class A $1,439,517,589 ____________________________________________________________ ============================================================ Class B $1,223,820,934 ____________________________________________________________ ============================================================ Class C $ 290,396,300 ____________________________________________________________ ============================================================ Class R $ 1,577,836 ____________________________________________________________ ============================================================ Investor Class $ 100,222 ____________________________________________________________ ============================================================ Institutional Class $ 135,725 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 134,716,761 ____________________________________________________________ ============================================================ Class B 119,762,062 ____________________________________________________________ ============================================================ Class C 28,419,655 ____________________________________________________________ ============================================================ Class R 147,951 ____________________________________________________________ ============================================================ Investor Class 9,378 ____________________________________________________________ ============================================================ Institutional Class 12,560 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 10.69 - ------------------------------------------------------------ Offering price per share: (Net asset value of $10.69 divided by 94.50%) $ 11.31 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 10.22 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 10.22 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 10.66 ____________________________________________________________ ============================================================ Investor Class: Net asset value and offering price per share $ 10.69 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 10.81 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $431,970 were on loan to brokers. See Notes to Financial Statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $79,735) $ 35,405,963 - --------------------------------------------------------------------------- Dividends from affiliated money market funds 985,598 - --------------------------------------------------------------------------- Interest 35,871 - --------------------------------------------------------------------------- Securities lending 34,455 =========================================================================== Total investment income 36,461,887 =========================================================================== EXPENSES: Advisory fees 17,924,075 - --------------------------------------------------------------------------- Administrative services fees 540,113 - --------------------------------------------------------------------------- Custodian fees 190,013 - --------------------------------------------------------------------------- Distribution fees: Class A 4,741,551 - --------------------------------------------------------------------------- Class B 11,597,496 - --------------------------------------------------------------------------- Class C 2,827,049 - --------------------------------------------------------------------------- Class R 2,613 - --------------------------------------------------------------------------- Investor Class 10 - --------------------------------------------------------------------------- Transfer agent fees 11,540,164 - --------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 81 - --------------------------------------------------------------------------- Trustees' fees 58,866 - --------------------------------------------------------------------------- Other 1,213,386 =========================================================================== Total expenses 50,635,417 =========================================================================== Less: Fees waived and expense offset arrangements (72,046) =========================================================================== Net expenses 50,563,371 =========================================================================== Net investment income (loss) (14,101,484) =========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS: Net realized gain (loss) from: Investment securities (109,521,399) - --------------------------------------------------------------------------- Foreign currencies 1,362 - --------------------------------------------------------------------------- Futures contracts 4,362,825 =========================================================================== (105,157,212) =========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 520,451,864 - --------------------------------------------------------------------------- Foreign currencies (538) - --------------------------------------------------------------------------- Futures contracts (1,164,391) =========================================================================== 519,286,935 =========================================================================== Net gain from investment securities, foreign currencies and futures contracts 414,129,723 =========================================================================== Net increase in net assets resulting from operations $ 400,028,239 ___________________________________________________________________________ ===========================================================================
See Notes to Financial Statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ----------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (14,101,484) $ (26,181,399) - ----------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities, foreign currencies and futures contracts (105,157,212) (605,224,882) - ----------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies and futures contracts 519,286,935 (87,627,440) =============================================================================================== Net increase (decrease) in net assets resulting from operations 400,028,239 (719,033,721) =============================================================================================== Share transactions-net: Class A (162,460,380) (325,975,435) - ----------------------------------------------------------------------------------------------- Class B (136,334,779) (303,773,409) - ----------------------------------------------------------------------------------------------- Class C (51,018,964) (109,471,968) - ----------------------------------------------------------------------------------------------- Class R 1,425,250 36,356 - ----------------------------------------------------------------------------------------------- Investor Class 99,068 -- - ----------------------------------------------------------------------------------------------- Institutional Class (43,881) 168,155 =============================================================================================== Net increase (decrease) in net assets resulting from share transactions (348,333,686) (739,016,301) =============================================================================================== Net increase (decrease) in net assets 51,694,553 (1,458,050,022) =============================================================================================== NET ASSETS: Beginning of year 2,903,854,053 4,361,904,075 =============================================================================================== End of year (including undistributed net investment income (loss) of ($193,930) and ($154,369) for 2003 and 2002, respectively) $2,955,548,606 $ 2,903,854,053 _______________________________________________________________________________________________ ===============================================================================================
F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's primary investment objective is long-term growth of capital with a secondary objective of current income. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are F-7 translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin. H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $350 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $21,702. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $540,113 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $6,046,387 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R, the Institutional Class and the Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class R and the Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of the Investor Class shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C, Class R and the Investor Class shares paid $4,741,551, $11,597,496, $2,827,049, $2,613 and $10, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $345,660 in front-end sales commissions from the sale of Class A shares and $27,553, $3,029, $17,172 and $0 from F-8 Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $48,392 and reductions in custodian fees of $1,952 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $50,344. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $6,755 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $431,970 were on loan to brokers. The loans were secured by cash collateral of $447,700 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $34,455 for securities lending. NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 557,955,231 - ------------------------------------------------------------ Temporary book/tax differences (193,930) - ------------------------------------------------------------ Capital loss carryforward (1,776,622,010) - ------------------------------------------------------------ Shares of beneficial interest 4,174,409,315 ============================================================ Total net assets $ 2,955,548,606 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's F-9 unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ------------------------------------------------------------ October 31, 2007 $ 38,614,682 - ------------------------------------------------------------ October 31, 2008 185,511,022 - ------------------------------------------------------------ October 31, 2009 833,974,843 - ------------------------------------------------------------ October 31, 2010 615,639,140 - ------------------------------------------------------------ October 31, 2011 102,882,323 ============================================================ Total capital loss carryforward $1,776,622,010 ____________________________________________________________ ============================================================
NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $752,061,350 and $1,056,490,615, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ----------------------------------------------------------- Aggregate unrealized appreciation of investment securities $611,034,149 - ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (53,078,918) =========================================================== Net unrealized appreciation of investment securities $557,955,231 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $2,381,912,431.
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2003, undistributed net investment income was increased by $14,061,923, undistributed net realized gains decreased by $1,362 and shares of beneficial interest decreased by $14,060,561. This reclassification had no effect on net assets of the Fund. F-10 NOTE 10--SHARE INFORMATION The Fund currently consists of six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, the Institutional Class shares and the Investor Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares, the Institutional Class shares and the Investor Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2003 2002 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 30,092,109 $ 289,868,346 35,714,782 $ 388,117,102 - -------------------------------------------------------------------------------------------------------------------------- Class B 12,053,281 111,049,162 15,784,454 168,633,848 - -------------------------------------------------------------------------------------------------------------------------- Class C 4,161,204 38,212,257 5,922,957 63,436,977 - -------------------------------------------------------------------------------------------------------------------------- Class R* 164,023 1,619,420 3,975 36,381 - -------------------------------------------------------------------------------------------------------------------------- Investor Class** 12,285 130,138 -- -- - -------------------------------------------------------------------------------------------------------------------------- Institutional Class*** -- -- 19,795 192,879 ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 1,670,042 16,099,491 1,132,609 12,298,772 - -------------------------------------------------------------------------------------------------------------------------- Class B (1,741,215) (16,099,491) (1,170,222) (12,298,772) ========================================================================================================================== Reacquired: Class A (49,132,867) (468,428,217) (68,970,741) (726,391,309) - -------------------------------------------------------------------------------------------------------------------------- Class B (25,556,829) (231,284,450) (45,721,299) (460,108,485) - -------------------------------------------------------------------------------------------------------------------------- Class C (9,824,798) (89,231,221) (16,701,794) (172,908,945) - -------------------------------------------------------------------------------------------------------------------------- Class R* (20,044) (194,170) (3) (25) - -------------------------------------------------------------------------------------------------------------------------- Investor Class** (2,907) (31,070) -- -- - -------------------------------------------------------------------------------------------------------------------------- Institutional Class*** (4,720) (43,881) (2,515) (24,724) ========================================================================================================================== (38,130,436) $(348,333,686) (73,988,002) $(739,016,301) __________________________________________________________________________________________________________________________ ==========================================================================================================================
* Class R shares commenced sales on June 3, 2002. ** Investor Class shares commenced sales on September 30, 2003. *** Institutional Class shares commenced sales on March 15, 2002. F-11 NOTE 11--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A(a) ----------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.22 $ 11.22 $ 17.29 $ 15.49 $ 12.05 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.02) (0.04)(b) (0.04) (0.05)(b) 0.01 - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.49 (1.96) (6.03) 1.85 3.47 ================================================================================================================================= Total from investment operations 1.47 (2.00) (6.07) 1.80 3.48 ================================================================================================================================= Less distributions: Dividends from net investment income -- -- -- -- (0.01) - --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- -- (0.03) ================================================================================================================================= Total distributions -- -- -- -- (0.04) ================================================================================================================================= Net asset value, end of period $ 10.69 $ 9.22 $ 11.22 $ 17.29 $ 15.49 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(c) 15.94% (17.82)% (35.11)% 11.60% 29.01% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,439,518 $1,402,589 $2,067,602 $3,163,453 $2,299,551 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 1.47%(d) 1.40% 1.28% 1.19% 1.19% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.17)%(d) (0.33)% (0.29)% (0.31)% 0.03% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 28% 28% 31% 22% 22% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Per share information for all periods prior to October 31, 2000 has been restated to reflect a 3 for 1 stock split, effected in the form of a 200% stock dividend, on September 8, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $1,354,728,865.
CLASS B(a) ----------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.88 $ 10.87 $ 16.87 $ 15.22 $ 11.91 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.42 (1.89) (5.87) 1.82 3.44 ================================================================================================================================= Total from investment operations 1.34 (1.99) (6.00) 1.65 3.34 ================================================================================================================================= Less distributions from net realized gains -- -- -- -- (0.03) ================================================================================================================================= Net asset value, end of period $ 10.22 $ 8.88 $ 10.87 $ 16.87 $ 15.22 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(c) 15.09% (18.31)% (35.57)% 10.87% 28.08% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,223,821 $1,198,513 $1,806,464 $2,746,149 $1,891,171 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.12%(d) 2.05% 1.94% 1.88% 1.91% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.82)%(d) (0.98)% (0.94)% (1.00)% (0.68)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 28% 28% 31% 22% 22% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Per share information for all periods prior to October 31, 2000 has been restated to reflect a 3 for 1 stock split, effected in the form of a 200% stock dividend, on September 8, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $1,159,749,563. F-12 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C(a) ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.88 $ 10.87 $ 16.86 $ 15.21 $ 11.91 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.08) (0.10)(b) (0.13) (0.17)(b) (0.10)(b) - ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.42 (1.89) (5.86) 1.82 3.43 ========================================================================================================================= Total from investment operations 1.34 (1.99) (5.99) 1.65 3.33 ========================================================================================================================= Less distributions from net realized gains -- -- -- -- (0.03) ========================================================================================================================= Net asset value, end of period $ 10.22 $ 8.88 $ 10.87 $ 16.86 $ 15.21 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(c) 15.09% (18.31)% (35.53)% 10.82% 28.09% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $290,396 $302,555 $487,838 $720,186 $349,951 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets 2.12%(d) 2.05% 1.94% 1.88% 1.90% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.82)%(d) (0.98)% (0.94)% (1.00)% (0.68)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 28% 28% 31% 22% 22% _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) Per share information for all periods prior to October 31, 2000 have been restated to reflect a 3 for 1 stock split, effected in the form of a 200% stock dividend, on September 8, 2000. (b) Calculated using average shares outstanding. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $282,704,852.
CLASS R ---------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - ------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 9.22 $ 10.53 - ------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.00) (0.02)(a) - ------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.44 (1.29) ========================================================================================== Total from investment operations 1.44 (1.31) ========================================================================================== Net asset value, end of period $10.66 $ 9.22 __________________________________________________________________________________________ ========================================================================================== Total return(b) 15.62% (12.44)% __________________________________________________________________________________________ ========================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $1,578 $ 37 __________________________________________________________________________________________ ========================================================================================== Ratio of expenses to average net assets 1.62%(c) 1.55%(d) ========================================================================================== Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.49)%(d) __________________________________________________________________________________________ ========================================================================================== Portfolio turnover rate(e) 28% 28% __________________________________________________________________________________________ ==========================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $522,665. (d) Annualized. (e) Not annualized for periods less than one year. F-13 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS ------------------ SEPTEMBER 30, 2003 (DATE SALES COMMENCED) TO OCTOBER 31, 2003 - ---------------------------------------------------------------------------------- Net asset value, beginning of period $10.16 - ---------------------------------------------------------------------------------- Income from investment operations: Net Investment income (loss) (0.00) - ---------------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 0.53 ================================================================================== Total from investment operations 0.53 ================================================================================== Net asset value, end of period $10.69 __________________________________________________________________________________ ================================================================================== Total return(a) 5.22% __________________________________________________________________________________ ================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 100 __________________________________________________________________________________ ================================================================================== Ratio of expenses to average net assets 1.29%(b) ================================================================================== Ratio of net investment income (loss) to average net assets (0.01)%(b) __________________________________________________________________________________ ================================================================================== Portfolio turnover rate(c) 28% __________________________________________________________________________________ ==================================================================================
(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (b) Ratios are annualized and based on average daily net assets of $49,231. (c) Not annualized for periods less than one year.
INSTITUTIONAL CLASS -------------------------------- MARCH 15, 2002 (DATE SALES YEAR ENDED COMMENCED) OCTOBER 31, TO OCTOBER 31, 2003 2002 - ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.26 $ 12.13 - ---------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.06 0.02(a) - ---------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.49 (2.89) ============================================================================================== Total from investment operations 1.55 (2.87) ============================================================================================== Net asset value, end of period $10.81 $ 9.26 ______________________________________________________________________________________________ ============================================================================================== Total return(b) 16.74% (23.66)% ______________________________________________________________________________________________ ============================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 136 $ 160 ______________________________________________________________________________________________ ============================================================================================== Ratio of expenses to average net assets 0.77%(c) 0.77%(d) ============================================================================================== Ratio of net investment income to average net assets 0.53%(c) 0.30%(d) ______________________________________________________________________________________________ ============================================================================================== Portfolio turnover rate(e) 28% 28% ______________________________________________________________________________________________ ==============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $141,917. (d) Annualized. (e) Not annualized for periods less than one year. F-14 NOTE 12--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-15 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Blue Chip Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Blue Chip Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Blue Chip Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Houston, Texas December 16, 2003 F-16 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds. F-17 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com BCH-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------ MUTUAL RETIREMENT ANNUITIES COLLEGE SEPARATELY OFFSHORE ALTERNATIVE CASH [AIM INVESTMENTS LOGO APPEARS HERE] FUNDS PRODUCTS SAVINGS MANAGED PRODUCTS INVESTMENTS MANAGEMENT --Servicemark-- PLANS ACCOUNTS
AIM CAPITAL DEVELOPMENT FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM CAPITAL DEVELOPMENT FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Class R shares are available only to o The unmanaged Standard & Poor's presented is as of 10/31/03 and is based certain retirement plans. Please see the Composite Index of 500 Stocks (the S&P on total net assets. prospectus for more information. They 500--Registered Trademark--) is an index are sold at net asset value, that is, of common stocks frequently used as a o AIM Capital Development Fund's without up-front sales charges. general measure of U.S. stock market performance figures are historical, and performance. they reflect fund expenses, the o The fund's investment return and reinvestment of distributions, and principal value will fluctuate, so an o Bloomberg, Inc. is a well-known changes in net asset value. investor's shares, when redeemed, may be independent financial research and worth more or less than their original reporting firm. o When sales charges are included in cost. performance figures, Class A share o A direct investment cannot be made in performance reflects the maximum 5.50% o Investing in small and mid-size an index. Unless otherwise indicated, sales charge, and Class B and Class C companies may involve risks not index results include reinvested share performance reflects the associated with investing in more dividends, and they do not reflect sales applicable contingent deferred sales established companies. Also, small charges or fund expenses. Performance of charge (CDSC) for the period involved. companies may have business risk, an index of funds reflects fund The CDSC on Class B shares declines from significant stock price fluctuations and expenses; performance of a market index 5% beginning at the time of purchase to illiquidity. does not. 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the o Industry classifications used in this A DESCRIPTION OF THE POLICIES AND first year after purchase. The report are generally according to the PROCEDURES THAT THE FUND USES TO performance of the fund's share classes Global Industry Classification Standard, DETERMINE HOW TO VOTE PROXIES RELATING will differ due to different sales which was developed by and is the TO PORTFOLIO SECURITIES IS AVAILABLE charge structures and class expenses. exclusive property and a service mark of WITHOUT CHARGE, UPON REQUEST, BY CALLING Morgan Stanley Capital International 800-959-4246, OR ON THE AIM WEB SITE, o Effective 9/30/03, Class B shares are Inc. and Standard & Poor's. AIMINVESTMENTS.COM. not available as an investment for retirement plans maintained pursuant to o The unmanaged Lipper Mid-Cap Core Fund Section 401 of the Internal Revenue Index represents an average of the Code, including 401(k) plans, money performance of the 30 largest purchase pension plans and profit mid-capitalization core funds tracked by sharing plans. Plans that have existing Lipper, Inc., an independent mutual fund accounts invested in Class B shares will performance monitor. continue to be allowed to make additional purchases. o The unmanaged Russell 2500--Registered Trademark-- Index measures the performance of the 2,500 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest companies based on market capitalization.
===================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or ===================================================== to persons who have received a current prospectus of AIMinvestments.com the fund.
TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS harmful short-term trading. These steps include: --Registered Trademark--: o Strengthening daily monitoring of trading activities. As you may be aware, there has been a [PHOTO OF great deal of media coverage recently o Imposing redemption fees on additional funds we believe ROBERT H. about the mutual fund industry and may be vulnerable to harmful short-term trading GRAHAM] allegations of improper activities by activity. certain individuals and companies. As ROBERT H. GRAHAM part of these widespread investigations, o Implementing an enhanced exchange policy (effective on INVESCO Funds Group (IFG), the former or about March 1, 2004) designed to limit exchanges [PHOTO OF adviser to certain INVESCO Funds, was between funds. MARK H. recently named as a defendant in WILLIAMSON] separate civil enforcement actions by o Employing an enhanced fair value pricing policy on the U.S. Securities and Exchange certain foreign securities as well as certain illiquid MARK H. WILLIAMSON Commission (SEC), the Office of the New securities. York Attorney General and the State of Colorado over an issue known as "market timing." A number of None of these tools alone, nor all of them taken together, private class or derivative actions also were filed in the eliminate the possibility of short-term trading strategies wake of the regulators' actions. that may be detrimental to a fund. Moreover, each of these tools involves judgments that are inherently subjective. We Investors are understandably concerned and frustrated have always sought and continue to seek to make these about these reports, and we would like to take this judgments to the best of our abilities and in a manner that opportunity to assure you that, based on an investigation we believe is consistent with the best interests of our fund conducted by an outside firm, IFG and its parent company, shareholders. And we remain committed to being as vigilant AMVESCAP PLC, believe that these civil actions are without as possible in the future to identify and address any merit. IFG is contesting the charges. harmful market timing investors who have the potential to harm our long-term fund shareholders. We encourage you to continue to monitor this situation, particularly as IFG has the opportunity to address the We sincerely hope these developments and the media allegations that have been made. Current information will be coverage surrounding them do not result in you or other posted on our Web site at AIMinvestments.com. We will shareholders losing confidence in AIM or INVESCO Funds. continue to communicate to you on our Web site about our Amidst this storm of controversy in the mutual fund finding, and the actions we are taking to protect and industry, we believe we can find encouragement in the promote the interests of our shareholders. The independent recovering economy and rising equity markets. As we write trustees of the funds are receiving regular reports from this letter, for instance, the S&P 500--Registered their independent counsel and outside counsel hired by Trademark-- Index is up approximately 23% year-to-date. AMVESCAP PLC, the parent of AIM and IFG, to perform an Although past performance is no guarantee of future results, ongoing investigation of market timing. there appear to be indicators that the economy and stock markets are showing signs of welcomed improvement. We A COMPLEX ISSUE encourage you to read the enclosed discussion of your fund's performance during this past reporting period. Market timing is an investment technique not defined in any regulation that involves frequent short-term trading of OUR UNWAVERING COMMITMENT mutual fund shares, sometimes with a goal to exploit inefficiencies in the way mutual funds price their shares. At AIM Investments, we have never wavered in our commitment We recognize that fund management companies have tried to to helping you build solutions for your financial goals. Our deal with this complex issue in various ways and believe company was founded on a core principle of integrity, and we that industry-wide guidance is in order. To that end, we have always worked hard to earn the trust of our welcome SEC Chairman William Donaldson's pledge to adopt new shareholders. We are committed to doing all we can to rules designed to curb market timing abuses. Comprehensive maintain your trust and confidence. rulemaking is necessary and is the best way to establish new industry responsibilities designed to protect shareholders. Thank you for your continued participation in AIM We support practical rule changes and structural Investments. Please call your financial advisor or one of modifications that are fair, enforceable and, most our Client Service representatives at 800-959-4246 if you importantly, beneficial for investors. have any further questions or concerns about your AIM Investments account. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Sincerely, activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND DELIVERS POSITIVE RETURN services, consumer staples and health care were the weakest-performing sectors. This report covers the fiscal year ended to its lowest level for the fiscal year Small- and mid-cap stocks generally October 31, 2003. During this period, on March 11, 2003. The index then outperformed large-cap stocks. While the your fund recorded positive returns. At rallied, posting a gain of 32.67% from performance of large-cap growth and net asset value, Class A shares produced its low on March 11 through the end of large-cap value stocks was similar, mid- a total return of 30.16%. By comparison, the reporting period. and small-cap growth stocks generally the Lipper Mid-Cap Core Fund Index, the outperformed their value counterparts by Russell 2500 Index and the S&P 500 Index During this rally, the United States wider margins. returned 32.01%, 41.69% and 20.79%, and its allies took military action respectively, over the same period. The against Iraq and ousted the regime of ========================================= fund outperformed the market in general, Saddam Hussein. The nation's gross as measured by the S&P 500 Index, because domestic product (GDP), generally SMALL- AND MID-CAP of its focus on mid-cap stocks while it considered the broadest measure of performed in line with funds with similar economic activity, expanded at an STOCKS GENERALLY strategies, as measured by the Lipper annualized rate of 3.3% in the second Mid-Cap Core Fund Index. We believe the quarter and 8.2% in the third quarter of OUTPERFORMED fund underperformed the Russell 2500 2003. As of the close of the fiscal year, Index because of the index's greater 405 companies in the S&P 500 had reported LARGE-CAP STOCKS. exposure to small-cap stocks, which third-quarter earnings. A total of 65.4% generally outperformed mid-cap stocks. of those companies reported earnings that ========================================= exceeded expectations compared to 60.2% MARKET CONDITIONS for the third quarter of 2002, according YOUR FUND to Bloomberg. The job market remained Amid a backdrop of generally improving weak, however, as the nation's At the close of the fiscal year, the economic conditions, the S&P 500 returned unemployment rate stood at 6.0% at the portfolio's three largest sector 20.79% for the year ended October 31, close of the reporting period. weightings were in information 2003. The index rose in November 2002, technology, consumer discretionary and then declined over the next three months, All sectors of the S&P 500 Index financials. These sectors also had the dropping recorded gains for the fiscal year. most positive impact on fund performance Information technology, materials and for the reporting period while the utilities were the top-performing sectors sectors that contributed the least were while telecommunication consumer staples, energy and utilities.
==================================================================================================================================== TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* 1. Omnicare, Inc. 1.6% 1. Thrifts & Mortgage Finance 5.6% 2. Friedman, Billings, Ramsey Group, Inc.-Class A 1.4 2. Application Software 4.4 3. Advance Auto Parts, Inc. 1.3 3. Semiconductors 3.9 4. American Financial Realty Trust 1.3 4. Data Processing & Outsourced Services 3.6 5. American Standard Cos. Inc. 1.2 5. Specialty Stores 3.4 6. Bard (C.R.) Inc. 1.2 6. Health Care Services 3.3 7. Caremark RX, Inc. 1.2 7. Electronic Equipment Manufacturers 3.2 8. New York Community Bancorp, Inc. 1.2 8. Pharmaceuticals 3.1 9. Ruby Tuesday, Inc. 1.2 9. Health Care Equipment 2.7 10. Fisher Scientific International Inc. 1.2 10. Real Estate 2.6 * Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ====================================================================================================================================
2 As economic conditions improved, we computer products mainly through [PHOTO OF MICHAEL CHAPMAN adjusted the portfolio to potentially catalogues and its Web site. We continue MICHAEL Mr. Chapman began his take advantage of this trend. For to hold this stock because CDW reported CHAPMAN] investment career in 1995 example, the fund's exposure to the record third-quarter earnings, and the as an analyst and then information technology sector, generally stock outperformed the benchmark since portfolio manager with U.S. considered more aggressive, increased the market low in March through the end Global Investors, Inc. He joined AIM in between the beginning and end of the of the reporting period. 2001 and was promoted to his current reporting period while its weighting in position in 2002. Prior to joining AIM, the consumer-discretionary sector, also IN CLOSING he was an equity analyst with Chase considered more economically sensitive, Manhattan Bank and a securities analyst remained about the same. We also reduced We continue to work diligently to meet with Gulf Investment Management. the fund's relatively small weighting in the fund's investment objective of growth large-cap stocks. By the close of the of capital. Regardless of market trends, Mr. Chapman has a B.S. in petroleum reporting period, mid- and small-cap we will adhere to the fund's strategy as engineering and an M.A. in energy and stocks, which generally perform better outlined in its prospectus. We will mineral resources from The University of during economic upturns, composed 99% of continue to focus on the reasonably Texas. the portfolio. priced stocks of companies that we believe have favorable growth prospects. PAUL J. RASPLICKA Stocks that enhanced performance [PHOTO OF Mr. Rasplicka is lead included Hasbro, one of the nation's See important fund and index disclosures PAUL J. portfolio manager of AIM largest toy makers, and Rockwell inside front cover. RASPLICKA Capital Development Fund. Automation, a leading producer of industrial automation equipment. Hasbro Mr. Rasplicka joined AIM in 1998. reported an 18% increase in net revenue Prior to joining AIM he was with INVESCO for the third quarter of 2003 compared to Trust Company, the Denver-based the same period for the previous year. investment management subsidiary of Rockwell Automation reported a 5% AMVESCAP PLC, since 1994. He was increase in sales for its 2003 fiscal responsible for portfolio management of year compared to its 2002 fiscal year. small-capitalization growth separate accounts. Detracting from performance was CDW Computer Centers, whose stock did not Mr. Rasplicka began his investment rise as quickly as the benchmark. CDW career in 1982 as an equity research sells analyst with Fayez Sarofim & Co. He then joined Daniel Breen & Company L.P. in 1985 as vice president and partner, where he managed over $1.5 billion of equity, balanced and fixed-income assets as part of a team. A native of Denver, Mr. Rasplicka is a magna cum laude graduate of the University of Colorado at Boulder with a B.S. in business administration. He received an M.B.A from the University of Chicago. He is a Chartered Financial Analyst and a Chartered Investment Counselor. Assisted by Small/Mid-Cap Core Team. [GRAPHIC] For More Information Visit AIMinvestments.com
================================================================================ FUND VS. INDEXES PORTFOLIO COMPOSITION BY INVESTMENT TYPE Total Returns 10/31/02-10/31/03, excluding sales charge Total number of holdings* 115 Total net assets $1.0 billion Class A Shares 30.16% Class B Shares 29.32 Class C Shares 29.34 Class R Shares 29.95 Russell 2500 Index 41.69 Source: Lipper, Inc.
================================================================================ 3 ================================================================================ FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 6/17/96-10/31/03 [MOUNTAIN CHART]
Date AIM Capital Development Fund Russell 2500 Class A Shares Index 6/17/96 $ 9450 $10000 7/31/96 8977 9268 10/31/96 10480 10158 1/31/97 11131 11094 4/30/97 9648 10566 7/31/97 12766 12714 10/31/97 13768 13117 1/31/98 13503 13219 4/30/98 15744 14857 7/31/98 13797 13210 10/31/98 12180 12107 1/31/99 13974 13453 4/30/99 13302 13987 7/31/99 14144 14649 10/31/99 14400 14286 1/31/00 17811 16345 4/30/00 20296 17429 7/31/00 19835 17232 10/31/00 20591 17611 1/31/01 20387 18017 4/30/01 18927 17339 7/31/01 19047 17467 10/31/01 16108 15469 1/31/02 17787 17438 4/30/02 18949 18270 7/31/02 15178 14738 10/31/02 14038 14055 1/31/03 13971 14129 4/30/03 14815 15162 7/31/03 16670 17883 10/31/03 $18275 $19915 Russell 2500 Index data from 6/30/96 Source: Lipper, Inc.
Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. ==================================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS *The returns shown for these periods are AVERAGE ANNUAL TOTAL RETURNS Including sales charges, as of 10/31/03 the blended returns of the historical Including sales charges, as of 9/30/03 performance of the fund's Class R shares CLASS A SHARES since their inception and the restated CLASS A SHARES Inception (6/17/96) 8.52% historical performance of the fund's Inception (6/17/96) 7.53% 5 Years 7.23 Class A shares (for the periods prior to 5 Years 6.34 1 Year 23.04 inception of the Class R shares) at net 1 Year 18.18 asset value, adjusted to reflect the CLASS B SHARES higher Rule 12b-1 fees applicable to the CLASS B SHARES Inception (10/1/96) 7.19% Class R shares. The inception date of Inception (10/1/96) 6.16% 5 Years 7.42 Class A shares is 6/17/96. The inception 5 Years 6.53 1 Year 24.32 date of the fund's Class R shares is 1 Year 19.32 6/3/02. Calculation of blended returns as CLASS C SHARES of 10/31/03 is from 6/17/96. Calculation CLASS C SHARES Inception (8/4/97) 5.12% of blended returns as of 9/30/03 is from Inception (8/4/97) 3.94% 5 Years 7.72 6/17/96. 5 Years 6.83 1 Year 28.34 1 Year 23.34 In addition to returns as of the close of CLASS R SHARES* the fiscal year, industry regulations CLASS R SHARES* Inception 9.19% require us to provide average annual Inception 8.20% 5 Years 8.28 total returns as of 9/30/03, the most 5 Years 7.40 1 Year 29.95 recent calendar quarter-end. 1 Year 24.92 ====================================================================================================================================
4 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM CAPITAL DEVELOPMENT FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (3/15/02) -1.50% those shown. All returns assume shareholders with a performance overview 1 Year 31.08 reinvestment of distributions at net specific to their holdings. asset value. Investment return and Institutional Class shares are offered principal value will fluctuate so your exclusively to institutional investors, AVERAGE ANNUAL TOTAL RETURNS shares, when redeemed, may be worth more including defined contribution plans For periods ended 9/30/03 or less than their original cost. See that meet certain criteria. Performance (most recent calendar quarter-end) full report for information on of Institutional Class shares will comparative benchmarks. If you have differ from performance of Class A INCEPTION (3/15/02) -6.22% questions, please consult your fund shares due to differing sales charges 1 Year 25.97 prospectus or call 800-451-4246. A I M and class expenses. Distributors, Inc.
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com CDV-INS-1 10/03 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - -------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-96.74% ADVERTISING-1.14% Interpublic Group of Cos., Inc. (The)(a) 498,200 $ 7,413,216 - -------------------------------------------------------------------------- Lamar Advertising Co.(a) 136,000 4,120,800 ========================================================================== 11,534,016 ========================================================================== AIR FREIGHT & LOGISTICS-1.07% C.H. Robinson Worldwide, Inc. 274,900 10,770,582 ========================================================================== APPAREL RETAIL-1.50% Limited Brands 288,000 5,068,800 - -------------------------------------------------------------------------- Ross Stores, Inc. 201,200 10,062,012 ========================================================================== 15,130,812 ========================================================================== APPLICATION SOFTWARE-4.41% Amdocs Ltd. (United Kingdom)(a) 365,400 7,841,484 - -------------------------------------------------------------------------- Autodesk, Inc. 578,100 11,128,425 - -------------------------------------------------------------------------- Hyperion Solutions Corp.(a) 280,500 9,393,945 - -------------------------------------------------------------------------- Intuit Inc.(a) 191,800 9,586,164 - -------------------------------------------------------------------------- Siebel Systems, Inc.(a) 514,600 6,478,814 ========================================================================== 44,428,832 ========================================================================== ASSET MANAGEMENT & CUSTODY BANKS-1.93% Affiliated Managers Group, Inc.(a) 141,000 10,222,500 - -------------------------------------------------------------------------- American Capital Strategies, Ltd. 342,400 9,244,800 ========================================================================== 19,467,300 ========================================================================== BIOTECHNOLOGY-0.47% QLT Inc. (Canada)(a) 304,200 4,699,890 ========================================================================== BROADCASTING & CABLE TV-0.86% Cox Radio, Inc.-Class A(a) 300,000 6,636,000 - -------------------------------------------------------------------------- Westwood One, Inc.(a) 67,200 2,011,296 ========================================================================== 8,647,296 ========================================================================== BUILDING PRODUCTS-1.23% American Standard Cos. Inc.(a) 129,600 12,402,720 ========================================================================== CASINOS & GAMING-2.10% GTECH Holdings Corp. 245,300 10,960,004 - -------------------------------------------------------------------------- Harrah's Entertainment, Inc. 234,400 10,196,400 ========================================================================== 21,156,404 ========================================================================== COMMUNICATIONS EQUIPMENT-2.32% Avocent Corp.(a) 154,400 5,836,320 - --------------------------------------------------------------------------
MARKET SHARES VALUE - --------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED) Harris Corp. 284,900 $ 10,603,978 - -------------------------------------------------------------------------- UTStarcom, Inc.(a) 219,900 6,926,850 ========================================================================== 23,367,148 ========================================================================== COMPUTER STORAGE & PERIPHERALS-1.50% Hutchinson Technology Inc.(a) 160,000 5,361,600 - -------------------------------------------------------------------------- Imation Corp. 285,000 9,704,250 ========================================================================== 15,065,850 ========================================================================== CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-1.08% Cummins Inc. 117,100 5,550,540 - -------------------------------------------------------------------------- Navistar International Corp.(a) 130,900 5,292,287 ========================================================================== 10,842,827 ========================================================================== CONSUMER FINANCE-1.76% AmeriCredit Corp.(a) 602,000 8,066,800 - -------------------------------------------------------------------------- Capital One Financial Corp. 159,000 9,667,200 ========================================================================== 17,734,000 ========================================================================== DATA PROCESSING & OUTSOURCED SERVICES-3.63% Alliance Data Systems Corp.(a) 354,200 9,839,676 - -------------------------------------------------------------------------- Certegy Inc. 200,450 6,747,147 - -------------------------------------------------------------------------- DST Systems, Inc.(a) 262,900 9,942,878 - -------------------------------------------------------------------------- Fiserv, Inc.(a) 143,400 5,064,888 - -------------------------------------------------------------------------- Iron Mountain Inc.(a) 131,100 5,013,264 ========================================================================== 36,607,853 ========================================================================== DIVERSIFIED COMMERCIAL SERVICES-2.13% ARAMARK Corp.-Class B(a) 398,700 10,653,264 - -------------------------------------------------------------------------- Career Education Corp.(a) 108,400 5,804,820 - -------------------------------------------------------------------------- United Rentals, Inc.(a) 286,500 4,990,830 ========================================================================== 21,448,914 ========================================================================== DIVERSIFIED METALS & MINING-1.06% CONSOL Energy Inc. (Acquired 9/17/03; Cost $9,740,412)(a)(b)(c) 546,600 10,650,501 ========================================================================== ELECTRIC UTILITIES-1.10% Wisconsin Energy Corp. 337,500 11,053,125 ==========================================================================
F-1
MARKET SHARES VALUE - -------------------------------------------------------------------------- ELECTRICAL COMPONENTS & EQUIPMENT-2.22% Cooper Industries, Ltd.-Class A (Bermuda) 214,000 $ 11,320,600 - -------------------------------------------------------------------------- Rockwell Automation, Inc. 354,600 11,010,330 ========================================================================== 22,330,930 ========================================================================== ELECTRONIC EQUIPMENT MANUFACTURERS-3.20% Amphenol Corp.-Class A(a) 187,600 11,021,500 - -------------------------------------------------------------------------- Varian Inc.(a) 282,800 10,127,068 - -------------------------------------------------------------------------- Waters Corp.(a) 353,400 11,107,362 ========================================================================== 32,255,930 ========================================================================== ENVIRONMENTAL SERVICES-1.00% Republic Services, Inc. 435,000 10,113,750 ========================================================================== FOOTWEAR-1.12% Reebok International Ltd. 290,800 11,326,660 ========================================================================== FOREST PRODUCTS-1.06% Louisiana-Pacific Corp.(a) 561,200 10,674,024 ========================================================================== GAS UTILITIES-1.09% Kinder Morgan, Inc. 205,800 11,020,590 ========================================================================== GENERAL MERCHANDISE STORES-1.49% Dollar General Corp. 232,100 5,215,287 - -------------------------------------------------------------------------- Dollar Tree Stores, Inc.(a) 255,500 9,754,990 ========================================================================== 14,970,277 ========================================================================== HEALTH CARE DISTRIBUTORS-1.61% Omnicare, Inc. 424,100 16,259,994 ========================================================================== HEALTH CARE EQUIPMENT-2.71% Bard (C.R.), Inc. 153,800 12,311,690 - -------------------------------------------------------------------------- Hillenbrand Industries, Inc. 177,600 10,572,528 - -------------------------------------------------------------------------- STERIS Corp.(a) 210,000 4,372,200 ========================================================================== 27,256,418 ========================================================================== HEALTH CARE FACILITIES-0.47% Universal Health Services, Inc.-Class B(a) 100,000 4,705,000 ========================================================================== HEALTH CARE SERVICES-3.27% AdvancePCS(a) 74,200 3,819,074 - -------------------------------------------------------------------------- Caremark Rx, Inc.(a) 490,900 12,297,045 - -------------------------------------------------------------------------- DaVita, Inc.(a) 308,600 10,831,860 - -------------------------------------------------------------------------- Lincare Holdings Inc.(a) 153,100 5,961,714 ========================================================================== 32,909,693 ==========================================================================
MARKET SHARES VALUE - --------------------------------------------------------------------------
HEALTH CARE SUPPLIES-1.16% Fisher Scientific International Inc.(a) 290,000 $ 11,672,500 ========================================================================== HOMEBUILDING-0.63% Lennar Corp.-Class A 69,100 6,346,835 ========================================================================== HOTELS, RESORTS & CRUISE LINES-0.38% Starwood Hotels & Resorts Worldwide, Inc. 113,800 3,838,474 ========================================================================== HOUSEWARES & SPECIALTIES-1.13% Yankee Candle Co., Inc. (The)(a) 408,400 11,427,032 ========================================================================== INDUSTRIAL GASES-0.86% Airgas, Inc. 455,000 8,713,250 ========================================================================== INDUSTRIAL MACHINERY-2.06% Parker-Hannifin Corp. 194,400 9,908,568 - -------------------------------------------------------------------------- SPX Corp.(a) 225,900 10,870,308 ========================================================================== 20,778,876 ========================================================================== INTEGRATED OIL & GAS-0.76% Murphy Oil Corp. 129,500 7,637,910 ========================================================================== INTERNET SOFTWARE & SERVICES-0.52% United Online, Inc.(a) 182,200 5,245,538 ========================================================================== INVESTMENT COMPANIES-ETFS-0.26% iShares Nasdaq Biotechnology Index Fund(a) 36,400 2,584,036 ========================================================================== LEISURE PRODUCTS-2.28% Brunswick Corp. 386,100 11,455,587 - -------------------------------------------------------------------------- Hasbro, Inc. 530,300 11,560,540 ========================================================================== 23,016,127 ========================================================================== MANAGED HEALTH CARE-1.23% Anthem, Inc.(a) 73,000 4,995,390 - -------------------------------------------------------------------------- Coventry Health Care, Inc.(a) 135,200 7,402,200 ========================================================================== 12,397,590 ========================================================================== MULTI-UTILITIES & UNREGULATED POWER-1.13% Williams Cos., Inc. (The) 1,120,100 11,425,020 ========================================================================== OFFICE ELECTRONICS-0.91% Zebra Technologies Corp.-Class A(a) 161,150 9,177,493 ========================================================================== OIL & GAS DRILLING-1.19% Pride International, Inc.(a) 447,300 7,326,774 - -------------------------------------------------------------------------- Rowan Cos., Inc.(a) 194,300 4,653,485 ========================================================================== 11,980,259 ==========================================================================
F-2
MARKET SHARES VALUE - -------------------------------------------------------------------------- OIL & GAS EQUIPMENT & SERVICES-0.83% BJ Services Co.(a) 111,300 $ 3,651,753 - -------------------------------------------------------------------------- Key Energy Services, Inc.(a) 539,500 4,709,835 ========================================================================== 8,361,588 ========================================================================== OIL & GAS EXPLORATION & PRODUCTION-0.83% XTO Energy, Inc. 351,300 8,315,271 ========================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-0.30% CapitalSource Inc.(a) 137,700 2,994,975 ========================================================================== PACKAGED FOODS & MEATS-0.54% Flowers Foods, Inc. 228,400 5,419,932 ========================================================================== PAPER PACKAGING-2.08% Sealed Air Corp.(a) 202,200 10,763,106 - -------------------------------------------------------------------------- Smurfit-Stone Container Corp.(a) 659,100 10,216,050 ========================================================================== 20,979,156 ========================================================================== PERSONAL PRODUCTS-1.04% NBTY, Inc.(a) 385,600 10,507,600 ========================================================================== PHARMACEUTICALS-3.14% Medicis Pharmaceutical Corp.-Class A 97,600 6,182,960 - -------------------------------------------------------------------------- Mylan Laboratories Inc. 215,100 5,194,665 - -------------------------------------------------------------------------- Pharmaceutical Resources, Inc.(a) 149,500 10,805,860 - -------------------------------------------------------------------------- Shire Pharmaceuticals Group PLC-ADR (United Kingdom)(a) 413,547 9,470,226 ========================================================================== 31,653,711 ========================================================================== PROPERTY & CASUALTY INSURANCE-1.97% ACE Ltd. (Cayman Islands) 270,617 9,742,212 - -------------------------------------------------------------------------- Quanta Capital Holdings Ltd. (Bermuda) (Acquired 08/27/03; Cost $10,000,000)(a)(b) 1,000,000 10,100,000 ========================================================================== 19,842,212 ========================================================================== PUBLISHING-0.33% Journal Communications, Inc.-Class A(a) 189,700 3,374,763 ========================================================================== REAL ESTATE-2.63% American Financial Realty Trust(c) 840,100 12,769,520 - -------------------------------------------------------------------------- Friedman, Billings, Ramsey Group, Inc.-Class A 689,155 13,727,968 ========================================================================== 26,497,488 ========================================================================== REGIONAL BANKS-0.47% Compass Bancshares, Inc. 125,100 4,726,278 ==========================================================================
MARKET SHARES VALUE - --------------------------------------------------------------------------
REINSURANCE-2.45% Everest Re Group, Ltd. (Bermuda) 120,800 $ 10,020,360 - -------------------------------------------------------------------------- PartnerRe Ltd. (Bermuda) 91,500 4,965,705 - -------------------------------------------------------------------------- Platinum Underwriters Holdings, Ltd. (Bermuda) 337,200 9,691,128 ========================================================================== 24,677,193 ========================================================================== RESTAURANTS-2.14% Brinker International, Inc.(a) 305,600 9,727,248 - -------------------------------------------------------------------------- Ruby Tuesday, Inc. 431,500 11,801,525 ========================================================================== 21,528,773 ========================================================================== SEMICONDUCTOR EQUIPMENT-0.56% Novellus Systems, Inc.(a) 136,700 5,644,343 ========================================================================== SEMICONDUCTORS-3.91% Cypress Semiconductor Corp.(a) 252,000 5,407,920 - -------------------------------------------------------------------------- GlobespanVirata, Inc.(a) 1,087,400 6,698,384 - -------------------------------------------------------------------------- Integrated Circuit Systems, Inc.(a) 297,300 9,980,361 - -------------------------------------------------------------------------- Intersil Corp.-Class A 276,300 7,125,777 - -------------------------------------------------------------------------- Microchip Technology Inc. 311,162 10,178,109 ========================================================================== 39,390,551 ========================================================================== SPECIALTY CHEMICALS-0.51% Great Lakes Chemical Corp. 239,500 5,149,250 ========================================================================== SPECIALTY STORES-3.38% Advance Auto Parts, Inc.(a) 167,600 13,109,672 - -------------------------------------------------------------------------- Michaels Stores, Inc. 245,700 11,663,379 - -------------------------------------------------------------------------- Rent-A-Center, Inc.(a) 297,500 9,299,850 ========================================================================== 34,072,901 ========================================================================== TECHNOLOGY DISTRIBUTORS-1.01% CDW Corp. 170,100 10,214,505 ========================================================================== THRIFTS & MORTGAGE FINANCE-5.59% Doral Financial Corp. (Puerto Rico) 222,100 11,216,050 - -------------------------------------------------------------------------- New Century Financial Corp. 153,100 5,676,948 - -------------------------------------------------------------------------- New York Community Bancorp, Inc. 336,666 12,187,309 - -------------------------------------------------------------------------- PMI Group, Inc. (The) 276,900 10,585,887 - -------------------------------------------------------------------------- Radian Group Inc. 209,000 11,056,100 - -------------------------------------------------------------------------- Saxon Capital Acquisition Corp.(a)(c) 296,600 5,582,012 ========================================================================== 56,304,306 ========================================================================== Total Common Stocks & Other Equity Interests (Cost $736,403,096) 974,727,072 ==========================================================================
F-3
MARKET SHARES VALUE - -------------------------------------------------------------------------- MONEY MARKET FUNDS-3.25% STIC Liquid Assets Portfolio(d) 16,395,571 $ 16,395,571 - -------------------------------------------------------------------------- STIC Prime Portfolio(d) 16,395,571 16,395,571 ========================================================================== Total Money Market Funds (Cost $32,791,142) 32,791,142 ========================================================================== TOTAL INVESTMENTS-99.99% (excluding investments purchased with cash collateral from securities loaned) (Cost $769,194,238) 1,007,518,214 ==========================================================================
MARKET SHARES VALUE
- -------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-15.47% STIC Liquid Assets Portfolio(d)(e) 77,943,886 $ 77,943,886 - -------------------------------------------------------------------------- STIC Prime Portfolio(d)(e) 77,943,886 77,943,886 ========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $155,887,772) 155,887,772 ========================================================================== TOTAL INVESTMENTS-115.46% (Cost $925,082,010) 1,163,405,986 ========================================================================== OTHER ASSETS LESS LIABILITIES-(15.46%) (155,813,164) ========================================================================== NET ASSETS-100.00% $1,007,592,822 __________________________________________________________________________ ==========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at 10/31/03 was $20,750,501, which represented 2.06% of the Fund's net assets. These securities are considered to be illiquid. (c) Security fair valued in accordance with the procedures established by the Board of Trustees. (d) The money market fund and the Fund are affiliated by having the same investment advisor. (e) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $736,403,096)* $ 974,727,072 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $188,678,914) 188,678,914 - ------------------------------------------------------------ Receivables for: Investments sold 14,296,403 - ------------------------------------------------------------ Fund shares sold 495,691 - ------------------------------------------------------------ Dividends 134,758 - ------------------------------------------------------------ Investment for deferred compensation plan 48,771 - ------------------------------------------------------------ Other assets 34,459 ============================================================ Total assets 1,178,416,068 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 12,090,192 - ------------------------------------------------------------ Fund shares reacquired 1,282,728 - ------------------------------------------------------------ Deferred compensation plan 48,771 - ------------------------------------------------------------ Collateral upon return of securities loaned 155,887,772 - ------------------------------------------------------------ Accrued distribution fees 629,898 - ------------------------------------------------------------ Accrued trustees' fees 41,641 - ------------------------------------------------------------ Accrued transfer agent fees 675,452 - ------------------------------------------------------------ Accrued operating expenses 166,792 ============================================================ Total liabilities 170,823,246 ============================================================ Net assets applicable to shares outstanding $1,007,592,822 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 745,788,184 - ------------------------------------------------------------ Undistributed net investment income (loss) (85,597) - ------------------------------------------------------------ Undistributed net realized gain from investment securities, foreign currencies and option contracts 23,566,260 - ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 238,323,975 ============================================================ $1,007,592,822 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 545,691,273 ____________________________________________________________ ============================================================ Class B $ 392,381,668 ____________________________________________________________ ============================================================ Class C $ 68,356,008 ____________________________________________________________ ============================================================ Class R $ 1,154,117 ____________________________________________________________ ============================================================ Institutional Class $ 9,756 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 32,748,997 ____________________________________________________________ ============================================================ Class B 24,853,019 ____________________________________________________________ ============================================================ Class C 4,332,614 ____________________________________________________________ ============================================================ Class R 69,441 ____________________________________________________________ ============================================================ Institutional Class 580 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 16.66 - ------------------------------------------------------------ Offering price per share: (Net asset value of $16.66 divided by 94.50%) $ 17.63 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 15.79 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 15.78 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 16.62 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 16.83 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $153,631,096 were on loan to brokers. See Notes to Financial Statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $8,183) $ 7,752,065 - -------------------------------------------------------------------------- Dividends from affiliated money market funds 588,530 - -------------------------------------------------------------------------- Securities lending 307,752 ========================================================================== Total investment income 8,648,347 ========================================================================== EXPENSES: Advisory fees 6,014,863 - -------------------------------------------------------------------------- Administrative services fees 240,864 - -------------------------------------------------------------------------- Custodian fees 113,090 - -------------------------------------------------------------------------- Distribution fees: Class A 1,681,630 - -------------------------------------------------------------------------- Class B 3,525,000 - -------------------------------------------------------------------------- Class C 588,010 - -------------------------------------------------------------------------- Class R 3,016 - -------------------------------------------------------------------------- Transfer agent fees 3,582,073 - -------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 39 - -------------------------------------------------------------------------- Trustees' fees 24,521 - -------------------------------------------------------------------------- Other 553,293 ========================================================================== Total expenses 16,326,399 ========================================================================== Less: Fees waived and expense offset arrangements (26,311) ========================================================================== Net expenses 16,300,088 ========================================================================== Net investment income (loss) (7,651,741) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS: Net realized gain from: Investment securities 64,257,050 - -------------------------------------------------------------------------- Foreign currencies 62,002 - -------------------------------------------------------------------------- Option contracts written 126,096 ========================================================================== 64,445,148 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 180,428,278 - -------------------------------------------------------------------------- Foreign currencies (902) ========================================================================== 180,427,376 ========================================================================== Net gain from investment securities, foreign currencies and option contracts 244,872,524 ========================================================================== Net increase in net assets resulting from operations $237,220,783 __________________________________________________________________________ ==========================================================================
See Notes to Financial Statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (7,651,741) $ (6,585,862) - ---------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities, foreign currencies and option contracts 64,445,148 (27,642,639) - ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies and option contracts 180,427,376 (101,615,274) ============================================================================================== Net increase (decrease) in net assets resulting from operations 237,220,783 (135,843,775) ============================================================================================== Share transactions-net: Class A (40,295,276) (49,872,882) - ---------------------------------------------------------------------------------------------- Class B (45,852,897) (51,574,661) - ---------------------------------------------------------------------------------------------- Class C (3,420,452) (497,034) - ---------------------------------------------------------------------------------------------- Class R 902,244 12,300 - ---------------------------------------------------------------------------------------------- Institutional Class -- 10,000 ============================================================================================== Net increase (decrease) in net assets resulting from share transactions (88,666,381) (101,922,277) ============================================================================================== Net increase (decrease) in net assets 148,554,402 (237,766,052) ============================================================================================== NET ASSETS: Beginning of year 859,038,420 1,096,804,472 ============================================================================================== End of year (including undistributed net investment income (loss) of ($85,597) and ($70,846) for 2003 and 2002, respectively) $1,007,592,822 $ 859,038,420 ______________________________________________________________________________________________ ==============================================================================================
See Notes to Financial Statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Capital Development Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADR's, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are F-8 translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $350 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $11,378. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $240,864 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc. a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $1,793,309 for such services and reimbursed fees for the Institutional Class shares of $31. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $1,681,630, $3,525,000, $588,010 and $3,016, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to F-9 remittance to the shareholder. During year ended October 31, 2003, AIM Distributors retained $104,786 in front-end sales commissions from the sale of Class A shares and $3,521, $108, $4,404 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $13,767 and reductions in custodian fees of $1,135 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $14,902. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $3,650 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $153,631,096 were on loan to brokers. The loans were secured by cash collateral of $155,887,772 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $307,752 for securities lending. NOTE 7--OPTION CONTRACTS WRITTEN Transactions in call options written during the year ended October 31, 2003 are summarized as follows:
CALL OPTION CONTRACTS ---------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED - ---------------------------------------------------------- Beginning of year -- $ -- - ---------------------------------------------------------- Written 1,300 126,096 - ---------------------------------------------------------- Expired (1,300) (126,096) ========================================================== End of year -- $ -- __________________________________________________________ ==========================================================
F-10 NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Undistributed long-term gain $ 24,193,359 - ------------------------------------------------------------ Unrealized appreciation -- investments 237,696,876 - ------------------------------------------------------------ Temporary book/tax differences (85,597) - ------------------------------------------------------------ Shares of beneficial interest 745,788,184 ============================================================ Total net assets $1,007,592,822 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and deferral of losses on straddles. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $853,484,217 and $916,157,482, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ----------------------------------------------------------- Aggregate unrealized appreciation of investment securities $246,128,701 - ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,431,825) =========================================================== Net unrealized appreciation of investment securities $237,696,876 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $925,709,110.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES As a result of differing book/tax treatment of foreign currency transactions, net operating losses and excise tax paid, on October 31, 2003, undistributed net investment income was increased by $7,636,990, undistributed net realized gains decreased by $62,002 and shares of beneficial interest decreased by $7,574,988. This reclassification had no effect on the net assets of the Fund. NOTE 11--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - --------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------- 2003 2002 ---------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------------------------------- Sold: Class A 7,864,878 $ 109,808,336 8,723,183 $ 137,031,183 - --------------------------------------------------------------------------------------------------------------------------- Class B 2,057,426 27,535,873 3,358,008 50,474,614 - --------------------------------------------------------------------------------------------------------------------------- Class C 834,828 11,240,012 1,443,905 21,757,217 - --------------------------------------------------------------------------------------------------------------------------- Class R* 74,458 986,707 749 12,300 - --------------------------------------------------------------------------------------------------------------------------- Institutional Class** -- -- 580 10,000 =========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 340,670 4,868,315 0 0 - --------------------------------------------------------------------------------------------------------------------------- Class B (358,616) (4,868,315) 0 0 =========================================================================================================================== Reacquired: Class A (11,106,766) (154,971,927) (12,317,285) (186,904,065) - --------------------------------------------------------------------------------------------------------------------------- Class B (5,230,794) (68,520,455) (7,163,019) (102,049,275) - --------------------------------------------------------------------------------------------------------------------------- Class C (1,117,790) (14,660,464) (1,519,831) (22,254,251) - --------------------------------------------------------------------------------------------------------------------------- Class R* (5,766) (84,463) -- -- =========================================================================================================================== (6,647,472) $ (88,666,381) (7,473,710) $(101,922,277) ___________________________________________________________________________________________________________________________ ===========================================================================================================================
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. F-11 NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.80 $ 14.69 $ 21.79 $ 15.24 $ 12.89 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.08)(a) (0.04)(a) (0.04) (0.13) (0.10)(a) - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.94 (1.85) (4.27) 6.68 2.45 ============================================================================================================================= Total from investment operations 3.86 (1.89) (4.31) 6.55 2.35 ============================================================================================================================= Less distributions from net realized gains -- -- (2.79) -- -- ============================================================================================================================= Net asset value, end of period $ 16.66 $ 12.80 $ 14.69 $ 21.79 $ 15.24 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 30.16% (12.87)% (21.76)% 42.98% 18.23% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $545,691 $456,268 $576,660 $759,838 $579,514 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets 1.53%(c) 1.38% 1.33% 1.28% 1.38% ============================================================================================================================= Ratio of net investment income (loss) to average net assets (0.56)%(c) (0.29)% (0.21)% (0.60)% (0.70)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 101% 120% 130% 101% 117% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $480,465,624.
CLASS B --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.21 $ 14.10 $ 21.16 $ 14.90 $ 12.70 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.16)(a) (0.14)(a) (0.15) (0.26) (0.20)(a) - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.74 (1.75) (4.12) 6.52 2.40 ============================================================================================================================= Total from investment operations 3.58 (1.89) (4.27) 6.26 2.20 ============================================================================================================================= Less distributions from net realized gains -- -- (2.79) -- -- ============================================================================================================================= Net asset value, end of period $ 15.79 $ 12.21 $ 14.10 $ 21.16 $ 14.90 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 29.32% (13.40)% (22.29)% 42.01% 17.32% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $392,382 $346,456 $454,018 $617,576 $451,508 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets 2.18%(c) 2.03% 1.99% 1.99% 2.12% ============================================================================================================================= Ratio of net investment income (loss) to average net assets (1.21)%(c) (0.94)% (0.87)% (1.30)% (1.44)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 101% 120% 130% 101% 117% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $352,500,019. F-12 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C -------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------- 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.20 $ 14.10 $ 21.15 $ 14.89 $ 12.69 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.16)(a) (0.14)(a) (0.14) (0.25) (0.20)(a) - ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.74 (1.76) (4.12) 6.51 2.40 ============================================================================================================================ Total from investment operations 3.58 (1.90) (4.26) 6.26 2.20 ============================================================================================================================ Less distributions from net realized gains -- -- (2.79) -- -- ============================================================================================================================ Net asset value, end of period $ 15.78 $ 12.20 $ 14.10 $ 21.15 $ 14.89 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Total return(b) 29.34% (13.48)% (22.24)% 42.04% 17.34% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $68,356 $56,298 $66,127 $82,982 $53,832 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratio of expenses to average net assets 2.18%(c) 2.03% 1.99% 1.99% 2.12% ============================================================================================================================ Ratio of net investment income (loss) to average net assets (1.21)%(c) (0.94)% (0.87)% (1.30)% (1.44)% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Portfolio turnover rate 101% 120% 130% 101% 117% ____________________________________________________________________________________________________________________________ ============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $58,801,044.
CLASS R ------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.79 $ 16.62 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.10)(a) (0.03)(a) - --------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.93 (3.80) ============================================================================================= Total from investment operations 3.83 (3.83) ============================================================================================= Net asset value, end of period $16.62 $ 12.79 _____________________________________________________________________________________________ ============================================================================================= Total return(b) 29.95% (23.05)% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,154 $ 10 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets 1.68%(c) 1.54%(d) ============================================================================================= Ratio of net investment income (loss) to average net assets (0.71)%(c) (0.44)%(d) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(e) 101% 120% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $603,132. (d) Annualized. (e) Not annualized for periods less than one year. F-13 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL -------------------------------- MARCH 15, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.84 $ 17.25 - ---------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.01(a) 0.02(a) - ---------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.98 (4.43) ============================================================================================== Total from investment operations 3.99 (4.41) ============================================================================================== Net asset value, end of period $16.83 $ 12.84 ______________________________________________________________________________________________ ============================================================================================== Total return(b) 31.08% (25.57)% ______________________________________________________________________________________________ ============================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 10 $ 7 ______________________________________________________________________________________________ ============================================================================================== Ratio of expenses to average net assets With fee waivers 0.87%(c) 0.84%(d) - ---------------------------------------------------------------------------------------------- Without fee waivers 1.25%(c) 0.99%(d) ============================================================================================== Ratio of net investment income to average net assets 0.10%(c) 0.25%(d) ______________________________________________________________________________________________ ============================================================================================== Portfolio turnover rate(e) 101% 120% ______________________________________________________________________________________________ ==============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $8,217. (d) Annualized. (e) Not annualized for periods less than one year. NOTE 13--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. F-14 NOTE 13--SUBSEQUENT EVENTS (CONTINUED) In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-15 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Capital Development Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Capital Development Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Capital Development Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas -s- Ernst & Young LLP December 16, 2003 F-16 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds. F-17 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com CDV-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM CHARTER FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM CHARTER FUND SEEKS TO PROVIDE GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Class R shares are available only to o Bloomberg, Inc. is a well-known presented is as of 10/31/03 and is based certain retirement plans. Please see the independent financial research and on total net assets. prospectus for more information. They reporting firm. are sold at net asset value, that is, o AIM Charter Fund's performance figures without up-front sales charges. o A direct investment cannot be made in are historical, and they reflect fund an index. Unless otherwise indicated, expenses, the reinvestment of o The fund's investment return and index results include reinvested distributions, and changes in net asset principal value will fluctuate, so an dividends, and they do not reflect sales value. investor's shares, when redeemed, may be or fund expenses charges. Performance of worth more or less than their original an index of funds reflects fund o When sales charges are included in cost. expenses; performance of a market index performance figures, Class A share does not. performance reflects the maximum 5.50% o Industry classifications used in this sales charge, and Class B and Class C report are generally according to the A description of the policies and share performance reflects the Global Industry Classification Standard, procedures that the fund uses to applicable contingent deferred sales which was developed by and is the determine how to vote proxies charge (CDSC) for the period involved. exclusive property and a service mark of relating to portfolio securities is The CDSC on Class B shares declines from Morgan Stanley Capital International Inc. available without charge, upon 5% beginning at the time of purchase to and Standard & Poor's. request, by calling 800-959-4246, or on 0% at the beginning of the seventh year. the AIM Web site, AIMinvestments.com. The CDSC on Class C shares is 1% for the o The unmanaged Lipper Large-Cap Core first year after purchase. The Equity Fund Index represents an average performance of the fund's share classes of the performance of the 30 largest will differ due to different sales large-capitalization core equity funds charge structures and class expenses. tracked by Lipper, Inc., an independent mutual fund performance monitor. o Effective 9/30/03, Class B shares are not available as an investment for o The unmanaged Standard & Poor's retirement plans maintained pursuant to Composite Index of 500 Stocks (the S&P Section 401 of the Internal Revenue 500--Registered Trademark-- is an index Code, including 401(k) plans, money of common stocks frequently used as a purchase pension plans and profit general measure of U.S. stock market sharing plans. Plans that have existing performance. accounts invested in Class B shares continued to be allowed to make additional purchases after 9/30/03.
===================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to ===================================================== persons who have received a current prospectus of the fund. AIMinvestments.com
TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN THE AIM FAMILY OF FUNDS--Registered Trademark--: [PHOTO OF As you may be aware, there has been a new policies and strengthened existing ones--to discourage ROBERT H. great deal of media coverage recently harmful short-term trading. These steps include: GRAHAM] about the mutual fund industry and allegations of improper activities by o Strengthening daily monitoring of trading activities. certain individuals and companies. As ROBERT H. GRAHAM part of these widespread investigations, o Imposing redemption fees on additional funds we believe INVESCO Funds Group (IFG), the former may be vulnerable to harmful short-term trading activity. adviser to certain INVESCO Funds, was recently named as a defendant in o Implementing an enhanced exchange policy (effective [PHOTO OF separate civil enforcement actions by on or about March 1, 2004) designed to limit exchanges MARK H. the U.S. Securities and Exchange between funds. WILLIAMSON] Commission (SEC), the Office of the New York Attorney General and the State of o Employing an enhanced fair value pricing policy on Colorado over an issue known as "market certain foreign securities as well as certain illiquid MARK H. WILLIAMSON timing." A number of private class or securities. derivative actions also were filed in the wake of the regulators' actions. None of these tools alone, nor all of them taken Investors are understandably concerned and frustrated together, eliminate the possibility of short-term trading about these reports, and we would like to take this strategies that may be detrimental to a fund. Moreover, each opportunity to assure you that, based on an investigation of these tools involves judgments that are inherently conducted by an outside firm, IFG and its parent company, subjective. We have always sought and continue to seek to AMVESCAP PLC, believe that these civil actions are make these judgments to the best of our abilities and in a without merit. IFG is contesting the charges. manner that we believe is consistent with the best interests We encourage you to continue to monitor this situation, of our fund shareholders. And we remain committed to being particularly as IFG has the opportunity to address the as vigilant as possible in the future to identify and allegations that have been made. Current information will be address any harmful market timing investors who have the posted on our Web site at AIMinvestments.com. We will potential to harm our long-term fund shareholders. continue to communicate to you on our Web site about our finding, and the actions we are taking to protect and We sincerely hope these developments and the media promote the interests of our shareholders. The independent coverage surrounding them do not result in you or other trustees of the funds are receiving regular reports from shareholders losing confidence in AIM or INVESCO Funds. their independent counsel and outside counsel hired by Amidst this storm of controversy in the mutual fund AMVESCAP PLC, the parent of AIM and IFG, to perform an industry, we believe we can find encouragement in the ongoing investigation of market timing. recovering economy and rising equity markets. As we write this letter, for instance, the S&P 500--Registered Trademark-- Index A COMPLEX ISSUE is up approximately 23% year-to-date. Although past performance is no guarantee of future results, there appear to be Market timing is an investment technique not defined in any indicators that the economy and stock markets are showing regulation that involves frequent short-term trading of signs of welcomed improvement. We encourage you to read the mutual fund shares, sometimes with a goal to exploit enclosed discussion of your fund's performance during this inefficiencies in the way mutual funds price their shares. past reporting period. We recognize that fund management companies have tried to deal with this complex issue in various ways and believe OUR UNWAVERING COMMITMENT that industry-wide guidance is in order. To that end, we welcome SEC Chairman William Donaldson's pledge to adopt new At AIM Investments, we have never wavered in our commitment rules designed to curb market timing abuses. Comprehensive to helping you build solutions for your financial goals. Our rulemaking is necessary and is the best way to establish new company was founded on a core principle of integrity, and we industry responsibilities designed to protect shareholders. have always worked hard to earn the trust of our We support practical rule changes and structural shareholders. We are committed to doing all we can to modifications that are fair, enforceable and, most maintain your trust and confidence. importantly, beneficial for investors. AIM Investments has policies in place designed to Thank you for your continued participation in AIM identify, prevent and eliminate harmful trading or other Investments. Please call your financial advisor or one of activities deemed to be detrimental to the funds. We have our Client Service representatives at 800-959-4246 if you also recently taken additional steps--implemented have any further questions or concerns about your AIM Investments account. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE SIGNS OF ECONOMIC RECOVERY BENEFIT FUND Signs of a strengthening economy The S&P 500 rose in November 2002, but it favored a more expansive monetary benefited the broad U.S. stock market then declined for several months, policy because the economy had not yet and AIM Charter Fund for the fiscal year reaching a low for the fiscal year on exhibited sustainable growth. By ended October 31, 2003. For the fiscal March 11, 2003. The market rallied for October, the Fed reported that the pace year covered by this report, the fund's the remainder of the fiscal year. of economic expansion had picked up, Class A, Class B, Class C, and Class R consumer spending generally shares returned 16.20%, 15.48%, 15.43%, The start of the market's rally strengthened, and residential real and 15.90%, respectively, at net asset coincided with the commencement of estate was strong--but that commercial value. The fund performed in line with Operation Iraqi Freedom on March 19, real estate was sluggish and that labor the Lipper Large-Cap Core Equity Fund 2003. U.S. and allied forces quickly markets remained weak. Indeed, the Index, which is composed of funds with toppled the regime of Saddam Hussein, nation's unemployment rate was 6.0% at investment strategies similar to the and by May 1 President Bush was able to the close of the fiscal year. fund's; that index returned 16.86% for announce that major combat operations in the fiscal year. Iraq had ended. ======================================== The fund underperformed the S&P 500, The U.S. economy expanded during the IT WAS INFORMATION which returned 20.79%, due to two fiscal year. Gross domestic product, the factors. First, we held a large cash broadest measure of economic activity, TECHNOLOGY, CONSUMER position, averaging more than 9% over grew at an annualized rate of 1.4% in the course of the fiscal year, to the first quarter of 2003, 3.3% in the DISCRETIONARY, FINANCIALS, mitigate fund volatility during a period second quarter, and 8.2% in the third of market turbulence; and second, small- quarter. Corporate earnings also showed AND INDUSTRIALS STOCKS AND mid-cap stocks generally signs of strength. According to outperformed large-cap stocks, the type Bloomberg, as of the close of the fiscal THAT CONTRIBUTED THE of equities in which the fund invests year, more than 65% of S&P 500 the bulk of its assets. corporations that had reported their MOST TO FUND third-quarter 2003 earnings exceeded MARKET CONDITIONS analysts' expectations. PERFORMANCE FOR THE Signs of a generally improving economy For most of the fiscal year, the FISCAL YEAR. helped the U.S. stock market rise for Federal Reserve (the Fed) kept the much of the fiscal year ended October short-term federal funds rate at 1.25%. ======================================== 31, 2003. On June 25, 2003, it lowered that rate to 1.00%, its lowest level since 1958, For the fiscal year: saying that o All sectors of the S&P 500 recorded gains. o Information technology, materials, and utilities were the top-performing sectors in the S&P 500. o Telecommunication services, consumer staples, and health care were the weakest-performing sectors.
==================================================================================================================================== TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* 1. Computer Associates International, Inc. 2.3% 1. Pharmaceuticals 9.9% 2. General Mills, Inc. 2.2 2. Packaged Foods & Meats 9.8 3. Pfizer Inc. 2.1 3. Integrated Oil & Gas 5.7 4. Dover Corp. 2.0 4. Systems Software 4.8 5. Intel Corp. 2.0 5. Semiconductors 4.3 6. Citigroup Inc. 1.9 6. Industrial Machinery 3.5 7. Kellogg Co. 1.9 7. Other Diversified Financial Services 3.1 8. Alcon, Inc. (Switzerland) 1.9 8. Computer Hardware 2.8 9. Washington Mutual, Inc. 1.9 9. Food Retail 2.8 10. Sara Lee Corp. 1.8 10. Property & Casualty Insurance 2.8 *Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ====================================================================================================================================
2 YOUR FUND At the close of the fiscal year, the products and components for industrial RONALD S. SLOAN fund was overweight consumer staples, and commercial use, and Intel, the [PHOTO OF Mr. Sloan, Chartered information technology, and industrials world's largest chip maker. In October, RONALD S. Financial Analyst, is stocks, and underweight financials, Dover announced that its third quarter SLOAN] lead portfolio manager health care, telecommunications, and earnings increased 28% from year-ago of AIM Charter Fund. He utilities stocks relative to its levels and that its operating margins has been in the benchmark index, the S&P 500. While had improved over second quarter 2003 investment industry consumer staples, information levels. Also in October, Intel announced since 1971 and technology, and industrials stocks that its third quarter net income rose joined AIM in 1998. Mr. Sloan holds a accounted for the highest percentage of 142% from year-ago levels and 79% from B.S. in business administration and an the fund's total net assets, it was the second quarter of 2003. M.B.A. from the University of Missouri. information technology, consumer discretionary, financials, and IN CLOSING Assisted by the Mid/Large Cap Core Team. industrials stocks that contributed the most to fund performance for the fiscal As the fiscal year ended, there were year. Telecommunications services signs that the economy was stocks, in which the fund was strengthening; time will tell whether significantly underweight relative to that recovery is sustainable. its benchmark, detracted from fund Regardless, we will continue to seek out performance. stocks of established companies with long-term, above-average growth in We made few significant changes to earnings as well as growth companies the number of fund holdings during the with the potential for above-average fiscal year. Both at the beginning and growth in earnings in an attempt to the end of the fiscal year, the fund achieve the fund's investment objective. held 73 stocks, and the 10 largest accounted for approximately 20% of total See important fund and index net assets. Also, at the beginning and disclosures inside front cover. the end of the fiscal year, approximately 80% of the fund's total [GRAPHIC] For More Information Visit net assets were invested in large-cap stocks, with the remainder invested AIMinvestments.com primarily in mid-cap holdings. Stocks that contributed to fund performance included Dover, a diversified manufacturer of
=================================================================================================================================== PORTFOLIO COMPOSITION BY SECTOR* FUND VS. INDEX TOTAL NUMBER OF HOLDINGS* 73 Total returns 10/31/02-10/31/03, TOTAL NET ASSETS $3.3 BILLION [PIE CHART] excluding sales charges Class A Shares 16.20% INDUSTRIALS 13.6% Class B Shares 15.48 INFORMATION TECHNOLOGY 16.3% Class C Shares 15.43 CONSUMER STAPLES 16.7% Class R Shares 15.90 ALL OTHERS 53.4% S&P 500 Index 20.79 Source: Lipper, Inc. ===================================================================================================================================
3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 11/26/68-10/31/03
[MOUNTAIN CHART] DATE AIM CHARTER FUND S&P 500 CLASS A SHARES INDEX 11/26/68 $ 9450 $ 10000 10/31/69 9577 9238 10/31/70 7043 8214 10/31/71 9192 9598 10/31/72 12774 11702 10/31/73 14167 11703 10/31/74 9745 8335 10/31/75 11909 10500 10/31/76 14380 12616 10/31/77 16096 11855 10/31/78 21539 12607 10/31/79 27424 14555 10/31/80 42322 19228 10/31/81 45448 19338 10/31/82 49290 22487 10/31/83 63951 28771 10/31/84 58999 30603 10/31/85 67497 36519 10/31/86 88821 48638 10/31/87 94792 51750 10/31/88 100381 59387 10/31/89 134197 75038 10/31/90 139372 69426 10/31/91 191818 92625 10/31/92 199832 101840 10/31/93 233649 117023 10/31/94 227680 121537 10/31/95 289223 153633 10/31/96 337503 190629 10/31/97 433958 251819 10/31/98 482479 307250 10/31/99 646804 386098 10/31/00 734728 409564 10/31/01 450077 307629 10/31/02 411779 261188 10/31/03 $478967 $315479 Source: Lipper, Inc.
=================================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS *The returns shown for these periods are AVERAGE ANNUAL TOTAL RETURNS As of 10/31/03, including sales charges the blended returns of the historical CLASS A SHARES performance of the fund's Class R shares As of 9/30/03, including sales charges 10 Years 6.83% since their inception and the restated CLASS A SHARES 5 Years -1.30 historical performance of the fund's 10 Years 6.53% 1 Year 9.77 Class A shares (for the periods prior to 5 Years -0.36 CLASS B SHARES inception of the Class R shares) at net 1 Year 12.20 Inception (6/26/95) 6.53% asset value, adjusted to reflect the CLASS B SHARES 5 Years -1.21 higher Rule 12b-1 fees applicable to the Inception (6/26/95) 6.18% 1 Year 10.48 Class R shares. The inception date of 5 Years -0.26 CLASS C SHARES Class A shares is 11/26/68. The 1 Year 13.06 Inception (8/4/97) 0.36% inception date of the fund's Class R CLASS C SHARES 5 Years -0.87 shares is 6/3/02. Calculation of blended Inception (8/4/97) -0.17% 1 Year 14.43 returns as of 10/31/03 is from 10/31/93. 5 Years 0.08 CLASS R SHARES* Calculation of blended returns as of 1 Year 17.00 10 Years 7.21% 9/30/03 is from 9/30/93. CLASS R SHARES* 5 Years -0.39 10 Years 6.92% 1 Year 15.90 In addition to returns as of the close 5 Years 0.58 of the fiscal year, industry regulations 1 Year 18.56 require us to provide average annual total returns (including sales charges) for periods ended 9/30/03, the most recent calendar quarter-end. ===================================================================================================================================
4 Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. S&P 500 Index data from 11/30/68. Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. REDUCE YOUR PAPER MAIL WITH AIM'S EDELIVERY Sign up for eDelivery and you can have your fund reports, prospectuses and quarterly account statements delivered electronically. To enroll, go to AIMinvestments.com, select "My Account," log in, click on the "Service Center" tab and select "Register for eDelivery." You will no longer receive paper copies of these documents. Instead you'll receive a link to the documents via email. (You can cancel the service at the Web site at any time.) If you receive account statements, fund reports and prospectuses from your financial advisor rather than from AIM, eDelivery is not accessible to you. Ask your financial advisor if his or her firm offers electronic delivery. [GRAPHIC]
5 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM CHARTER FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (7/30/91) 8.63% those shown. All returns assume shareholders with a performance overview 10 Years 7.90 reinvestment of distributions at net specific to their holdings. 5 Years 0.27 asset value. Investment return and Institutional Class shares are offered 1 Year 16.84 principal value will fluctuate so your exclusively to institutional investors, shares, when redeemed, may be worth more including defined contribution plans or less than their original cost. See that meet certain criteria. Performance AVERAGE ANNUAL TOTAL RETURNS full report for information on of Institutional Class shares will For periods ended 9/30/03 comparative benchmarks. If you have differ from performance of Class A (most recent calendar quarter-end) questions, please consult your fund shares due to differing sales charges prospectus or call 800-451-4246. A I M and class expenses. INCEPTION (7/30/91) 8.40% Distributors, Inc. 10 Years 7.62 5 Years 1.25 1 Year 19.53
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com CHT-INS-1 10/03 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ------------------------------------------------------------------------- DOMESTIC COMMON STOCKS-80.40% ADVERTISING-1.10% Omnicom Group Inc. 460,000 $ 36,708,000 ========================================================================= AEROSPACE & DEFENSE-2.19% Lockheed Martin Corp. 492,200 22,818,392 - ------------------------------------------------------------------------- Northrop Grumman Corp. 560,000 50,064,000 ========================================================================= 72,882,392 ========================================================================= APPAREL RETAIL-1.78% Limited Brands 3,355,000 59,048,000 ========================================================================= BUILDING PRODUCTS-2.26% American Standard Cos. Inc.(a) 449,000 42,969,300 - ------------------------------------------------------------------------- Masco Corp. 1,174,500 32,298,750 ========================================================================= 75,268,050 ========================================================================= COMMUNICATIONS EQUIPMENT-0.76% Cisco Systems, Inc.(a) 1,200,000 25,176,000 ========================================================================= COMPUTER HARDWARE-2.80% Dell Inc.(a) 700,000 25,284,000 - ------------------------------------------------------------------------- Hewlett-Packard Co. 1,000,000 22,310,000 - ------------------------------------------------------------------------- International Business Machines Corp. 510,000 45,634,800 ========================================================================= 93,228,800 ========================================================================= DATA PROCESSING & OUTSOURCED SERVICES-1.54% Automatic Data Processing, Inc. 1,355,000 51,137,700 ========================================================================= DIVERSIFIED BANKS-1.21% Bank of America Corp. 530,000 40,136,900 ========================================================================= DIVERSIFIED CHEMICALS-0.96% Dow Chemical Co. (The) 850,000 32,036,500 ========================================================================= ELECTRIC UTILITIES-1.41% FPL Group, Inc. 430,000 27,408,200 - ------------------------------------------------------------------------- TXU Corp. 850,000 19,397,000 ========================================================================= 46,805,200 ========================================================================= ELECTRICAL COMPONENTS & EQUIPMENT-1.49% Emerson Electric Co. 875,000 49,656,250 ========================================================================= ENVIRONMENTAL SERVICES-1.12% Waste Management, Inc. 1,440,000 37,324,800 ========================================================================= FOOD RETAIL-2.78% Kroger Co. (The)(a) 3,210,000 56,142,900 - ------------------------------------------------------------------------- Safeway Inc.(a) 1,720,000 36,292,000 ========================================================================= 92,434,900 =========================================================================
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MARKET SHARES VALUE FOOTWEAR-1.38% NIKE, Inc.-Class B 719,500 $ 45,976,050 ========================================================================= HOME IMPROVEMENT RETAIL-1.38% Home Depot, Inc. (The) 1,235,000 45,781,450 ========================================================================= HOUSEHOLD PRODUCTS-1.08% Kimberly-Clark Corp. 680,000 35,910,800 ========================================================================= HOUSEWARES & SPECIALTIES-1.19% Newell Rubbermaid Inc. 1,740,000 39,672,000 ========================================================================= HYPERMARKETS & SUPER CENTERS-0.89% Wal-Mart Stores, Inc. 500,000 29,475,000 ========================================================================= INDUSTRIAL MACHINERY-3.50% Dover Corp. 1,690,000 65,943,800 - ------------------------------------------------------------------------- Illinois Tool Works Inc. 685,000 50,381,750 ========================================================================= 116,325,550 ========================================================================= INTEGRATED OIL & GAS-4.67% ChevronTexaco Corp. 520,000 38,636,000 - ------------------------------------------------------------------------- ConocoPhillips 610,000 34,861,500 - ------------------------------------------------------------------------- Exxon Mobil Corp. 1,225,000 44,810,500 - ------------------------------------------------------------------------- Occidental Petroleum Corp. 1,050,000 37,023,000 ========================================================================= 155,331,000 ========================================================================= INVESTMENT BANKING & BROKERAGE-1.37% Morgan Stanley 830,000 45,542,100 ========================================================================= LIFE & HEALTH INSURANCE-1.38% Prudential Financial, Inc. 1,190,000 45,981,600 ========================================================================= OIL & GAS EQUIPMENT & SERVICES-1.02% Baker Hughes Inc. 1,200,000 33,912,000 ========================================================================= OTHER DIVERSIFIED FINANCIAL SERVICES-3.07% Citigroup Inc. 1,350,000 63,990,000 - ------------------------------------------------------------------------- Principal Financial Group, Inc. 1,215,000 38,090,250 ========================================================================= 102,080,250 ========================================================================= PACKAGED FOODS & MEATS-9.83% Campbell Soup Co. 2,020,000 52,358,400 - ------------------------------------------------------------------------- ConAgra Foods, Inc. 1,330,300 31,714,352 - -------------------------------------------------------------------------
F-1
MARKET SHARES VALUE - ------------------------------------------------------------------------- PACKAGED FOODS & MEATS-(CONTINUED) General Mills, Inc. 1,600,000 $ 71,760,000 - ------------------------------------------------------------------------- Kellogg Co. 1,930,000 63,940,900 - ------------------------------------------------------------------------- Kraft Foods Inc.-Class A 1,600,000 46,560,000 - ------------------------------------------------------------------------- Sara Lee Corp. 3,045,000 60,686,850 ========================================================================= 327,020,502 ========================================================================= PERSONAL PRODUCTS-1.07% Gillette Co. (The) 1,120,000 35,728,000 ========================================================================= PHARMACEUTICALS-8.27% Abbott Laboratories 790,000 33,669,800 - ------------------------------------------------------------------------- Bristol-Myers Squibb Co. 1,450,000 36,786,500 - ------------------------------------------------------------------------- Johnson & Johnson 935,000 47,058,550 - ------------------------------------------------------------------------- Merck & Co. Inc. 740,000 32,745,000 - ------------------------------------------------------------------------- Pfizer Inc. 2,170,000 68,572,000 - ------------------------------------------------------------------------- Wyeth 1,270,000 56,057,800 ========================================================================= 274,889,650 ========================================================================= PROPERTY & CASUALTY INSURANCE-0.94% Travelers Property Casualty Corp.-Class A 856,486 13,960,722 - ------------------------------------------------------------------------- Travelers Property Casualty Corp.-Class B 1,054,271 17,258,416 ========================================================================= 31,219,138 ========================================================================= PUBLISHING-2.24% Gannett Co., Inc. 450,000 37,849,500 - ------------------------------------------------------------------------- New York Times Co. (The)-Class A 772,900 36,735,937 ========================================================================= 74,585,437 ========================================================================= RAILROADS-1.73% Norfolk Southern Corp. 1,334,000 26,880,100 - ------------------------------------------------------------------------- Union Pacific Corp. 490,000 30,674,000 ========================================================================= 57,554,100 ========================================================================= RESTAURANTS-1.40% McDonald's Corp. 1,855,000 46,393,550 ========================================================================= SEMICONDUCTOR EQUIPMENT-1.24% KLA-Tencor Corp.(a) 720,000 41,277,600 ========================================================================= SEMICONDUCTORS-3.53% Intel Corp. 1,959,500 64,761,475 - ------------------------------------------------------------------------- Xilinx, Inc.(a) 1,665,000 52,780,500 ========================================================================= 117,541,975 ========================================================================= SOFT DRINKS-1.09% Coca-Cola Co. (The) 780,000 36,192,000 ========================================================================= SYSTEMS SOFTWARE-4.84% Computer Associates International, Inc. 3,310,000 77,851,200 - -------------------------------------------------------------------------
- -------------------------------------------------------------------------
MARKET SHARES VALUE SYSTEMS SOFTWARE-(CONTINUED) Microsoft Corp. 2,287,000 $ 59,805,050 - ------------------------------------------------------------------------- Oracle Corp.(a) 1,960,000 23,441,600 ========================================================================= 161,097,850 ========================================================================= THRIFTS & MORTGAGE FINANCE-1.89% Washington Mutual, Inc. 1,440,000 63,000,000 ========================================================================= Total Domestic Common Stocks (Cost $2,418,180,502) 2,674,331,094 ========================================================================= FOREIGN STOCKS & OTHER EQUITY INTERESTS-11.50% BERMUDA-1.97% Tyco International Ltd. (Industrial Conglomerates) 2,000,000 41,760,000 - ------------------------------------------------------------------------- XL Capital Ltd.-Class A (Property & Casualty Insurance) 340,000 23,630,000 ========================================================================= 65,390,000 ========================================================================= CAYMAN ISLANDS-2.12% ACE Ltd. (Property & Casualty Insurance) 1,025,000 36,900,000 - ------------------------------------------------------------------------- GlobalSantaFe Corp. (Oil & Gas Drilling) 1,500,000 33,765,000 ========================================================================= 70,665,000 ========================================================================= GERMANY-0.78% SAP A.G.-ADR (Application Software) 712,000 26,016,480 ========================================================================= ISRAEL-1.61% Teva Pharmaceutical Industries Ltd.-ADR (Pharmaceuticals) 940,000 53,476,600 ========================================================================= PANAMA-1.29% Carnival Corp. (Hotels, Resorts & Cruise Lines) 1,225,000 42,764,750 ========================================================================= SWITZERLAND-1.90% Alcon, Inc. (Health Care Supplies) 1,150,000 63,376,500 ========================================================================= TAIWAN-0.81% Taiwan Semiconductor Manufacturing Co. Ltd.- ADR (Semiconductors) 2,447,280 27,066,917 ========================================================================= UNITED KINGDOM-1.02% BP PLC-ADR (Integrated Oil & Gas) 800,000 33,904,000 ========================================================================= Total Foreign Stocks & Other Equity Interests (Cost $323,738,450) 382,660,247 ========================================================================= MONEY MARKET FUNDS-5.95% STIC Liquid Assets Portfolio(b) 98,974,452 98,974,452 - ------------------------------------------------------------------------- STIC Prime Portfolio(b) 98,974,452 98,974,452 ========================================================================= Total Money Market Funds (Cost $197,948,904) 197,948,904 ========================================================================= TOTAL INVESTMENTS-97.85% (excluding investments purchased with cash collateral from securities loaned)(Cost $2,939,867,856) 3,254,940,245 =========================================================================
F-2
MARKET SHARES VALUE - ------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-0.68% STIC Liquid Assets Portfolio(b)(c) 22,552,000 $ 22,552,000 ========================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $22,552,000) 22,552,000 ========================================================================= TOTAL INVESTMENTS--98.53% (Cost $2,962,419,856) 3,277,492,245 ========================================================================= OTHER ASSETS LESS LIABILITIES--1.47% 48,786,899 ========================================================================= NET ASSETS--100.00% $3,326,279,144 _________________________________________________________________________ =========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $2,741,918,952)* $3,056,991,341 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $220,500,904) 220,500,904 - ------------------------------------------------------------ Cash 74,415 - ------------------------------------------------------------ Receivables for: Investments sold 75,751,738 - ------------------------------------------------------------ Fund shares sold 880,244 - ------------------------------------------------------------ Dividends 4,368,336 - ------------------------------------------------------------ Investments matured (Note 8) 607,000 - ------------------------------------------------------------ Investment for deferred compensation plan 152,900 - ------------------------------------------------------------ Other assets 84,262 ============================================================ Total assets 3,359,411,140 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Fund shares reacquired 6,530,307 - ------------------------------------------------------------ Deferred compensation plan 152,900 - ------------------------------------------------------------ Collateral upon return of securities loaned 22,552,000 - ------------------------------------------------------------ Accrued distribution fees 1,679,277 - ------------------------------------------------------------ Accrued trustees' fees 216,869 - ------------------------------------------------------------ Accrued transfer agent fees 1,617,006 - ------------------------------------------------------------ Accrued operating expenses 383,637 ============================================================ Total liabilities 33,131,996 ============================================================ Net assets applicable to shares outstanding $3,326,279,144 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $3,962,274,000 - ------------------------------------------------------------ Undistributed net investment income 1,365,253 - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities (952,432,498) - ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 315,072,389 ============================================================ $3,326,279,144 ____________________________________________________________ ============================================================ NET ASSETS: Class A $2,008,702,269 ____________________________________________________________ ============================================================ Class B $1,149,942,947 ____________________________________________________________ ============================================================ Class C $ 163,859,364 ____________________________________________________________ ============================================================ Class R $ 1,713,858 ____________________________________________________________ ============================================================ Institutional Class $ 2,060,706 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 180,585,240 ____________________________________________________________ ============================================================ Class B 107,811,471 ____________________________________________________________ ============================================================ Class C 15,319,076 ____________________________________________________________ ============================================================ Class R 154,647 ____________________________________________________________ ============================================================ Institutional Class 179,936 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 11.12 - ------------------------------------------------------------ Offering price per share: (Net asset value of $11.12 divided by 94.50%) $ 11.77 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 10.67 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 10.70 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 11.08 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 11.45 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $21,709,590 were on loan to brokers. See Notes to Financial Statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $301,430) $ 51,649,180 - --------------------------------------------------------------------------- Dividends from affiliated money market funds 3,818,102 - --------------------------------------------------------------------------- Securities lending 220,475 =========================================================================== Total investment income 55,687,757 =========================================================================== EXPENSES: Advisory fees 20,917,533 - --------------------------------------------------------------------------- Administrative services fees 574,103 - --------------------------------------------------------------------------- Custodian fees 243,985 - --------------------------------------------------------------------------- Distribution fees: Class A 5,969,787 - --------------------------------------------------------------------------- Class B 11,503,103 - --------------------------------------------------------------------------- Class C 1,621,567 - --------------------------------------------------------------------------- Class R 3,783 - --------------------------------------------------------------------------- Transfer agent fees 10,331,020 - --------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 1,555 - --------------------------------------------------------------------------- Trustees' fees 68,932 - --------------------------------------------------------------------------- Other 1,080,550 =========================================================================== Total expenses 52,315,918 =========================================================================== Less: Fees waived and expense offset arrangements (124,977) =========================================================================== Net expenses 52,190,941 =========================================================================== Net investment income 3,496,816 =========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from investment securities (177,091,373) - --------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 649,910,066 - --------------------------------------------------------------------------- Foreign currencies (67) =========================================================================== 649,909,999 =========================================================================== Net gain from investment securities and foreign currencies 472,818,626 =========================================================================== Net increase in net assets resulting from operations $ 476,315,442 ___________________________________________________________________________ ===========================================================================
See Notes to Financial Statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ----------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 3,496,816 $ (8,504,860) - ----------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities and foreign currencies (177,091,373) 304,583,841 - ----------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities and foreign currencies 649,909,999 (628,211,415) =============================================================================================== Net increase (decrease) in net assets resulting from operations 476,315,442 (332,132,434) =============================================================================================== Share transactions-net: Class A (380,938,708) (870,998,051) - ----------------------------------------------------------------------------------------------- Class B (215,082,650) (391,079,522) - ----------------------------------------------------------------------------------------------- Class C (29,277,194) (61,301,813) - ----------------------------------------------------------------------------------------------- Class R 1,521,693 17,606 - ----------------------------------------------------------------------------------------------- Institutional Class 339,875 (60,090) =============================================================================================== Net increase (decrease) in net assets resulting from share transactions (623,436,984) (1,323,421,870) =============================================================================================== Net increase (decrease) in net assets (147,121,542) (1,655,554,304) =============================================================================================== NET ASSETS: Beginning of year 3,473,400,686 5,128,954,990 =============================================================================================== End of year (including undistributed net investment income (loss) of $1,365,253 and $(2,131,563) for 2003 and 2002, respectively) $3,326,279,144 $ 3,473,400,686 _______________________________________________________________________________________________ ===============================================================================================
See Notes to Financial Statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. F-7 E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million up to and including $150 million, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $71,387. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $574,103 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $5,291,312 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $5,969,787, $11,503,103, $1,621,567 and $3,783, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $266,509 in front-end sales commissions from the sale of Class A shares and $3,192, $1,449, $10,762 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $52,204 and reductions in custodian fees of $1,386 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $53,590. F-8 NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $7,667 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $21,709,590 were on loan to brokers. The loans were secured by cash collateral of $22,552,000 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $220,475 for securities lending. NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Undistributed ordinary income $ 4,232,634 - ------------------------------------------------------------ Unrealized appreciation -- investments 263,538,600 - ------------------------------------------------------------ Temporary book/tax differences (366,068) - ------------------------------------------------------------ Capital loss carryforward (903,400,022) - ------------------------------------------------------------ Shares of beneficial interest 3,962,274,000 ============================================================ Total net assets $3,326,279,144 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and the treatment of defaulted bonds. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. F-9 The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - -------------------------------------------------------------------------- October 31, 2009 $771,331,122 - -------------------------------------------------------------------------- October 31, 2011 132,068,900 ========================================================================== Total capital loss carryforward $903,400,022 __________________________________________________________________________ ==========================================================================
NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $825,855,209 and $1,336,270,759, respectively. Receivable for investments matured represents the estimated proceeds to the Fund by Candescent Technologies Corp. which is in default with respect to the principal payments on $60,700,000 par value, Senior Unsecured Guaranteed Subordinated Debentures, 8.00% which was due May 1, 2003. This estimate was determined in accordance with the fair valuation procedures authorized by the Board of Trustees.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $426,402,735 - ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (162,864,135) ============================================================================== Net unrealized appreciation of investment securities $263,538,600 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $3,013,953,645.
NOTE 9--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - ----------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2003 2002 ---------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------------------------------------- Sold: Class A 16,680,459 $ 167,057,570 16,193,575 $ 174,972,073 - ----------------------------------------------------------------------------------------------------------------------------- Class B 8,128,480 78,572,729 9,302,039 97,387,968 - ----------------------------------------------------------------------------------------------------------------------------- Class C 2,035,003 19,657,080 2,633,061 27,700,439 - ----------------------------------------------------------------------------------------------------------------------------- Class R* 182,932 1,841,485 1,719 17,663 - ----------------------------------------------------------------------------------------------------------------------------- Institutional Class 53,551 570,090 45,275 481,439 ============================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 3,640,846 37,843,518 717,246 7,724,451 - ----------------------------------------------------------------------------------------------------------------------------- Class B (3,789,510) (37,843,518) (739,880) (7,724,451) ============================================================================================================================= Reacquired: Class A (58,788,618) (585,839,796) (99,779,666) (1,053,694,575) - ----------------------------------------------------------------------------------------------------------------------------- Class B (26,845,101) (255,811,861) (47,214,599) (480,743,039) - ----------------------------------------------------------------------------------------------------------------------------- Class C (5,102,475) (48,934,274) (8,599,959) (89,002,252) - ----------------------------------------------------------------------------------------------------------------------------- Class R* (29,999) (319,792) (5) (57) - ----------------------------------------------------------------------------------------------------------------------------- Institutional Class (22,226) (230,215) (51,011) (541,529) ============================================================================================================================= (63,856,658) $(623,436,984) (127,492,205) $(1,323,421,870) _____________________________________________________________________________________________________________________________ =============================================================================================================================
* Class R shares commenced sales on June 3, 2002. F-10 NOTE 10--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.57 $ 10.46 $ 18.07 $ 17.16 $ 13.32 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.04(a) 0.01(b) (0.03) (0.04)(a) 0.02 - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.51 (0.90) (6.70) 2.30 4.39 ================================================================================================================================= Total from investment operations 1.55 (0.89) (6.73) 2.26 4.41 ================================================================================================================================= Less distributions: Dividends from net investment income -- -- -- -- (0.03) - --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- (0.88) (1.35) (0.54) ================================================================================================================================= Total distributions -- -- (0.88) (1.35) (0.57) ================================================================================================================================= Net asset value, end of period $ 11.12 $ 9.57 $ 10.46 $ 18.07 $ 17.16 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(c) 16.20% (8.51)% (38.75)% 13.60% 34.05% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $2,008,702 $2,096,866 $3,159,304 $5,801,869 $4,948,666 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers 1.30%(d) 1.22% 1.16% 1.06% 1.05% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 1.30%(d) 1.22% 1.17% 1.08% 1.07% ================================================================================================================================= Ratio of net investment income (loss) to average net assets 0.39%(d) 0.09%(b) (0.24)% (0.20)% 0.11% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 28% 103% 78% 80% 107% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) As required, effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $1,989,929,149. F-11 NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B --------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.24 $ 10.18 $ 17.72 $ 16.97 $ 13.24 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.10) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.46 (0.86) (6.53) 2.27 4.37 ================================================================================================================================= Total from investment operations 1.43 (0.94) (6.66) 2.10 4.27 ================================================================================================================================= Less distributions from net realized gains -- -- (0.88) (1.35) (0.54) ================================================================================================================================= Net asset value, end of period $ 10.67 $ 9.24 $ 10.18 $ 17.72 $ 16.97 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(c) 15.48% (9.23)% (39.14)% 12.76% 33.06% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,149,943 $1,204,617 $1,719,470 $3,088,611 $2,206,752 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers 2.00%(d) 1.92% 1.86% 1.80% 1.80% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.00%(d) 1.92% 1.87% 1.82% 1.82% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.31)%(d) (0.61)%(b) (0.94)% (0.94)% (0.64)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 28% 103% 78% 80% 107% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) As required, effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $1,150,310,322. F-12 NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C ----------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.27 $ 10.21 $ 17.77 $ 17.01 $ 13.27 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.08)(b) (0.13) (0.17)(a) (0.09) - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.46 (0.86) (6.55) 2.28 4.37 =============================================================================================================================== Total from investment operations 1.43 (0.94) (6.68) 2.11 4.28 =============================================================================================================================== Less distributions from net realized gains -- -- (0.88) (1.35) (0.54) =============================================================================================================================== Net asset value, end of period $ 10.70 $ 9.27 $ 10.21 $ 17.77 $ 17.01 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Total return(c) 15.43% (9.21)% (39.14)% 12.78% 33.06% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $163,859 $170,444 $248,533 $412,872 $138,467 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratio of expenses to average net assets: With fee waivers 2.00%(d) 1.92% 1.86% 1.80% 1.80% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.00%(d) 1.92% 1.87% 1.82% 1.82% =============================================================================================================================== Ratio of net investment income (loss) to average net assets (0.31)%(d) (0.61)%(b) (0.94)% (0.94)% (0.64)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Portfolio turnover rate 28% 103% 78% 80% 107% _______________________________________________________________________________________________________________________________ ===============================================================================================================================
(a) Calculated using average shares outstanding. (b) As required, effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (d) Ratios are based on average daily net assets of $162,156,695. F-13 NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R ------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.56 $ 10.94 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.02(a) 0.00(b) - --------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.50 (1.38) ============================================================================================= Total from investment operations 1.52 (1.38) ============================================================================================= Net asset value, end of period $11.08 $ 9.56 _____________________________________________________________________________________________ ============================================================================================= Total return(c) 15.90% (12.61)% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,714 $ 16 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets 1.50%(d) 1.42%(e) ============================================================================================= Ratio of net investment income (loss) to average net assets 0.19%(d) (0.11)%(b)(e) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(f) 28% 103% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) As required, effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share and ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to November 1, 2001 have not been restated to reflect this change in presentation. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (d) Ratios are based on average daily net assets of $756,569. (e) Annualized. (f) Not annualized for periods less than one year. F-14 NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS ------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.80 $10.67 $ 18.33 $17.33 $ 13.42 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09(a) 0.06(b) 0.04 0.52 0.09 - -------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.56 (0.93) (6.82) 1.83 4.43 ==================================================================================================================== Total from investment operations 1.65 (0.87) (6.78) 2.35 4.52 ==================================================================================================================== Less distributions: Dividends from net investment income -- -- -- -- (0.07) - -------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- (0.88) (1.35) (0.54) ==================================================================================================================== Total distributions -- -- (0.88) (1.35) (0.61) ==================================================================================================================== Net asset value, end of period $11.45 $ 9.80 $ 10.67 $18.33 $ 17.33 ____________________________________________________________________________________________________________________ ==================================================================================================================== Total return(c) 16.84% (8.15)% (38.46)% 14.02% 34.61% ____________________________________________________________________________________________________________________ ==================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $2,061 $1,457 $ 1,648 $3,234 $66,801 ____________________________________________________________________________________________________________________ ==================================================================================================================== Ratio of expenses to average net assets: With fee waivers and expense reimbursements 0.79%(d) 0.79% 0.68% 0.66% 0.65% - -------------------------------------------------------------------------------------------------------------------- Without fee waivers and expense reimbursements 0.79%(d) 0.83% 0.69% 0.68% 0.67% ==================================================================================================================== Ratio of net investment income to average net assets 0.90%(d) 0.52%(b) 0.25% 0.20% 0.51% ____________________________________________________________________________________________________________________ ==================================================================================================================== Portfolio turnover rate 28% 103% 78% 80% 107% ____________________________________________________________________________________________________________________ ====================================================================================================================
(a) Calculated using average shares outstanding. (b) As required, effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios prior to November 1, 2001 have not been restated to reflect this change in presentation. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America. (d) Ratios are based on average daily net assets of $1,652,566. NOTE 11--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any F-15 NOTE 11--SUBSEQUENT EVENTS (CONTINUED) registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-16 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Charter Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Charter Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Charter Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 F-17 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-18 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (The Trust), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (The Trust), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP A I M Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Capital Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Management, Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5)Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com CHT-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM CONSTELLATION FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM CONSTELLATION FUND SEEKS TO PROVIDE GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Class R shares are available only to o A direct investment cannot be made in presented is as of 10/31/03 and is based certain retirement plans. Please see the an index. Unless otherwise indicated, on total net assets. prospectus for more information. They index results include reinvested are sold at net asset value, that is, dividends, and they do not reflect sales o AIM Constellation Fund's performance without up-front sales charges. charges or fund expenses. figures are historical, and they reflect fund expenses, the reinvestment of o The fund's investment return and A description of the policies and distributions, and changes in net asset principal value will fluctuate, so an procedures that the fund uses to value. investor's shares, when redeemed, may be determine how to vote proxies relating worth more or less than their original to portfolio securities is available o When sales charges are included in cost. without charge, upon request, by calling performance figures, Class A share 800-959-4246, or on the AIM Web site, performance reflects the maximum 5.50% o Investing in small and mid-size AIMinvestments.com. sales charge, and Class B and Class C companies may involve risks not share performance reflects the associated with investing in more applicable contingent deferred sales established companies. Also, small charge (CDSC) for the period involved. companies may have business risk, The CDSC on Class B shares declines from significant stock price fluctuations and 5% beginning at the time of purchase to illiquidity. 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the o Industry classifications used in this first year after purchase. The report are generally according to the performance of the fund's share classes Global Industry Classification Standard, will differ due to different sales which was developed by and is the charge structures and class expenses. exclusive property and a service mark of Morgan Stanley Capital International o Effective 9/30/03, Class B shares are Inc. and Standard & Poor's. not available as an investment for retirement plans maintained pursuant to o The unmanaged Standard & Poor's Section 401 of the Internal Revenue Composite Index of 500 Stocks (the S&P Code, including 401(k) plans, money 500--Registered Trademark--) is an purchase pension plans and profit index of common stocks frequently used sharing plans. Plans that have existing as a general measure of U.S. stock accounts invested in Class B shares will market performance. continue to be allowed to make additional purchases. o Bloomberg, Inc. is a well-known independent financial research and reporting firm.
=================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to persons who have =================================================== received a current prospectus of the fund.
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--Registered harmful short-term trading. These steps include: Trademark--: As you may be aware, there has been a [PHOTO OF great deal of media coverage recently o Strengthening daily monitoring of trading ROBERT H. about the mutual fund industry and activities. GRAHAM] allegations of improper activities by certain individuals and companies. As o Imposing redemption fees on additional funds ROBERT H GRAHAM part of these widespread investigations, we believe may be vulnerable to harmful INVESCO Funds Group (IFG), the former short-term trading activity. [PHOTO OF adviser to certain INVESCO Funds, was MARK H. recently named as a defendant in o Implementing an enhanced exchange policy WILLIAMSON] separate civil enforcement actions by (effective on or about March 1, 2004) the U.S. Securities and Exchange designed to limit exchanges between funds. MARK H. WILLIAMSON Commission (SEC), the Office of the New York Attorney General and the State of o Employing an enhanced fair value pricing Colorado over an issue known as "market timing." A number of policy on certain foreign securities as well private class or derivative actions also were filed in as certain illiquid securities. the wake of the regulators' actions. Investors are understandably concerned and frustrated None of these tools alone, nor all of them taken about these reports, and we would like to take this together, eliminate the possibility of short-term opportunity to assure you that, based on an investigation trading strategies that may be detrimental to a fund. conducted by an outside firm, IFG and its parent company, Moreover, each of these tools involves judgments that AMVESCAP PLC, believe that these civil actions are without are inherently subjective. We have always sought and merit. IFG is contesting the charges. continue to seek to make these judgments to the best of our abilities and in a manner that we believe is We encourage you to continue to monitor this situation, consistent with the best interests of our fund particularly as IFG has the opportunity to address the shareholders. And we remain committed to being as allegations that have been made. Current information will be vigilant as possible in the future to identify and posted on our Web site at AIMinvestments.com. We will address any harmful market timing investors who have continue to communicate to you on our Web site about our the potential to harm our long-term fund shareholders. finding, and the actions we are taking to protect and promote the interests of our shareholders. The independent We sincerely hope these developments and the media trustees of the funds are receiving regular reports from coverage surrounding them do not result in you or other their independent counsel and outside counsel hired by shareholders losing confidence in AIM or INVESCO Funds. AMVESCAP PLC, the parent of AIM and IFG, to perform an Amidst this storm of controversy in the mutual fund ongoing investigation of market timing. industry, we believe we can find encouragement in the recovering economy and rising equity markets. As we A COMPLEX ISSUE write this letter, for instance, the S&P 500--Registered Trademark-- Index is up approximately 23% year-to-date. Market timing is an investment technique not defined in any Although past performance is no guarantee of future regulation that involves frequent short-term trading of results, there appear to be indicators that the economy mutual fund shares, sometimes with a goal to exploit and stock markets are showing signs of welcomed improvement. inefficiencies in the way mutual funds price their shares. We encourage you to read the enclosed discussion of your We recognize that fund management companies have tried to fund's performance during this past reporting period. deal with this complex issue in various ways and believe that industry-wide guidance is in order. To that end, we OUR UNWAVERING COMMITMENT welcome SEC Chairman William Donaldson's pledge to adopt new rules designed to curb market timing abuses. Comprehensive At AIM Investments, we have never wavered in our rulemaking is necessary and is the best way to establish new commitment to helping you build solutions for your industry responsibilities designed to protect shareholders. financial goals. Our company was founded on a core We support practical rule changes and structural principle of integrity, and we have always worked hard modifications that are fair, enforceable and, most to earn the trust of our shareholders. We are committed importantly, beneficial for investors. to doing all we can to maintain your trust and confidence. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Thank you for your continued participation in AIM activities deemed to be detrimental to the funds. We have Investments. Please call your financial advisor or one also recently taken additional steps--implemented of our Client Service representatives at 800-959-4246 if you have any further questions or concerns about your AIM Investments account. Sincerely, /s/ROBERT H. GRAHAM /s/MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND DELIVERS POSITIVE RETURN materials and utilities were the FOR FISCAL YEAR top-performing sectors while telecommunication services, consumer This report covers the fiscal year ended economic activity, expanded at an staples and health care were the October 31, 2003. During this period, annualized rate of 3.3% in the second weakest-performing sectors. your fund recorded positive returns. At quarter and 8.2% in the third quarter of net asset value, Class A shares produced 2003. As of the close of the fiscal ======================================== a total return of 19.89%. By comparison, year, 405 companies in the S&P 500 had the S&P 500 Index returned 20.79% over reported third-quarter earnings. A total SMALL- AND MID-CAP the same period. The fund slightly of 65.4% of those companies reported underperformed the index because it had earnings that exceeded expectations STOCKS GENERALLY no exposure to utilities, one of the compared to 60.2% for the third quarter best-performing sectors in the S&P 500. of 2002, according to Bloomberg. The job OUTPERFORMED market remained weak, however, as the MARKET CONDITIONS nation's unemployment rate stood at 6.0% LARGE-CAP STOCKS. at the close of the reporting period. Amid a backdrop of generally improving ======================================== economic conditions, the S&P 500 For most of the fiscal year, the produced double-digit gains for the year Federal Reserve (the Fed) kept the Small- and mid-cap stocks generally ended October 31, 2003. The index rose short-term federal funds rate at 1.25%. outperformed large-cap stocks. While the in November 2002, then declined over the On June 25, 2003, it lowered that rate performance of large-cap growth and next three months, dropping to its to 1.00%, its lowest level since 1958. large-cap value stocks was similar, mid- lowest level for the fiscal year on At the time, the Fed said it favored a and small-cap growth stocks generally March 11, 2003. The index then rallied, more expansive monetary policy because outperformed their value counterparts by posting a gain of 32.67% from its low on the economy had not yet exhibited wider margins. March 11 through the end of the sustainable growth. By October, the Fed reporting period. reported that economic expansion had YOUR FUND increased and consumer spending was During this rally, the United generally stronger, although the job At the close of the fiscal year, the States and its allies took military market remained weak. portfolio's three largest sector action against Iraq and ousted the weightings were the same as at the regime of Saddam Hussein. The nation's All sectors of the S&P 500 recorded beginning of the reporting period: gross domestic product, generally gains for the fiscal year. Information information technology, consumer considered the broadest measure of technology, discretionary and health care. These sectors also contributed the most to fund performance. The portfolio was overweight in health care
================================================================================================================================= FUND VS. INDEXES TOP 10 INDUSTRIES* TOP 10 EQUITY HOLDINGS* Total Returns 10/31/02-10/31/03, excluding sales charges 1. Semiconductors 6.9% 1. Microsoft Corp. 2.8% 2. Health Care Equipment 5.3 2. Microchip Technology Inc. 2.1 Class A Shares 19.89% 3. Pharmaceuticals 5.3 3. Fiserv, Inc. 1.8 Class B Shares 19.02 Class C Shares 19.02 4. Communications Equipment 4.7 4. Dell Inc. 1.7 Class R Shares 19.59 S&P 500 Index 20.79 5. Semiconductor Equipment 4.4 5. Biomet, Inc. 1.7 Source: Lipper, Inc. 6. Systems Software 4.3 6. CDW Corp. 1.7 Past performance cannot guarantee 7. Consumer Finance 3.1 7. Analog Devices, Inc. 1.7 comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS 8. Restaurants 2.8 8. Teva Pharmaceuticals 1.6 OF AN INVESTMENT MADE TODAY MAY DIFFER Industries Ltd.-ADR (Israel) SUBSTANTIALLY FROM THE HISTORICAL 9. Data Processing & Outsourced PERFORMANCE SHOWN. CALL YOUR FINANCIAL Services 2.6 9. Cisco Systems, Inc. 1.6 ADVISOR FOR MORE CURRENT PERFORMANCE. 10. Broadcasting & Cable TV 2.6 10. Wal-Mart Stores, Inc. 1.5 *Excludes money market fund holdings. TOTAL NUMBER OF HOLDINGS* 137 The fund's holdings are subject to change, and there is no assurance that the fund TOTAL NET ASSETS $7.9 BILLION will continue to hold any particular security. =================================================================================================================================
2 compared to the S&P 500, so its benefiting from the ongoing economic CHRISTIAN A. COSTANZO contribution to performance was greater recovery. Teva reported a 34% increase [PHOTO OF Mr. Costanzo joined AIM for the fund than for the index. The in sales for the first nine months of CHRISTIAN A. in 1995 as an analyst sectors that contributed the least to 2003, partially because of the sale of COSTANZO] and assumed his current fund performance were materials, 14 new products in the North American duties in 1997. Prior to consumer staples and energy. Although market. joining AIM, he worked materials was one of the at AT&T as a business analyst from 1991 better-performing sectors of the S&P Detracting from performance was Lockheed to 1993 and as a B-52 Navigator in the 500, the portfolio had little exposure Martin, one of the world's largest United States Air Force from 1987 to to this sector, so its impact on defense contractors. This stock declined 1990. He holds a B.A. in biology and performance was minimal. even though the company reported a 23% economics from the University of increase in sales for the third quarter Virginia and an M.B.A. from The During the fiscal year, we of 2003 compared to the comparable University of Texas at Austin. increased the proportion of stocks that period for the previous year. we consider more economically sensitive ROBERT LLOYD to about 60% of the portfolio. IN CLOSING [PHOTO OF Mr. Lloyd joined AIM in Simultaneously, we reduced its exposure ROBERT 2000 as a senior analyst to stocks that we regard as more We continue to work diligently to meet LLOYD] for the technology defensive core-growth holdings to about the fund's investment objective of funds. He was promoted 40% of the portfolio. We made these growth of capital. Regardless of market to portfolio manager in adjustments in response to generally trends, we will adhere to the fund's 2001. Mr. Lloyd was previously a trader improving economic conditions. History strategy as outlined in its prospectus. for Enron Corporation and American has shown that more economically We will continue to focus on the stocks Electric Power. He held a position in sensitive stocks tend to perform better of companies that we believe have business development with American in an improving economic environment. favorable growth prospects. Electric Power before leaving to join AIM. He served eight years in the U.S. Stocks that enhanced performance See important fund and index Navy as a Naval Flight Officer flying included Cisco Systems, a leading disclosures inside front cover. the S-3B Viking. He received a B.B.A. Internet networking firm, and Teva from the University of Notre Dame and an Pharmaceutical Industries, a major M.B.A. from the University of Chicago. generic drug company. In August, Cisco He is a Chartered Financial Analyst. reported fiscal year 2003 net income of $3.6 billion, up sharply from $1.9 BRIAN UNTERHALTER billion for the 2002 fiscal year. In our [PHOTO OF Mr. Unterhalter began opinion, Cisco is one of a growing BRIAN his investment career in number of companies UNTERHALTER] 1995 as an equity trader with First Interstate Bank. In 1997, he joined AIM as a domestic equity trader and later became an analyst on AIM's International (Europe/Canada) investment management team in 1998. He was promoted to his current position in 2003. A native of Johannesburg, South Africa, he received a B.A. from The University of ================================================================================= Texas at Austin and an M.B.A. from the University of St. Thomas. REDUCE YOUR PAPER MAIL WITH AIM'S EDELIVERY KENNETH A. ZSCHAPPEL Sign up for eDelivery and you can have your fund reports, prospectuses and [PHOTO OF Mr. Zschappel is lead quarterly account statements delivered electronically. To enroll, go to KENNETH A. portfolio manager of AIM AIMinvestments.com, select "My Account," log in, click on the "Service Center" ZSCHAPPEL] Constellation Fund. He tab and select "Register for eDelivery." You will no longer receive paper copies joined AIM in 1990 and of these documents. Instead you'll receive a link to the documents via email. in 1992 became a (You can cancel the service at the Web site at any time.) portfolio analyst for equity securities, specializing in technology and health If you receive account statements, fund reports and prospectuses from your care. A native of Austin, Texas, he financial advisor rather than from AIM, eDelivery is not accessible to you. Ask received a B.A. in political science your financial advisor if his or her firm offers electronic delivery. from Baylor University. ================================================================================= Assisted by Multi-Cap Growth Team GRAPHIC GRAPHIC For More Information Visit AIMinvestments.com
3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 4/30/76-10/31/03 [MOUNTAIN CHART]
DATE AIM CONSTELLATION FUND S&P 500 CLASS A SHARES INDEX 4/30/76 $ 9450 $ 10000 10/31/76 9111 10327 10/31/77 8573 9704 10/31/78 10338 10320 10/31/79 15631 11914 10/31/80 31383 15739 10/31/81 30655 15829 10/31/82 29017 18407 10/31/83 40590 23551 10/31/84 35906 25051 10/31/85 39690 29893 10/31/86 58182 39813 10/31/87 56766 42361 10/31/88 70001 48613 10/31/89 94855 61424 10/31/90 79503 56830 10/31/91 141394 75820 10/31/92 162358 83363 10/31/93 208766 95792 10/31/94 224316 99487 10/31/95 299333 125760 10/31/96 333002 156045 10/31/97 395670 206133 10/31/98 386648 251507 10/31/99 521308 316051 10/31/00 711888 335259 10/31/01 405058 251817 10/31/02 353087 213802 Source: Lipper, Inc. 10/31/03 $423256 $258241
=================================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS CLASS R SHARES* In addition to returns as of the close As of 10/31/03, including sales charges 10 Years 7.15% of the fiscal year, industry regulations 5 Years 1.70 require us to provide average annual CLASS A SHARES 1 Year 19.59 total returns as of 9/30/03, the most Inception (4/30/76) 14.59% recent calendar quarter-end. 10 Years 6.72 5 Years 0.68 AVERAGE ANNUAL TOTAL RETURNS 1 Year 13.30 As of 9/30/03, including sales charges CLASS B SHARES CLASS A SHARES Inception (11/3/97) -0.24% Inception (4/30/76) 14.35% 5 Years 0.77 10 Years 6.01 1 Year 14.02 5 Years 0.31 1 Year 15.20 CLASS C SHARES Inception (8/4/97) -0.27% CLASS B SHARES 5 Years 1.07 Inception (11/3/97) -1.38% 1 Year 18.02 5 Years 0.38 1 Year 16.04 ===================================================================================================================================
4 Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. CLASS C SHARES *The returns shown for these periods are Inception (8/4/97) -1.37% the blended returns of the historical 5 Years 0.68 performance of the fund's Class R shares 1 Year 20.04 since their inception and the restated historical performance of the fund's CLASS R SHARES* Class A shares (for the periods prior to 10 Years 6.43% inception of the Class R shares) at net 5 Years 1.32 asset value, adjusted to reflect the 1 Year 21.65 higher Rule 12b-1 fees applicable to the Class R shares. The inception date of Class A shares is 4/30/76. The inception date of the fund's Class R shares is 6/3/02. Calculation of blended returns as of 10/31/03 is from 10/31/93. Calculation of blended returns as of 9/30/03 is from 9/30/93. Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
5 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM CONSTELLATION FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (4/8/92) 9.86% those shown. All returns assume shareholders with a performance overview 10 Years 7.84 reinvestment of distributions at net specific to their holdings. 5 Years 2.32 asset value. Investment return and Institutional Class shares are offered 1 Year 20.55 principal value will fluctuate so your exclusively to institutional investors, shares, when redeemed, may be worth more including defined contribution plans or less than their original cost. See that meet certain criteria. Performance AVERAGE ANNUAL TOTAL RETURNS full report for information on of Institutional Class shares will For periods ended 9/30/03 comparative benchmarks. If you have differ from performance of Class A (most recent calendar quarter-end) questions, please consult your fund shares due to differing sales charges prospectus or call 800-451-4246. A I M and class expenses. INCEPTION (4/8/92) 9.27% Distributors, Inc. 10 Years 7.12 5 Years 1.94 1 Year 22.57
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com CST-INS-1 10/03 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-98.11% ADVERTISING-1.53% Lamar Advertising Co.(a) 3,000,000 $ 90,900,000 - ------------------------------------------------------------------------- Omnicom Group Inc. 366,900 29,278,620 ========================================================================= 120,178,620 ========================================================================= AEROSPACE & DEFENSE-1.33% L-3 Communications Holdings, Inc.(a) 750,000 35,055,000 - ------------------------------------------------------------------------- Lockheed Martin Corp. 1,500,000 69,540,000 ========================================================================= 104,595,000 ========================================================================= AIR FREIGHT & LOGISTICS-0.64% Expeditors International of Washington, Inc. 500,000 18,770,000 - ------------------------------------------------------------------------- FedEx Corp. 420,800 31,879,808 ========================================================================= 50,649,808 ========================================================================= AIRLINES-0.99% Southwest Airlines Co. 4,000,000 77,600,000 ========================================================================= APPAREL RETAIL-2.22% Chico's FAS, Inc.(a) 1,000,000 37,540,000 - ------------------------------------------------------------------------- Gap, Inc. (The) 5,000,000 95,400,000 - ------------------------------------------------------------------------- TJX Cos., Inc. (The) 2,000,000 41,980,000 ========================================================================= 174,920,000 ========================================================================= APPAREL, ACCESSORIES & LUXURY GOODS-0.13% Coach, Inc.(a) 289,700 10,275,659 ========================================================================= APPLICATION SOFTWARE-1.29% Intuit Inc.(a) 1,250,000 62,475,000 - ------------------------------------------------------------------------- Mercury Interactive Corp.(a) 839,800 39,000,312 ========================================================================= 101,475,312 ========================================================================= ASSET MANAGEMENT & CUSTODY BANKS-0.94% Northern Trust Corp. 750,000 34,837,500 - ------------------------------------------------------------------------- State Street Corp. 750,000 39,270,000 ========================================================================= 74,107,500 ========================================================================= BIOTECHNOLOGY-2.11% Amgen Inc.(a) 1,200,000 74,112,000 - ------------------------------------------------------------------------- Genzyme Corp.(a) 1,350,900 62,006,310 - ------------------------------------------------------------------------- Gilead Sciences, Inc.(a) 544,600 29,724,268 ========================================================================= 165,842,578 ========================================================================= BROADCASTING & CABLE TV-2.60% Clear Channel Communications, Inc. 2,500,000 102,050,000 - -------------------------------------------------------------------------
- -------------------------------------------------------------------------
MARKET SHARES VALUE BROADCASTING & CABLE TV-(CONTINUED) Univision Communications Inc.-Class A(a) 2,137,500 $ 72,568,125 - ------------------------------------------------------------------------- Westwood One, Inc.(a) 1,000,000 29,930,000 ========================================================================= 204,548,125 ========================================================================= CASINOS & GAMING-0.68% MGM MIRAGE(a) 1,500,000 53,250,000 ========================================================================= COMMUNICATIONS EQUIPMENT-4.74% Avaya Inc.(a) 2,000,000 25,880,000 - ------------------------------------------------------------------------- Cisco Systems, Inc.(a) 6,000,000 125,880,000 - ------------------------------------------------------------------------- Corning Inc.(a) 4,000,000 43,920,000 - ------------------------------------------------------------------------- Foundry Networks, Inc.(a) 2,500,000 58,150,000 - ------------------------------------------------------------------------- Juniper Networks, Inc.(a) 2,000,000 35,980,000 - ------------------------------------------------------------------------- Nortel Networks Corp. (Canada)(a) 12,500,000 55,625,000 - ------------------------------------------------------------------------- Scientific-Atlanta, Inc. 500,000 14,800,000 - ------------------------------------------------------------------------- UTStarcom, Inc.(a) 389,300 12,262,950 ========================================================================= 372,497,950 ========================================================================= COMPUTER & ELECTRONICS RETAIL-0.93% Best Buy Co., Inc. 1,250,000 72,887,500 ========================================================================= COMPUTER HARDWARE-1.72% Dell Inc.(a) 3,750,000 135,450,000 ========================================================================= COMPUTER STORAGE & PERIPHERALS-1.13% EMC Corp.(a) 5,110,200 70,725,168 - ------------------------------------------------------------------------- Western Digital Corp.(a) 1,369,300 18,417,085 ========================================================================= 89,142,253 ========================================================================= CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-1.42% Caterpillar, Inc. 700,000 51,296,000 - ------------------------------------------------------------------------- Deere & Co. 1,000,000 60,620,000 ========================================================================= 111,916,000 ========================================================================= CONSUMER FINANCE-3.07% American Express Co. 2,250,000 105,592,500 - ------------------------------------------------------------------------- MBNA Corp. 3,100,000 76,725,000 - ------------------------------------------------------------------------- SLM Corp. 1,500,000 58,740,000 ========================================================================= 241,057,500 ========================================================================= DATA PROCESSING & OUTSOURCED SERVICES-2.62% Fiserv, Inc.(a) 4,000,000 141,280,000 - ------------------------------------------------------------------------- SunGard Data Systems Inc.(a) 2,298,500 64,472,925 ========================================================================= 205,752,925 =========================================================================
F-1
MARKET SHARES VALUE - ------------------------------------------------------------------------- DEPARTMENT STORES-0.39% Nordstrom, Inc. 1,000,000 $ 30,490,000 ========================================================================= DIVERSIFIED BANKS-0.84% Bank of America Corp. 500,000 37,865,000 - ------------------------------------------------------------------------- Wells Fargo & Co. 500,000 28,160,000 ========================================================================= 66,025,000 ========================================================================= DIVERSIFIED COMMERCIAL SERVICES-0.57% Apollo Group, Inc.-Class A(a) 700,000 44,471,000 ========================================================================= DRUG RETAIL-0.77% Walgreen Co. 1,750,000 60,935,000 ========================================================================= ELECTRONIC EQUIPMENT MANUFACTURERS-0.48% Agilent Technologies, Inc.(a) 1,500,000 37,380,000 ========================================================================= ELECTRONIC MANUFACTURING SERVICES-0.44% Molex Inc. 1,094,700 34,362,633 ========================================================================= EMPLOYMENT SERVICES-0.81% Robert Half International Inc.(a) 2,707,400 63,921,714 ========================================================================= FOOD DISTRIBUTORS-0.53% SYSCO Corp. 1,250,000 42,075,000 ========================================================================= FOOD RETAIL-0.38% Whole Foods Market, Inc.(a) 500,000 29,620,000 ========================================================================= GENERAL MERCHANDISE STORES-1.26% Dollar General Corp. 1,500,000 33,705,000 - ------------------------------------------------------------------------- Family Dollar Stores, Inc. 1,500,000 65,415,000 ========================================================================= 99,120,000 ========================================================================= HEALTH CARE DISTRIBUTORS-0.60% Cardinal Health, Inc. 800,000 47,472,000 ========================================================================= HEALTH CARE EQUIPMENT-5.31% Biomet, Inc. 3,770,675 135,216,406 - ------------------------------------------------------------------------- Boston Scientific Corp.(a) 1,080,700 73,185,004 - ------------------------------------------------------------------------- Guidant Corp. 489,800 24,984,698 - ------------------------------------------------------------------------- Medtronic, Inc. 1,718,600 78,316,602 - ------------------------------------------------------------------------- St. Jude Medical, Inc.(a) 500,000 29,080,000 - ------------------------------------------------------------------------- Zimmer Holdings, Inc.(a) 1,200,000 76,572,000 ========================================================================= 417,354,710 ========================================================================= HEALTH CARE FACILITIES-0.48% Health Management Associates, Inc.-Class A 1,706,000 37,787,900 ========================================================================= HEALTH CARE SERVICES-1.64% AdvancePCS(a) 1,089,603 56,081,866 - -------------------------------------------------------------------------
- -------------------------------------------------------------------------
MARKET SHARES VALUE HEALTH CARE SERVICES-(CONTINUED) Caremark Rx, Inc.(a) 2,000,000 $ 50,100,000 - ------------------------------------------------------------------------- Medco Health Solutions, Inc.(a) 686,900 22,805,080 ========================================================================= 128,986,946 ========================================================================= HOME ENTERTAINMENT SOFTWARE-0.38% Electronic Arts Inc.(a) 300,000 29,712,000 ========================================================================= HOME IMPROVEMENT RETAIL-0.89% Lowe's Cos., Inc. 1,182,400 69,678,832 ========================================================================= HOTELS, RESORTS & CRUISE LINES-1.51% Carnival Corp. (Panama) 1,000,000 34,910,000 - ------------------------------------------------------------------------- Marriott International, Inc.-Class A 500,000 21,600,000 - ------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. (Liberia) 1,250,000 37,137,500 - ------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. 750,000 25,297,500 ========================================================================= 118,945,000 ========================================================================= HOUSEHOLD PRODUCTS-0.79% Procter & Gamble Co. (The) 629,400 61,863,726 ========================================================================= HYPERMARKETS & SUPER CENTERS-1.50% Wal-Mart Stores, Inc. 2,000,000 117,900,000 ========================================================================= INDUSTRIAL CONGLOMERATES-0.52% 3M Co. 523,400 41,280,558 ========================================================================= INDUSTRIAL MACHINERY-2.00% Danaher Corp. 500,000 41,425,000 - ------------------------------------------------------------------------- Eaton Corp. 400,000 40,096,000 - ------------------------------------------------------------------------- Ingersoll-Rand Co.-Class A (Bermuda) 1,250,000 75,500,000 ========================================================================= 157,021,000 ========================================================================= INSURANCE BROKERS-0.12% Marsh & McLennan Cos., Inc. 222,900 9,528,975 ========================================================================= INTERNET RETAIL-1.40% Amazon.com, Inc.(a) 750,000 40,815,000 - ------------------------------------------------------------------------- eBay Inc.(a) 654,000 36,584,760 - ------------------------------------------------------------------------- InterActiveCorp.(a) 884,400 32,466,324 ========================================================================= 109,866,084 ========================================================================= INTERNET SOFTWARE & SERVICES-0.39% Yahoo! Inc.(a) 700,000 30,590,000 ========================================================================= INVESTMENT BANKING & BROKERAGE-2.36% Bear Stearns Cos. Inc. (The) 285,800 21,792,250 - ------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 800,000 75,120,000 - ------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 1,500,000 88,800,000 ========================================================================= 185,712,250 =========================================================================
F-2
MARKET SHARES VALUE - ------------------------------------------------------------------------- IT CONSULTING & OTHER SERVICES-0.30% Accenture Ltd.-Class A (Bermuda)(a) 1,012,000 $ 23,680,800 ========================================================================= MANAGED HEALTH CARE-2.20% Aetna Inc. 593,700 34,084,317 - ------------------------------------------------------------------------- UnitedHealth Group Inc. 1,323,400 67,334,592 - ------------------------------------------------------------------------- WellPoint Health Networks Inc.(a) 806,000 71,653,400 ========================================================================= 173,072,309 ========================================================================= MOTORCYCLE MANUFACTURERS-0.90% Harley-Davidson, Inc. 1,500,000 71,115,000 ========================================================================= MOVIES & ENTERTAINMENT-1.45% Pixar, Inc.(a) 500,000 34,405,000 - ------------------------------------------------------------------------- Viacom Inc.-Class B 2,000,000 79,740,000 ========================================================================= 114,145,000 ========================================================================= MULTI-LINE INSURANCE-0.77% American International Group, Inc. 997,800 60,696,174 ========================================================================= OIL & GAS DRILLING-1.73% ENSCO International Inc. 1,519,000 40,025,650 - ------------------------------------------------------------------------- Nabors Industries, Ltd. (Bermuda)(a) 1,000,000 37,800,000 - ------------------------------------------------------------------------- Noble Corp. (Cayman Islands)(a) 1,000,000 34,330,000 - ------------------------------------------------------------------------- Transocean Inc. (Cayman Islands)(a) 1,250,000 23,987,500 ========================================================================= 136,143,150 ========================================================================= OIL & GAS EQUIPMENT & SERVICES-1.25% BJ Services Co.(a) 1,169,600 38,374,576 - ------------------------------------------------------------------------- Smith International, Inc.(a) 900,000 33,507,000 - ------------------------------------------------------------------------- Weatherford International Ltd. (Bermuda)(a) 750,000 26,062,500 ========================================================================= 97,944,076 ========================================================================= OIL & GAS EXPLORATION & PRODUCTION-0.43% Devon Energy Corp. 700,000 33,950,000 ========================================================================= OTHER DIVERSIFIED FINANCIAL SERVICES-1.21% Citigroup Inc. 2,000,000 94,800,000 ========================================================================= PERSONAL PRODUCTS-0.51% Gillette Co. (The) 1,250,000 39,875,000 ========================================================================= PHARMACEUTICALS-5.29% Allergan, Inc. 125,000 9,452,500 - ------------------------------------------------------------------------- Forest Laboratories, Inc.(a) 500,000 25,005,000 - ------------------------------------------------------------------------- Lilly (Eli) & Co. 646,100 43,043,182 - ------------------------------------------------------------------------- Medicis Pharmaceutical Corp.-Class A 1,000,000 63,350,000 - ------------------------------------------------------------------------- Pfizer Inc. 2,582,100 81,594,360 - -------------------------------------------------------------------------
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MARKET SHARES VALUE PHARMACEUTICALS-(CONTINUED) Teva Pharmaceutical Industries Ltd.-ADR (Israel) 2,244,800 $ 127,706,672 - ------------------------------------------------------------------------- Wyeth 1,500,000 66,210,000 ========================================================================= 416,361,714 ========================================================================= PROPERTY & CASUALTY INSURANCE-0.59% Chubb Corp. (The) 700,000 46,767,000 ========================================================================= PUBLISHING-0.53% Gannett Co., Inc. 500,000 42,055,000 ========================================================================= RESTAURANTS-2.80% Brinker International, Inc.(a) 1,516,800 48,279,744 - ------------------------------------------------------------------------- McDonald's Corp. 2,000,000 50,020,000 - ------------------------------------------------------------------------- Outback Steakhouse, Inc. 1,213,300 50,958,600 - ------------------------------------------------------------------------- P.F. Chang's China Bistro, Inc.(a) 700,000 34,118,000 - ------------------------------------------------------------------------- Wendy's International, Inc. 1,000,000 37,050,000 ========================================================================= 220,426,344 ========================================================================= SEMICONDUCTOR EQUIPMENT-4.44% Applied Materials, Inc.(a) 4,285,900 100,161,483 - ------------------------------------------------------------------------- KLA-Tencor Corp.(a) 1,739,400 99,719,802 - ------------------------------------------------------------------------- Lam Research Corp.(a) 4,000,000 114,960,000 - ------------------------------------------------------------------------- Teradyne, Inc.(a) 1,500,000 34,170,000 ========================================================================= 349,011,285 ========================================================================= SEMICONDUCTORS-6.89% Analog Devices, Inc.(a) 3,000,000 132,990,000 - ------------------------------------------------------------------------- Linear Technology Corp. 2,000,000 85,220,000 - ------------------------------------------------------------------------- Marvell Technology Group Ltd. (Bermuda)(a) 1,000,000 43,870,000 - ------------------------------------------------------------------------- Maxim Integrated Products, Inc. 1,750,000 86,992,500 - ------------------------------------------------------------------------- Microchip Technology Inc. 5,068,952 165,805,420 - ------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd.-ADR (Taiwan) 2,420,064 26,765,908 ========================================================================= 541,643,828 ========================================================================= SPECIALIZED FINANCE-0.55% Moody's Corp. 750,000 43,372,500 ========================================================================= SPECIALTY STORES-2.56% Bed Bath & Beyond Inc.(a) 2,350,000 99,264,000 - ------------------------------------------------------------------------- Staples, Inc.(a) 2,500,000 67,050,000 - ------------------------------------------------------------------------- Williams-Sonoma, Inc.(a) 1,000,000 35,330,000 ========================================================================= 201,644,000 ========================================================================= SYSTEMS SOFTWARE-4.26% Adobe Systems Inc. 650,000 28,496,000 - ------------------------------------------------------------------------- Microsoft Corp. 8,500,000 222,275,000 - ------------------------------------------------------------------------- Oracle Corp.(a) 2,500,000 29,900,000 - -------------------------------------------------------------------------
F-3
MARKET SHARES VALUE - ------------------------------------------------------------------------- SYSTEMS SOFTWARE-(CONTINUED) VERITAS Software Corp.(a) 1,500,000 $ 54,225,000 ========================================================================= 334,896,000 ========================================================================= TECHNOLOGY DISTRIBUTORS-1.71% CDW Corp. 2,233,300 134,109,665 ========================================================================= WIRELESS TELECOMMUNICATION SERVICES-1.29% Nextel Communications, Inc.-Class A(a) 1,820,000 44,044,000 - ------------------------------------------------------------------------- Vodafone Group PLC (United Kingdom) 27,345,190 57,351,477 ========================================================================= 101,395,477 ========================================================================= Total Common Stocks & Other Equity Interests (Cost $5,798,440,332) 7,715,351,380 ========================================================================= MONEY MARKET FUNDS-2.44% STIC Liquid Assets Portfolio(b) 95,933,174 95,933,174 - ------------------------------------------------------------------------- STIC Prime Portfolio(b) 95,933,174 95,933,174 ========================================================================= Total Money Market Funds (Cost $191,866,348) 191,866,348 ========================================================================= TOTAL INVESTMENTS-100.55% (excluding investments purchased with cash collateral from securities loaned) (Cost $5,990,306,680) 7,907,217,728 =========================================================================
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MARKET SHARES VALUE INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-2.29% STIC Liquid Assets Portfolio(b)(c) 155,180,095 $ 155,180,095 - ------------------------------------------------------------------------- STIC Prime Portfolio(b)(c) 24,938,485 24,938,485 ========================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $180,118,580) 180,118,580 ========================================================================= TOTAL INVESTMENTS-102.84% (Cost $6,170,425,260) 8,087,336,308 ========================================================================= OTHER ASSETS LESS LIABILITIES-(2.84%) (223,133,791) ========================================================================= NET ASSETS-100.00% $7,864,202,517 _________________________________________________________________________ =========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $5,798,440,332)* $ 7,715,351,380 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $371,984,928) 371,984,928 - ------------------------------------------------------------ Receivables for: Investments sold 22,973,044 - ------------------------------------------------------------ Fund shares sold 3,766,990 - ------------------------------------------------------------ Dividends 3,973,670 - ------------------------------------------------------------ Investment for deferred compensation plan 314,171 - ------------------------------------------------------------ Other assets 125,652 ============================================================ Total assets 8,118,489,835 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 44,898,225 - ------------------------------------------------------------ Fund shares reacquired 20,290,401 - ------------------------------------------------------------ Deferred compensation plan 314,171 - ------------------------------------------------------------ Collateral upon return of securities loaned 180,118,580 - ------------------------------------------------------------ Accrued distribution fees 2,408,634 - ------------------------------------------------------------ Accrued trustees' fees 555,134 - ------------------------------------------------------------ Accrued transfer agent fees 4,285,116 - ------------------------------------------------------------ Accrued operating expenses 1,417,057 ============================================================ Total liabilities 254,287,318 ============================================================ Net assets applicable to shares outstanding $ 7,864,202,517 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 8,869,425,554 - ------------------------------------------------------------ Undistributed net investment income (loss) (844,799) - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities, foreign currencies and option contracts (2,921,289,286) - ------------------------------------------------------------ Unrealized appreciation of investment securities 1,916,911,048 ============================================================ $ 7,864,202,517 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 6,825,022,555 ____________________________________________________________ ============================================================ Class B $ 688,587,420 ____________________________________________________________ ============================================================ Class C $ 193,585,049 ____________________________________________________________ ============================================================ Class R $ 2,857,476 ____________________________________________________________ ============================================================ Institutional Class $ 154,150,017 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 331,117,751 ____________________________________________________________ ============================================================ Class B 35,377,323 ____________________________________________________________ ============================================================ Class C 9,948,607 ____________________________________________________________ ============================================================ Class R 138,523 ____________________________________________________________ ============================================================ Institutional Class 6,953,267 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 20.61 - ------------------------------------------------------------ Offering price per share: (Net asset value of $20.61 divided by 94.50%) $ 21.81 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 19.46 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 19.46 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 20.63 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 22.17 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $174,003,209 were on loan to brokers. See Notes to Financial Statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $244,235) $ 42,795,714 - ---------------------------------------------------------------------------- Dividends from affiliated money market funds 2,446,905 - ---------------------------------------------------------------------------- Securities lending 144,803 ============================================================================ Total investment income 45,387,422 ============================================================================ EXPENSES: Advisory fees 46,349,081 - ---------------------------------------------------------------------------- Administrative services fees 696,174 - ---------------------------------------------------------------------------- Custodian fees 451,569 - ---------------------------------------------------------------------------- Distribution fees: Class A 19,315,644 - ---------------------------------------------------------------------------- Class B 6,227,801 - ---------------------------------------------------------------------------- Class C 1,792,081 - ---------------------------------------------------------------------------- Class R 6,237 - ---------------------------------------------------------------------------- Transfer agent fees 23,165,160 - ---------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 105,564 - ---------------------------------------------------------------------------- Trustees' fees 142,695 - ---------------------------------------------------------------------------- Other 2,473,308 ============================================================================ Total expenses 100,725,314 ============================================================================ Less: Fees waived and expense offset arrangements (753,706) ============================================================================ Net expenses 99,971,608 ============================================================================ Net investment income (loss) (54,584,186) ============================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities (455,564,558) - ---------------------------------------------------------------------------- Foreign currencies 527,909 - ---------------------------------------------------------------------------- Option contracts written 291,491 ============================================================================ (454,745,158) ============================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities 1,834,296,432 - ---------------------------------------------------------------------------- Foreign currencies 17,825 - ---------------------------------------------------------------------------- Option contracts written (123,292) ============================================================================ 1,834,190,965 ============================================================================ Net gain from investment securities, foreign currencies and option contracts 1,379,445,807 ============================================================================ Net increase in net assets resulting from operations $1,324,861,621 ____________________________________________________________________________ ============================================================================
See Notes to Financial Statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ------------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ (54,584,186) $ (81,004,558) - ------------------------------------------------------------------------------------------------ Net realized gain (loss) from investment securities, foreign currencies and option contracts (454,745,158) (1,231,119,667) - ------------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities, foreign currencies and option contracts 1,834,190,965 143,436,189 ================================================================================================ Net increase (decrease) in net assets resulting from operations 1,324,861,621 (1,168,688,036) ================================================================================================ Share transactions-net: Class A (1,112,282,235) (1,905,685,542) - ------------------------------------------------------------------------------------------------ Class B (46,666,906) (89,586,163) - ------------------------------------------------------------------------------------------------ Class C (22,091,083) (44,303,197) - ------------------------------------------------------------------------------------------------ Class R 2,235,274 204,500 - ------------------------------------------------------------------------------------------------ Institutional Class 5,433,008 (10,243,640) ================================================================================================ Net increase (decrease) in net assets resulting from share transactions (1,173,371,942) (2,049,614,042) ================================================================================================ Net increase (decrease) in net assets 151,489,679 (3,218,302,078) ================================================================================================ NET ASSETS: Beginning of year 7,712,712,838 10,931,014,916 ================================================================================================ End of year (including undistributed net investment income (loss) of $(844,799) and $(770,211) for 2003 and 2002, respectively) $ 7,864,202,517 $ 7,712,712,838 ________________________________________________________________________________________________ ================================================================================================
See Notes to Financial Statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADR's, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in F-8 foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million to and including $150 million, plus 0.625% of the Fund's average daily net assets in excess of $150 million. AIM has voluntarily agreed to waive advisory fees payable by the Fund to AIM at the annual rate of 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum waiver of 0.175% on net assets in excess of $35 billion. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). Voluntary fee waivers may be modified or discontinued with approval of Board of Trustees without further notice to investors. For the year ended October 31, 2003, AIM waived fees of $638,100. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $696,174 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc. a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $11,253,012 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, F-9 for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $19,315,644, $6,227,801, $1,792,081 and $6,237, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During year ended October 31, 2003, AIM Distributors retained $829,628 in front-end sales commissions from the sale of Class A shares and $4,130, $68 and $12,817 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $114,189 and reductions in custodian fees of $1,417 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $115,606. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $14,087 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $174,003,209 were on loan to brokers. The loans were secured by cash collateral of $180,118,580 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003, the Fund received fees of $144,803 for securities lending. F-10 NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD - ------------------------------------------------------------ CALL OPTION CONTRACTS ------------------------ NUMBER OF PREMIUMS CONTRACTS RECEIVED - ------------------------------------------------------------ Beginning of year 1,551 $ 398,595 - ------------------------------------------------------------ Written 3,088 1,040,859 - ------------------------------------------------------------ Exercised (3,264) (1,147,963) - ------------------------------------------------------------ Expired (1,375) (291,491) - ------------------------------------------------------------ End of year -- $ -- ____________________________________________________________ ============================================================
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 1,905,448,839 - ------------------------------------------------------------ Temporary book/tax differences (844,799) - ------------------------------------------------------------ Capital loss carryforward (2,909,827,077) - ------------------------------------------------------------ Shares of beneficial interest 8,869,425,554 ============================================================ Total net assets $ 7,864,202,517 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable to the tax deferral of losses on wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ----------------------------------------------------------- October 31, 2009 $1,224,074,030 - ----------------------------------------------------------- October 31, 2010 1,223,985,487 - ----------------------------------------------------------- October 31, 2011 461,767,560 =========================================================== Total capital loss carryforward $2,909,827,077 ___________________________________________________________ ===========================================================
NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $3,370,231,624 and $4,537,133,153, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $2,147,646,200 - ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (242,197,361) ============================================================ Net unrealized appreciation of investment securities $1,905,448,839 ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $6,181,887,469.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2003, undistributed net investment income was increased by $54,509,598, undistributed net realized gains decreased by $527,909 and shares of beneficial interest decreased by $53,981,689. This reclassification had no effect on the net assets of the Fund. F-11 NOTE 11--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - -------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------------ 2003 2002 ------------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------------- Sold: Class A 40,892,692 $ 728,901,495 48,969,691 $ 970,494,859 - -------------------------------------------------------------------------------------------------------------------------------- Class B 4,399,643 74,587,779 5,811,283 111,506,491 - -------------------------------------------------------------------------------------------------------------------------------- Class C 1,764,643 29,858,199 2,391,741 46,150,281 - -------------------------------------------------------------------------------------------------------------------------------- Class R* 163,302 2,916,332 13,083 204,591 - -------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,117,656 21,391,286 6,254,346 139,801,926 ================================================================================================================================ Automatic conversion of Class B shares to Class A shares: Class A 325,830 5,894,532 223,534 4,426,684 - -------------------------------------------------------------------------------------------------------------------------------- Class B (344,006) (5,894,532) (234,440) (4,426,684) ================================================================================================================================ Reacquired: Class A (104,213,879) (1,847,078,262) (147,108,087) (2,880,607,085) - -------------------------------------------------------------------------------------------------------------------------------- Class B (6,899,964) (115,360,153) (10,685,339) (196,665,970) - -------------------------------------------------------------------------------------------------------------------------------- Class C (3,090,330) (51,949,282) (4,824,172) (90,453,478) - -------------------------------------------------------------------------------------------------------------------------------- Class R* (37,857) (681,058) (5) (91) - -------------------------------------------------------------------------------------------------------------------------------- Institutional Class (833,861) (15,958,278) (6,757,582) (150,045,566) ================================================================================================================================ (66,756,131) $(1,173,371,942) (105,945,947) $(2,049,614,042) ________________________________________________________________________________________________________________________________ ================================================================================================================================
* Class R shares commenced sales on June 3, 2002. NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A -------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.20 $ 19.72 $ 43.50 $ 34.65 $ 26.37 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.12)(a) (0.15)(a) (0.12) (0.26) (0.17) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.53 (2.37) (16.24) 12.39 9.18 ================================================================================================================================= Total from investment operations 3.41 (2.52) (16.36) 12.13 9.01 ================================================================================================================================= Less distributions from net realized gains -- -- (7.42) (3.28) (0.73) ================================================================================================================================= Net asset value, end of period $ 20.61 $ 17.20 $ 19.72 $ 43.50 $ 34.65 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 19.83% (12.78)% (43.10)% 36.56% 34.81% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $6,825,023 $6,780,055 $9,703,277 $19,268,977 $14,292,905 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers 1.29%(c) 1.26% 1.14% 1.08% 1.10% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 1.30%(c) 1.27% 1.17% 1.11% 1.12% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.67)%(c) (0.74)% (0.46)% (0.61)% (0.50)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 47% 57% 75% 88% 62% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $6,438,548,158. F-12 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B ------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.36 $ 18.89 $ 42.28 $ 34.00 $ 26.11 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.23)(a) (0.27)(a) (0.28) (0.58)(a) (0.42) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.33 (2.26) (15.69) 12.14 9.04 ================================================================================================================================= Total from investment operations 3.10 (2.53) (15.97) 11.56 8.62 ================================================================================================================================= Less distributions from net realized gains -- -- (7.42) (3.28) (0.73) ================================================================================================================================= Net asset value, end of period $ 19.46 $ 16.36 $ 18.89 $ 42.28 $ 34.00 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 18.95% (13.39)% (43.49)% 35.51% 33.64% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $688,587 $625,294 $818,343 $1,315,524 $589,718 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers 1.99%(c) 1.96% 1.86% 1.85% 1.98% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.00%(c) 1.97% 1.89% 1.88% 2.00% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.44)% (1.17)% (1.38)% (1.38)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 47% 57% 75% 88% 62% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $622,780,089.
CLASS C ----------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.36 $ 18.88 $ 42.27 $ 33.99 $ 26.10 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.23)(a) (0.27)(a) (0.29) (0.59)(a) (0.42) - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.33 (2.25) (15.68) 12.15 9.04 =============================================================================================================================== Total from investment operations 3.10 (2.52) (15.97) 11.56 8.62 =============================================================================================================================== Less distributions from net realized gains -- -- (7.42) (3.28) (0.73) =============================================================================================================================== Net asset value, end of period $ 19.46 $ 16.36 $ 18.88 $ 42.27 $ 33.99 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Total return(b) 18.95% (13.35)% (43.51)% 35.52% 33.65% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $193,585 $184,393 $258,786 $434,544 $161,490 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratio of expenses to average net assets: With fee waivers 1.99%(c) 1.96% 1.86% 1.85% 1.98% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.00%(c) 1.97% 1.89% 1.88% 2.00% =============================================================================================================================== Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.44)% (1.17)% (1.38)% (1.38)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Portfolio turnover rate 47% 57% 75% 88% 62% _______________________________________________________________________________________________________________________________ ===============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $179,208,048. F-13 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R ------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $17.26 $ 19.82 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.16)(a) (0.07)(a) - --------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.53 (2.49) ============================================================================================= Total from investment operations 3.37 (2.56) ============================================================================================= Net asset value, end of period $20.63 $ 17.26 _____________________________________________________________________________________________ ============================================================================================= Total return(b) 19.52% (12.92)% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $2,857 $ 226 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets: With fee waivers 1.49%(c) 1.53%(d) - --------------------------------------------------------------------------------------------- Without fee waivers 1.50%(c) 1.54%(d) ============================================================================================= Ratio of net investment income (loss) to average net assets (0.87)%(c) (1.01)%(d) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(e) 47% 57% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $1,247,495. (d) Annualized. (e) Not annualized for periods less than one year.
INSTITUTIONAL CLASS ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 18.40 $ 21.00 $ 45.55 $ 36.01 $ 27.25 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.06) 0.01 (0.09) (0.01) - ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.80 (2.54) (17.14) 12.91 9.50 ========================================================================================================================= Total from investment operations 3.77 (2.60) (17.13) 12.82 9.49 ========================================================================================================================= Less distributions from net realized gains -- -- (7.42) (3.28) (0.73) ========================================================================================================================= Net asset value, end of period $ 22.17 $ 18.40 $ 21.00 $ 45.55 $ 36.01 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 20.49% (12.38)% (42.80)% 37.14% 35.46% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $154,150 $122,746 $150,609 $288,097 $244,369 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers 0.75%(c) 0.80% 0.65% 0.65% 0.64% - ------------------------------------------------------------------------------------------------------------------------- Without fee waivers 0.76%(c) 0.81% 0.68% 0.68% 0.66% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.13)%(c) (0.28)% 0.03% (0.18)% (0.04)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 47% 57% 75% 88% 62% _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $132,069,108. F-14 NOTE 13--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds--Registered Trademark--, which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-15 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Constellation Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Constellation Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Constellation Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ Ernst & Young LLP December 16, 2003 F-16 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-17 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP A I M Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Capital Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Management, Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund SECTOR EQUITY AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund AIM Real Estate Fund AIM Opportunities III Fund INVESCO Advantage Health Sciences Fund AIM Premier Equity Fund INVESCO Energy Fund AIM Select Equity Fund INVESCO Financial Services Fund AIM Small Cap Equity Fund(2) INVESCO Gold & Precious Metals Fund AIM Small Cap Growth Fund(3) INVESCO Health Sciences Fund AIM Trimark Endeavor Fund INVESCO Leisure Fund AM Trimark Small Companies Fund INVESCO Multi-Sector Fund AIM Weingarten Fund INVESCO Technology Fund INVESCO Core Equity Fund INVESCO Utilities Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com CST-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM DENT DEMOGRAPHIC TRENDS FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM DENT DEMOGRAPHIC TRENDS FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Harry S. Dent's stock market scenario o The unmanaged Russell 3000--Registered presented is as of 10/31/03 and is based for the coming decade, based on Trademark-- Index is an index of common on total net assets. historical data, represents his opinion. stocks that measures performance of the Unforeseen events such as rising largest 3,000 U.S. companies based on o AIM Dent Demographic Trends Fund's inflation, declining productivity, market capitalization. performance figures are historical, and irregular spending and savings patterns, they reflect fund expenses, the and other social, political and economic o The unmanaged Standard & Poor's reinvestment of distributions, and uncertainty could affect corporate Composite Index of 500 Stocks (the S&P changes in net asset value. earnings and the stock market, 500--Registered Trademark--) is an index negatively altering Mr. Dent's view. of common stocks frequently used as a o When sales charges are included in general measure of U.S. stock market performance figures, Class A share o Investing in Small and mid-size performance. performance reflects the maximum 5.50% companies may involve risks not sales charge, and Class B and Class C associated with investing in more o Bloomberg, Inc. is a well-known share performance reflects the established companies. Also, Small independent financial research and applicable contingent deferred sales companies may have business risk, reporting firm. charge (CDSC) for the period involved. significant stock price fluctuations and The CDSC on Class B shares declines from illiquidity. o A direct investment cannot be made in 5% beginning at the time of purchase to an index. Unless otherwise indicated, 0% at the beginning of the seventh year. o The fund's investment return and index results include reinvested The CDSC on Class C shares is 1% for the principal value will fluctuate, so an dividends, and they do not reflect sales first year after purchase. The investor's shares, when redeemed, may be charges or fund expenses. Performance of performance of the fund's share classes worth more or less than their original an index of funds reflects fund will differ due to different sales cost. expenses; performance of a market index charge structures and class expenses. does not. o Industry classifications used in this o Effective 9/30/03, Class B shares are report are generally according to the A description of the policies and not available as an investment for Global Industry Classification Standard, procedures that the fund uses to retirement plans maintained pursuant to which was developed by and is the determine how to vote proxies relating Section 401 of the Internal Revenue exclusive property and a service mark of to portfolio securities is available Code, including 401(k) plans, money Morgan Stanley Capital International without charge, upon request, by calling purchase pension plans and profit Inc. and Standard & Poor's. 800-959-4246, or on the AIM Web site, sharing plans. Plans that have existing AIMinvestments.com. accounts invested in Class B shares o The unmanaged Lipper Multi-Cap Growth continued to be allowed to make Fund Index represents an average of the additional purchases after 9/30/03. performance of the 30 largest multi-capitalization growth funds tracked by Lipper, Inc., an independent mutual fund performance monitor.
===================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to persons who have received a current prospectus of the fund. =====================================================
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--Registered harmful short-term trading. These steps include: Trademark--: o Strengthening daily monitoring of trading activities. [PHOTO OF As you may be aware, there has been a ROBERT H. great deal of media coverage recently o Imposing redemption fees on additional funds we GRAHAM] about the mutual fund industry and believe may be vulnerable to harmful short-term allegations of improper activities by trading activity. ROBERT H. GRAHAM certain individuals and companies. As part of these widespread investigations, o Implementing an enhanced exchange policy (effective on INVESCO Funds Group (IFG), the former or about March 1, 2004) designed to limit exchanges [PHOTO OF adviser to certain INVESCO Funds, was between funds. MARK H. recently named as a defendant in WILLIAMSON] separate civil enforcement actions by o Employing an enhanced fair value pricing policy on the U.S. Securities and Exchange certain foreign securities as well as certain illiquid MARK H. WILLIAMSON Commission (SEC), the Office of the New securities. York Attorney General and the State of Colorado over an issue known as "market timing." A number of None of these tools alone, nor all of them taken private class or derivative actions also were filed in the together, eliminate the possibility of short-term trading wake of the regulators' actions. strategies that may be detrimental to a fund. Moreover, each of these tools involves judgments that are inherently Investors are understandably concerned and frustrated subjective. We have always sought and continue to seek to about these reports, and we would like to take this make these judgments to the best of our abilities and in a opportunity to assure you that, based on an investigation manner that we believe is consistent with the best interests conducted by an outside firm, IFG and its parent company, of our fund shareholders. And we remain committed to being AMVESCAP PLC, believe that these civil actions are without as vigilant as possible in the future to identify and merit. IFG is contesting the charges. address any harmful market timing investors who have the potential to harm our long-term fund shareholders. We encourage you to continue to monitor this situation, particularly as IFG has the opportunity to address the We sincerely hope these developments and the media allegations that have been made. Current information will be coverage surrounding them do not result in you or other posted on our Web site at AIMinvestments.com. We will shareholders losing confidence in AIM or INVESCO Funds. continue to communicate to you on our Web site about our Amidst this storm of controversy in the mutual fund finding, and the actions we are taking to protect and industry, we believe we can find encouragement in the promote the interests of our shareholders. The independent recovering economy and rising equity markets. As we write trustees of the funds are receiving regular reports from this letter, for instance, the S&P 500--Registered their independent counsel and outside counsel hired by Trademark-- Index is up approximately 23% year-to-date. AMVESCAP PLC, the parent of AIM and IFG, to perform an Although past performance is no guarantee of future results, ongoing investigation of market timing. there appear to be indicators that the economy and stock markets are showing signs of welcomed improvement. We A COMPLEX ISSUE encourage you to read the enclosed discussion of your fund's performance during this past reporting period. Market timing is an investment technique not defined in any regulation that involves frequent short-term trading of OUR UNWAVERING COMMITMENT mutual fund shares, sometimes with a goal to exploit inefficiencies in the way mutual funds price their shares. At AIM Investments, we have never wavered in our commitment We recognize that fund management companies have tried to to helping you build solutions for your financial goals. Our deal with this complex issue in various ways and believe company was founded on a core principle of integrity, and we that industry-wide guidance is in order. To that end, we have always worked hard to earn the trust of our welcome SEC Chairman William Donaldson's pledge to adopt new shareholders. We are committed to doing all we can to rules designed to curb market timing abuses. Comprehensive maintain your trust and confidence. rulemaking is necessary and is the best way to establish new industry responsibilities designed to protect shareholders. Thank you for your continued participation in AIM We support practical rule changes and structural Investments. Please call your financial advisor or one of modifications that are fair, enforceable and, most our Client Service representatives at 800-959-4246 if you importantly, beneficial for investors. have any further questions or concerns about your AIM Investments account. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Sincerely, activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE SIGNS OF ECONOMIC RECOVERY 1958, saying that it favored a more BENEFIT FUND expansive monetary policy because the economy had not yet exhibited Signs of a strengthening economy for the fiscal year on March 11, 2003. sustainable growth. By October, the Fed benefited the U.S. stock market and AIM The market rallied for the remainder of reported that the pace of economic Dent Demographic Trends Fund for the the fiscal year. expansion had picked up, consumer fiscal year ended October 31, 2003. For spending generally strengthened, and the fiscal year, the fund's Class A, The start of the market's rally residential real estate was strong--but Class B, and Class C shares returned coincided with the commencement of that commercial real estate was sluggish 29.67%, 28.79%, and 28.79%, Operation Iraqi Freedom on March 19, and that labor markets remained weak. respectively, at net asset value. The 2003. U.S. and allied forces quickly Indeed, the nation's unemployment rate fund outperformed its benchmark index, toppled the regime of Saddam Hussein, was 6.0% at the close of the fiscal the Russell 3000 Index, as well as the and by May 1 President Bush was able to year. S&P 500, often considered representative announce that major combat operations in of the performance of the broad U.S. Iraq had ended. stock market. Those indexes returned ======================================== 23.69% and 20.79%, respectively. The U.S. economy expanded during the Additionally, the fund outperformed the fiscal year. Gross domestic product, the THE FUND OUTPERFORMED Lipper Multi-Cap Growth Fund Index, broadest measure of economic activity, which returned 28.14% for the fiscal grew at an annualized rate of 1.4% in ITS BENCHMARK INDEX, THE year. That index measures the the first quarter of 2003, 3.3% in the performance of mutual funds with second quarter, and 8.2% in the third RUSSELL 3000 INDEX, AS investment strategies similar to that of quarter. Corporate earnings also showed AIM Dent Demographic Trends Fund. signs of strength. According to WELL AS THE S&P 500.... Bloomberg, as of the close of the fiscal MARKET CONDITIONS year, more than 65% of S&P 500 ======================================== corporations that had reported their Signs of a generally improving economy third-quarter 2003 earnings exceeded helped the U.S. stock market rise for analysts' expectations. For the fiscal year: much of the fiscal year ended October 31, 2003. The S&P 500 rose in November For most of the fiscal year, the o All sectors of the S&P 500 2002, but then declined for several Federal Reserve (the Fed) kept the recorded gains. months, reaching a low short-term federal funds rate at 1.25%. On June 25, 2003, it lowered that rate o Information technology, materials, to 1.00%, its lowest level since and utilities were the top-performing sectors in the S&P 500 while telecommunication services, consumer staples, and health care were the weakest-performing sectors. o Small- and mid-cap stocks generally outperformed large-cap stocks.
================================================================================================================================ TOTAL NUMBER OF HOLDINGS* 102 TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* TOTAL NET ASSETS $560.6 million 1. Microsoft Corp. 2.4% 1. Semiconductors 8.6% PORTFOLIO COMPOSITION BY SECTOR* 2. Novellus Systems, Inc. 2.4 2. Communications Equipment 8.2 Information Technology 40.7% 3. Cisco Systems, Inc. 2.2 3. Systems Software 7.0 Consumer Discretionary 18.5 4. Analog Devices, Inc. 2.0 4. Pharmaceuticals 5.3 Health Care 18.2 5. Citigroup Inc. 1.9 5. Investment Banking & Brokerage 3.8 Financials 15.0 6. Amazon.com, Inc. 1.8 6. Health Care Equipment 3.8 All Others 7.6 7. VERITAS Software Corp. 1.8 7. Specialty Stores 3.5 8. Microchip Technology Inc. 1.8 8. Biotechnology 3.5 9. Goldman Sachs Group, Inc. (The) 1.6 9. Computer Storage & Peripherals 3.2 10. Boston Scientific Corp. 1.6 10. Semiconductor Equipment 3.0 * Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ================================================================================================================================
2 YOUR FUND sales rose from $851 million in 2002 to KIRK L. ANDERSON $1.13 billion in 2003, transforming a $10 [PHOTO OF Mr. Anderson is a At the close of the fiscal year, the fund million third-quarter loss in 2002 into a KIRK L. portfolio manager of AIM was overweight consumer discretionary and $52 million third-quarter profit in 2003 ANDERSON] Dent Demographic Trends information technology stocks, and and boosting the company's share price. Fund. He joined AIM in underweight industrials, consumer 1994 and assumed his current position in staples, and financials stocks relative IN CLOSING 2003. Mr. Anderson earned a B.A. in to the Russell 3000 Index. Information political science from Texas A&M technology, consumer discretionary, As the fiscal year ended, there were University and an M.S. in finance from health care, and financials stocks signs that the economy was strengthening; the University of Houston. accounted for the highest percentage of time will tell whether that recovery is the fund's total net assets and sustainable. Regardless, we will continue JAMES G. BIRDSALL contributed most significantly to the to seek out stocks of companies that are [PHOTO OF Mr. Birdsall is a fund's positive performance. likely to benefit from changing JAMES G. portfolio manager of AIM Telecommunications services was the only demographic, economic, and lifestyle BIRDSALL] Dent Demographic Trends sector that negatively affected fund trends in an attempt to achieve the Fund. He has been performance. fund's investment objective. associated with AIM since 1995, and assumed his current position in 1999. Mr. With significant exposure to See important fund and index Birdsall received his B.B.A. with a economically sensitive sectors, the fund disclosures inside front cover. concentration in finance from Stephen F. has been positioned for a recovery in the Austin State University before earning U.S. economy, and remained so at the his M.B.A. with a concentration in close of the fiscal year. As a result, finance and international business from the generally improving economy helped the University of St. Thomas. fund performance during the fiscal year. LANNY H. SACHNOWITZ Stocks that contributed to fund [PHOTO OF Mr. Sachnowitz is the lead performance included Cisco, a worldwide LANNY H. portfolio manager of AIM leader in networking for the Internet, SACHNOWITZ] Dent Demographic Trends and online retailer Amazon.com. In Fund. He joined AIM in August, Cisco reported fiscal 2003 net 1987 as a money market trader and income of $3.6 billion, up sharply from research analyst. He was named to his $1.9 billion for fiscal 2002. By current position in 1991. Mr. Sachnowitz aggressively cutting prices and offering received a B.S. in finance from the customers free shipping, Amazon has University of Southern California and an sharply increased its sales and M.B.A. from the University of Houston. profitability. For the third quarter, Assisted by the Large Cap Growth Team.
FUND VS. INDEX Total returns 10/31/02-10/31/03, excluding sales charges ========================================= [BAR CHART] AIM DENT DEMOGRAPHIC TRENDS FUND CLASS A SHARES 29.67% AIM DENT DEMOGRAPHIC TRENDS FUND CLASS B SHARES 28.79% AIM DENT DEMOGRAPHIC TRENDS FUND CLASS C SHARES 28.79% RUSSELL 3000 INDEX 23.69% Source: Lipper, Inc. ========================================= [GRAPHIC] For More Information Visit AIMinvestments.com 3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 6/7/99-10/31/03
DATE AIM DENT DEMOGRAPHIC AIM DENT DEMOGRAPHIC AIM DENT DEMOGRAPHIC RUSSELL 3000 TRENDS FUND TRENDS FUND TRENDS FUND INDEX CLASS A SHARES CLASS B SHARES CLASS C SHARES 6/7/99 9450 10000 10000 10000 6/30/99 10263 10850 10850 10505 7/31/99 10424 11020 11020 10187 8/31/99 10500 11101 11101 10071 9/30/99 10528 11111 11111 9814 10/31/99 11474 12111 12111 10429 11/30/99 12598 13290 13290 10721 12/31/99 14601 15401 15401 11405 1/31/00 14204 14971 14971 10958 2/29/00 16038 16901 16892 11060 3/31/00 16152 17001 17002 11926 4/30/00 14989 15772 15773 11506 5/31/00 13836 14551 14552 11183 6/30/00 15348 16131 16132 11514 [MOUNTAIN CHART] 7/31/00 15253 16021 16022 11310 8/31/00 16859 17702 17692 12149 9/30/00 15858 16642 16641 11599 10/31/00 14554 15262 15261 11434 11/30/00 11804 12371 12371 10380 12/31/00 12087 12661 12660 10554 1/31/01 12522 13110 13110 10915 2/28/01 9687 10141 10130 9918 3/31/01 8298 8681 8680 9271 4/30/01 9498 9931 9930 10015 5/31/01 9403 9820 9820 10095 6/30/01 9498 9911 9910 9909 7/31/01 8902 9290 9290 9746 8/31/01 8052 8400 8400 9171 9/30/01 6663 6950 6950 8362 10/31/01 7202 7500 7500 8556 11/30/01 8185 8520 8520 9215 12/31/01 8214 8550 8550 9345 1/31/02 8044 8360 8360 9228 2/28/02 7467 7760 7760 9039 3/31/02 8006 8320 8320 9435 4/30/02 7448 7730 7730 8940 5/31/02 7220 7491 7490 8837 6/30/02 6550 6790 6790 8201 7/31/02 5888 6100 6100 7549 8/31/02 5813 6020 6020 7584 9/30/02 5255 5441 5441 6787 10/31/02 5671 5871 5870 7328 11/30/02 6068 6270 6270 7771 12/31/02 5529 5710 5710 7332 1/31/03 5501 5680 5680 7153 2/28/03 5454 5630 5630 7035 3/31/03 5529 5710 5700 7109 4/30/03 5993 6180 6180 7689 5/31/03 6475 6670 6670 8154 6/30/03 6598 6800 6800 8264 7/31/03 6825 7020 7020 8453 8/31/03 7014 7211 7210 8641 9/30/03 6806 7001 7001 8547 10/31/03 7354 7409 7560 9064 Source: Lipper, Inc.
Your fund's total return includes sales charges, expenses and management fees. Your fund's total return includes sales charges, expenses, and management fees. Results for B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the fund at the close of the reporting period and paid the applicable contingent deferred sales charges. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. Russell 3000 Index data from 5/31/99. =================================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS In addition to returns as of the close of Past performance cannot guarantee As of 10/31/03, including sales charges the fiscal year, industry regulations comparable future results. DUE TO require us to provide average annual SIGNIFICANT MARKET VOLATILITY, RESULTS OF CLASS A SHARES total returns (including sales charges) AN INVESTMENT MADE TODAY MAY DIFFER Inception (6/7/99) -6.75% for periods ended 9/30/03, the most SUBSTANTIALLY FROM THE HISTORICAL 1 Year 22.52 recent calendar quarter-end. PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. CLASS B SHARES AVERAGE ANNUAL TOTAL RETURNS Inception (6/7/99) -6.59% As of 9/30/03, including sales charges 1 Year 23.79 CLASS A SHARES CLASS C SHARES Inception (6/7/99) -8.53% Inception (6/7/99) -6.16% 1 Year 22.45 1 Year 27.79 CLASS B SHARES Inception (6/7/99) -8.36% 1 Year 23.68 CLASS C SHARES Inception (6/7/99) -7.93% 1 Year 27.68 ===================================================================================================================================
4 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ------------------------------------------------------------------------ COMMON STOCKS & OTHER EQUITY INTERESTS-94.61% APPAREL RETAIL-2.05% AnnTaylor Stores Corp.(a) 105,000 $ 3,759,000 - ------------------------------------------------------------------------ Gap, Inc. (The) 260,000 4,960,800 - ------------------------------------------------------------------------ Pacific Sunwear of California, Inc.(a) 120,000 2,770,800 ======================================================================== 11,490,600 ======================================================================== APPAREL, ACCESSORIES & LUXURY GOODS-0.95% Coach, Inc.(a) 150,000 5,320,500 ======================================================================== APPLICATION SOFTWARE-1.38% Mercury Interactive Corp.(a) 100,000 4,644,000 - ------------------------------------------------------------------------ PeopleSoft, Inc.(a) 150,000 3,114,000 ======================================================================== 7,758,000 ======================================================================== ASSET MANAGEMENT & CUSTODY BANKS-1.31% Franklin Resources, Inc. 92,000 4,362,640 - ------------------------------------------------------------------------ T. Rowe Price Group Inc. 73,000 3,003,950 ======================================================================== 7,366,590 ======================================================================== BIOTECHNOLOGY-3.48% Amgen Inc.(a) 140,000 8,646,400 - ------------------------------------------------------------------------ Genentech, Inc.(a) 52,300 4,287,031 - ------------------------------------------------------------------------ Gilead Sciences, Inc.(a) 21,400 1,168,012 - ------------------------------------------------------------------------ Invitrogen Corp.(a) 85,000 5,405,150 ======================================================================== 19,506,593 ======================================================================== CASINOS & GAMING-0.82% International Game Technology 140,000 4,585,000 ======================================================================== COMMUNICATIONS EQUIPMENT-8.23% ADTRAN, Inc. 60,000 4,081,800 - ------------------------------------------------------------------------ Cisco Systems, Inc.(a) 600,000 12,588,000 - ------------------------------------------------------------------------ Comverse Technology, Inc.(a) 220,000 3,968,800 - ------------------------------------------------------------------------ Corning Inc.(a) 400,000 4,392,000 - ------------------------------------------------------------------------ Juniper Networks, Inc.(a) 250,000 4,497,500 - ------------------------------------------------------------------------ Motorola, Inc. 345,000 4,667,850 - ------------------------------------------------------------------------ Nortel Networks Corp. (Canada)(a) 850,000 3,782,500 - ------------------------------------------------------------------------ QLogic Corp.(a) 75,000 4,203,750 - ------------------------------------------------------------------------ Research In Motion Ltd. (Canada)(a) 90,000 3,970,800 ======================================================================== 46,153,000 ======================================================================== COMPUTER & ELECTRONICS RETAIL-1.35% Best Buy Co., Inc. 130,000 7,580,300 ========================================================================
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MARKET SHARES VALUE COMPUTER HARDWARE-1.48% Dell Inc.(a) 230,000 $ 8,307,600 ======================================================================== COMPUTER STORAGE & PERIPHERALS-3.17% EMC Corp.(a) 580,000 8,027,200 - ------------------------------------------------------------------------ Network Appliance, Inc.(a) 125,000 3,085,000 - ------------------------------------------------------------------------ SanDisk Corp.(a) 40,000 3,224,000 - ------------------------------------------------------------------------ Seagate Technology (Cayman Islands) 150,000 3,447,000 ======================================================================== 17,783,200 ======================================================================== CONSUMER FINANCE-1.96% American Express Co. 115,000 5,396,950 - ------------------------------------------------------------------------ MBNA Corp. 225,000 5,568,750 ======================================================================== 10,965,700 ======================================================================== DATA PROCESSING & OUTSOURCED SERVICES-2.07% Affiliated Computer Services, Inc.-Class A(a) 60,000 2,935,800 - ------------------------------------------------------------------------ Alliance Data Systems Corp.(a) 150,000 4,167,000 - ------------------------------------------------------------------------ Paychex, Inc. 115,000 4,475,800 ======================================================================== 11,578,600 ======================================================================== DEPARTMENT STORES-0.76% Nordstrom, Inc. 140,000 4,268,600 ======================================================================== DIVERSIFIED BANKS-1.27% Wachovia Corp. 155,000 7,109,850 ======================================================================== DIVERSIFIED CAPITAL MARKETS-1.41% J.P. Morgan Chase & Co. 220,000 7,898,000 ======================================================================== DIVERSIFIED COMMERCIAL SERVICES-0.77% Career Education Corp.(a) 80,000 4,284,000 ======================================================================== DRUG RETAIL-0.50% CVS Corp. 80,000 2,814,400 ======================================================================== ELECTRONIC EQUIPMENT MANUFACTURERS-0.79% Agilent Technologies, Inc.(a) 177,500 4,423,300 ======================================================================== GENERAL MERCHANDISE STORES-0.60% Target Corp. 85,000 3,377,900 ======================================================================== HEALTH CARE DISTRIBUTORS-0.65% Omnicare, Inc. 95,000 3,642,300 ======================================================================== HEALTH CARE EQUIPMENT-3.80% Boston Scientific Corp.(a) 130,000 8,803,600 - ------------------------------------------------------------------------ Guidant Corp. 85,000 4,335,850 - ------------------------------------------------------------------------ Varian Medical Systems, Inc.(a) 56,000 3,580,640 - ------------------------------------------------------------------------
F-1
MARKET SHARES VALUE - ------------------------------------------------------------------------ HEALTH CARE EQUIPMENT-(CONTINUED) Zimmer Holdings, Inc.(a) 72,000 $ 4,594,320 ======================================================================== 21,314,410 ======================================================================== HEALTH CARE SERVICES-1.52% Caremark Rx, Inc.(a) 200,000 5,010,000 - ------------------------------------------------------------------------ DaVita, Inc.(a) 100,000 3,510,000 ======================================================================== 8,520,000 ======================================================================== HEALTH CARE SUPPLIES-1.09% Alcon, Inc. (Switzerland) 60,000 3,306,600 - ------------------------------------------------------------------------ Fisher Scientific International Inc.(a) 70,000 2,817,500 ======================================================================== 6,124,100 ======================================================================== HOME ENTERTAINMENT SOFTWARE-1.40% Electronic Arts Inc.(a) 45,000 4,456,800 - ------------------------------------------------------------------------ Take-Two Interactive Software, Inc.(a) 85,000 3,361,750 ======================================================================== 7,818,550 ======================================================================== HOME IMPROVEMENT RETAIL-1.13% Home Depot, Inc. (The) 170,000 6,301,900 ======================================================================== HOTELS, RESORTS & CRUISE LINES-1.46% Royal Caribbean Cruises Ltd. (Liberia) 100,000 2,971,000 - ------------------------------------------------------------------------ Starwood Hotels & Resorts Worldwide, Inc. 155,000 5,228,150 ======================================================================== 8,199,150 ======================================================================== HOUSEHOLD PRODUCTS-1.05% Procter & Gamble Co. (The) 60,000 5,897,400 ======================================================================== INTERNET RETAIL-2.79% Amazon.com, Inc.(a) 185,000 10,067,700 - ------------------------------------------------------------------------ eBay Inc.(a) 100,000 5,594,000 ======================================================================== 15,661,700 ======================================================================== INTERNET SOFTWARE & SERVICES-1.48% Yahoo! Inc.(a) 190,000 8,303,000 ======================================================================== INVESTMENT BANKING & BROKERAGE-3.84% Charles Schwab Corp. (The) 385,000 5,220,600 - ------------------------------------------------------------------------ Goldman Sachs Group, Inc. (The) 95,000 8,920,500 - ------------------------------------------------------------------------ Merrill Lynch & Co., Inc. 125,000 7,400,000 ======================================================================== 21,541,100 ======================================================================== IT CONSULTING & OTHER SERVICES-0.79% Accenture Ltd.-Class A (Bermuda)(a) 190,000 4,446,000 ======================================================================== MANAGED HEALTH CARE-2.33% Aetna Inc. 50,000 2,870,500 - ------------------------------------------------------------------------ Coventry Health Care, Inc.(a) 56,000 3,066,000 - ------------------------------------------------------------------------
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MARKET SHARES VALUE MANAGED HEALTH CARE-(CONTINUED) PacifiCare Health Systems, Inc.(a) 53,500 $ 3,183,250 - ------------------------------------------------------------------------ UnitedHealth Group Inc. 77,000 3,917,760 ======================================================================== 13,037,510 ======================================================================== MOTORCYCLE MANUFACTURERS-0.51% Harley-Davidson, Inc. 60,000 2,844,600 ======================================================================== MOVIES & ENTERTAINMENT-1.08% Viacom Inc.-Class B 152,000 6,060,240 ======================================================================== MULTI-LINE INSURANCE-1.49% Hartford Financial Services Group, Inc. (The) 75,000 4,117,500 - ------------------------------------------------------------------------ HCC Insurance Holdings, Inc. 145,000 4,225,300 ======================================================================== 8,342,800 ======================================================================== OFFICE ELECTRONICS-0.57% Zebra Technologies Corp.-Class A(a) 56,000 3,189,200 ======================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-1.86% Citigroup Inc. 220,000 10,428,000 ======================================================================== PHARMACEUTICALS-5.28% Lilly (Eli) & Co. 55,000 3,664,100 - ------------------------------------------------------------------------ Pfizer Inc. 135,000 4,266,000 - ------------------------------------------------------------------------ Pharmaceutical Resources, Inc.(a) 60,000 4,336,800 - ------------------------------------------------------------------------ Taro Pharmaceutical Industries Ltd. (Israel)(a) 71,000 4,561,750 - ------------------------------------------------------------------------ Teva Pharmaceutical Industries Ltd.-ADR (Israel) 115,000 6,542,350 - ------------------------------------------------------------------------ Watson Pharmaceuticals, Inc.(a) 29,500 1,158,465 - ------------------------------------------------------------------------ Wyeth 115,000 5,076,100 ======================================================================== 29,605,565 ======================================================================== PUBLISHING-0.92% Getty Images, Inc.(a) 115,000 5,140,500 ======================================================================== RESTAURANTS-0.56% Starbucks Corp.(a) 100,000 3,160,000 ======================================================================== SEMICONDUCTOR EQUIPMENT-2.98% Entegris Inc.(a) 250,000 3,290,000 - ------------------------------------------------------------------------ Novellus Systems, Inc.(a) 325,000 13,419,250 ======================================================================== 16,709,250 ======================================================================== SEMICONDUCTORS-8.57% Analog Devices, Inc.(a) 250,000 11,082,500 - ------------------------------------------------------------------------ Linear Technology Corp. 100,000 4,261,000 - ------------------------------------------------------------------------ Marvell Technology Group Ltd. (Bermuda)(a) 100,000 4,387,000 - ------------------------------------------------------------------------ Microchip Technology Inc. 300,000 9,813,000 - ------------------------------------------------------------------------ PMC-Sierra, Inc.(a) 200,000 3,634,000 - ------------------------------------------------------------------------ Taiwan Semiconductor Manufacturing Co. Ltd.-ADR (Taiwan) 600,000 6,636,000 - ------------------------------------------------------------------------ Texas Instruments Inc. 285,000 8,242,200 ======================================================================== 48,055,700 ========================================================================
F-2
MARKET SHARES VALUE - ------------------------------------------------------------------------ SPECIALTY STORES-3.52% Advance Auto Parts, Inc.(a) 56,000 $ 4,380,320 - ------------------------------------------------------------------------ Staples, Inc.(a) 160,000 4,291,200 - ------------------------------------------------------------------------ Tiffany & Co. 125,000 5,931,250 - ------------------------------------------------------------------------ Williams-Sonoma, Inc.(a) 145,000 5,122,850 ======================================================================== 19,725,620 ======================================================================== SYSTEMS SOFTWARE-7.03% Computer Associates International, Inc. 300,000 7,056,000 - ------------------------------------------------------------------------ Microsoft Corp. 520,000 13,598,000 - ------------------------------------------------------------------------ Oracle Corp.(a) 335,000 4,006,600 - ------------------------------------------------------------------------ Symantec Corp.(a) 71,000 4,732,150 - ------------------------------------------------------------------------ VERITAS Software Corp.(a) 277,500 10,031,625 ======================================================================== 39,424,375 ======================================================================== TECHNOLOGY DISTRIBUTORS-0.75% CDW Corp. 70,000 4,203,500 ======================================================================== THRIFTS & MORTGAGE FINANCE-1.81% Doral Financial Corp. (Puerto Rico) 90,000 4,545,000 - ------------------------------------------------------------------------ New York Community Bancorp, Inc. 155,000 5,611,000 ======================================================================== 10,156,000 ======================================================================== Total Common Stocks & Other Equity Interests (Cost $412,171,027) 530,424,203 ========================================================================
MARKET SHARES VALUE - ------------------------------------------------------------------------ MONEY MARKET FUNDS-5.06% STIC Liquid Assets Portfolio(b) 14,188,517 $ 14,188,517 - ------------------------------------------------------------------------ STIC Prime Portfolio(b) 14,188,517 14,188,517 ======================================================================== Total Money Market Funds (Cost $28,377,034) 28,377,034 ======================================================================== TOTAL INVESTMENTS-99.67% (excluding investments purchased with cash collateral from securities loaned) (Cost $440,548,061) 558,801,237 ======================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-2.46% STIC Liquid Assets Portfolio(b)(c) 13,760,300 13,760,300 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $13,760,300) 13,760,300 ======================================================================== TOTAL INVESTMENTS-102.13% (Cost $454,308,361) 572,561,537 ======================================================================== OTHER ASSETS LESS LIABILITIES-(2.13%) (11,928,896) ======================================================================== NET ASSETS-100.00% $560,632,641 ________________________________________________________________________ ========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $412,171,027)* $ 530,424,203 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $42,137,334) 42,137,334 - ------------------------------------------------------------ Receivables for: Investments sold 19,168,632 - ------------------------------------------------------------ Fund shares sold 285,653 - ------------------------------------------------------------ Dividends 298,613 - ------------------------------------------------------------ Investment for deferred compensation plan 29,558 - ------------------------------------------------------------ Other assets 21,033 ============================================================ Total assets 592,365,026 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 15,932,154 - ------------------------------------------------------------ Fund shares reacquired 960,889 - ------------------------------------------------------------ Deferred compensation plan 29,558 - ------------------------------------------------------------ Collateral upon return of securities loaned 13,760,300 - ------------------------------------------------------------ Amount due custodian bank 22,182 - ------------------------------------------------------------ Accrued distribution fees 352,160 - ------------------------------------------------------------ Accrued trustees' fees 18,790 - ------------------------------------------------------------ Accrued transfer agent fees 419,406 - ------------------------------------------------------------ Accrued operating expenses 236,946 ============================================================ Total liabilities 31,732,385 ============================================================ Net assets applicable to shares outstanding $ 560,632,641 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $1,332,848,413 - ------------------------------------------------------------ Undistributed net investment income (loss) (47,845) - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities, foreign currencies and option contracts (890,421,103) - ------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies and option contracts 118,253,176 ============================================================ $ 560,632,641 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 212,862,734 ____________________________________________________________ ============================================================ Class B $ 251,650,060 ____________________________________________________________ ============================================================ Class C $ 96,119,847 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 27,345,132 ____________________________________________________________ ============================================================ Class B 33,275,069 ____________________________________________________________ ============================================================ Class C 12,711,437 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 7.78 - ------------------------------------------------------------ Offering price per share: (Net asset value of $7.78 divided by 94.50%) $ 8.23 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 7.56 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 7.56 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $13,346,326 were on loan to brokers. See Notes to Financial Statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $43,299) $ 3,368,071 - -------------------------------------------------------------------------- Dividends from affiliated money market funds 203,943 - -------------------------------------------------------------------------- Interest 12,466 - -------------------------------------------------------------------------- Securities lending 15,476 ========================================================================== Total investment income 3,599,956 ========================================================================== EXPENSES: Advisory fees 4,249,017 - -------------------------------------------------------------------------- Administrative services fees 132,438 - -------------------------------------------------------------------------- Custodian fees 77,399 - -------------------------------------------------------------------------- Distribution fees: Class A 660,338 - -------------------------------------------------------------------------- Class B 2,241,790 - -------------------------------------------------------------------------- Class C 870,372 - -------------------------------------------------------------------------- Transfer agent fees 3,452,061 - -------------------------------------------------------------------------- Trustees' fees 17,458 - -------------------------------------------------------------------------- Other 432,312 ========================================================================== Total expenses 12,133,185 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangements (73,913) ========================================================================== Net expenses 12,059,272 ========================================================================== Net investment income (loss) (8,459,316) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities 13,284,983 - -------------------------------------------------------------------------- Foreign currencies (896) - -------------------------------------------------------------------------- Option contracts written (384,883) ========================================================================== 12,899,204 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 124,404,259 - -------------------------------------------------------------------------- Foreign currencies 18,842 - -------------------------------------------------------------------------- Option contracts written (8,273) ========================================================================== 124,414,828 ========================================================================== Net gain from investment securities, foreign currencies and option contracts 137,314,032 ========================================================================== Net increase in net assets resulting from operations $128,854,716 __________________________________________________________________________ ==========================================================================
See Notes to Financial Statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (8,459,316) $ (12,825,259) - ------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities, foreign currencies, futures contracts and option contracts 12,899,204 (202,713,132) - ------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities, foreign currencies and option contracts 124,414,828 63,144,429 =========================================================================================== Net increase (decrease) in net assets resulting from operations 128,854,716 (152,393,962) =========================================================================================== Share transactions-net: Class A (26,713,489) (64,886,914) - ------------------------------------------------------------------------------------------- Class B (29,364,137) (75,460,458) - ------------------------------------------------------------------------------------------- Class C (14,000,141) (35,199,684) =========================================================================================== Net increase (decrease) in net assets resulting from share transactions (70,077,767) (175,547,056) =========================================================================================== Net increase (decrease) in net assets 58,776,949 (327,941,018) =========================================================================================== NET ASSETS: Beginning of year 501,855,692 829,796,710 =========================================================================================== End of year (including undistributed net investment income (loss) of $(47,845) and $(36,813) for 2003 and 2002, respectively) $560,632,641 $ 501,855,692 ___________________________________________________________________________________________ ===========================================================================================
See Notes to Financial Statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Dent Demographic Trends Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded fund and ADR's, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are F-7 translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold. I. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin. J. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). H.S. Dent Advisors, Inc. ("H.S. Dent") is the Fund's sub-advisor. Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $2 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets exceeding $2 billion. Under the terms of a sub-advisory agreement between AIM and H.S. Dent, AIM pays H.S. Dent at the annual rate of 0.13% of the first $1 billion of the Fund's average daily net assets, plus 0.10% of the next $1 billion of the Fund's average daily net assets, plus 0.07% of the Fund's average daily net assets exceeding $2 billion. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit total annual operating expenses of Class A shares to 2.00%. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $3,998. Under a prior agreement to limit the F-8 aggregate costs of certain shareholder services provided by third party administrators, AIM reimbursed fees of $58,910 for Class A, Class B and Class C shares based on the relative net assets of those classes. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $132,438 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $1,925,638 for such services. The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $660,338, $2,241,790 and $870,372, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $76,461 in front-end sales commissions from the sale of Class A shares and $0, $38 and $4,191 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $11,005 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $11,005. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $3,042 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. F-9 NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $13,346,326 were on loan to brokers. The loans were secured by cash collateral of $13,760,300 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $15,476 for securities lending. NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD - ------------------------------------------------------------ CALL OPTION CONTRACTS ------------------------ NUMBER OF PREMIUMS CONTRACTS RECEIVED Beginning of year 275 $ 69,460 - ------------------------------------------------------------ Written 18,016 2,584,777 - ------------------------------------------------------------ Closed (17,851) (2,604,959) - ------------------------------------------------------------ Expired (440) (49,278) ============================================================ End of year -- $ -- ____________________________________________________________ ============================================================
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: - ------------------------------ There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: - ----------------------------- As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 115,181,534 - ------------------------------------------------------------ Temporary book/tax differences (47,845) - ------------------------------------------------------------ Capital loss carryforward (887,349,461) - ------------------------------------------------------------ Shares of beneficial interest 1,332,848,413 ============================================================ Total net assets $ 560,632,641 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales and the tax deferral for tax purposes on certain straddle transactions. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ---------------------------------------------------------- October 31, 2007 $ 3,389,675 - ---------------------------------------------------------- October 31, 2008 144,576,334 - ---------------------------------------------------------- October 31, 2009 541,794,870 - ---------------------------------------------------------- October 31, 2010 195,681,695 - ---------------------------------------------------------- October 31, 2011 1,906,887 ========================================================== Total capital loss carryforward $887,349,461 __________________________________________________________ ==========================================================
NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $735,016,461 and $824,749,316, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ----------------------------------------------------------- Aggregate unrealized appreciation of investment securities $118,030,322 - ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,848,788) =========================================================== Net unrealized appreciation of investment securities $115,181,534 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $457,380,003.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES As a result of differing book/tax treatment of foreign currency transactions and net operating losses on October 31, 2003, undistributed net investment income (loss) was increased by $8,448,284, undistributed net realized gains increased by $895 and shares of beneficial interest decreased by $8,449,179. This reclassification had no effect on net assets of the Fund. F-10 NOTE 11--SHARE INFORMATION The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2003 2002 --------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 3,976,331 $ 26,689,358 5,537,858 $ 43,117,200 - ------------------------------------------------------------------------------------------------------------------------- Class B 3,032,772 19,799,210 3,503,829 26,984,220 - ------------------------------------------------------------------------------------------------------------------------- Class C 1,236,736 8,126,066 1,824,515 14,029,736 ========================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 268,267 1,801,536 214,960 1,628,659 - ------------------------------------------------------------------------------------------------------------------------- Class B (275,388) (1,801,536) (217,773) (1,628,659) ========================================================================================================================= Reacquired: Class A (8,611,375) (55,204,383) (15,019,465) (109,632,773) - ------------------------------------------------------------------------------------------------------------------------- Class B (7,607,073) (47,361,811) (14,137,854) (100,816,019) - ------------------------------------------------------------------------------------------------------------------------- Class C (3,515,974) (22,126,207) (6,815,024) (49,229,420) ========================================================================================================================= (11,495,704) $(70,077,767) (25,108,954) $(175,547,056) _________________________________________________________________________________________________________________________ =========================================================================================================================
NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A -------------------------------------------------------------------- JUNE 7, 1999 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ------------------------------------------------ OCTOBER 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 6.00 $ 7.62 $ 15.40 $ 12.14 $ 10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.09) (0.12) (0.12) (0.11) (0.03) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.87 (1.50) (7.66) 3.37 2.17 ================================================================================================================================= Total from investment operations 1.78 (1.62) (7.78) 3.26 2.14 ================================================================================================================================= Net asset value, end of period $ 7.78 $ 6.00 $ 7.62 $ 15.40 $ 12.14 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(a) 29.67% (21.26)% (50.52)% 26.85% 21.40% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $212,863 $190,253 $312,377 $666,929 $163,872 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.01%(b)(c) 1.87% 1.64% 1.50% 1.60%(b)(d) ================================================================================================================================= Ratio of net investment income (loss) to average net assets (1.29)%(c) (1.31)% (1.04)% (0.93)% (1.00)%(d) _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate(e) 152% 189% 143% 90% 29% _________________________________________________________________________________________________________________________________ =================================================================================================================================
()(a)Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. ()(b)After fee waivers and reimbursements. Ratio of expenses to average net assets prior to the fee waivers for 2003 and 1999 was 2.02% and 1.65% (annualized), respectively. ()(c)Ratios are based on average daily net assets of $188,668,082. ()(d)Annualized. ()(e)Not annualized for periods less than one year. F-11 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B -------------------------------------------------------------------- JUNE 7, 1999 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ------------------------------------------------ OCTOBER 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.13) (0.17) (0.18) (0.18) (0.04) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.82 (1.46) (7.58) 3.33 2.15 ================================================================================================================================= Total from investment operations 1.69 (1.63) (7.76) 3.15 2.11 ================================================================================================================================= Net asset value, end of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(a) 28.79% (21.73)% (50.85)% 26.01% 21.10% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $251,650 $223,666 $367,494 $748,480 $177,430 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.66%(b)(c) 2.53% 2.32% 2.17% 2.24%(b)(d) ================================================================================================================================= Ratio of net investment income (loss) to average net assets (1.94)%(c) (1.97)% (1.72)% (1.60)% (1.64)%(d) _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate(e) 152% 189% 143% 90% 29% _________________________________________________________________________________________________________________________________ =================================================================================================================================
()(a)Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. ()(b)After fee waivers and reimbursements. Ratio of expenses to average net assets prior to the fee waivers for 2003 and 1999 was 2.67% and 2.29% (annualized), respectively. ()(c)Ratios are based on average daily net assets of $224,179,024. ()(d)Annualized. ()(e)Not annualized for periods less than one year.
CLASS C ---------------------------------------------------------------------- JUNE 7, 1999 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ------------------------------------------------ OCTOBER 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.87 $ 7.50 $ 15.26 $ 12.11 $ 10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.13) (0.17) (0.19) (0.17) (0.04) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.82 (1.46) (7.57) 3.32 2.15 ================================================================================================================================= Total from investment operations 1.69 (1.63) (7.76) 3.15 2.11 ================================================================================================================================= Net asset value, end of period $ 7.56 $ 5.87 $ 7.50 $ 15.26 $ 12.11 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(a) 28.79% (21.73)% (50.85)% 26.01% 21.10% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $96,120 $87,938 $149,925 $309,821 $51,605 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.66%(b)(c) 2.53% 2.32% 2.17% 2.24%(b)(d) ================================================================================================================================= Ratio of net investment income (loss) to average net assets (1.94)%(c) (1.97)% (1.72)% (1.60)% (1.64)%(d) _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate(e) 152% 189% 143% 90% 29% _________________________________________________________________________________________________________________________________ =================================================================================================================================
()(a)Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. ()(b)After fee waivers and reimbursements. Ratio of expenses to average net assets prior to the fee waivers for 2003 and 1999 was 2.67% and 2.29% (annualized), respectively. ()(c)Ratios are based on average daily net assets of $87,037,243. ()(d)Annualized. ()(e)Not annualized for periods less than one year. NOTE 13--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. F-12 NOTE 13--SUBSEQUENT EVENTS (CONTINUED) Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-13 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Dent Demographics Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Dent Demographics Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Dent Demographics Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ Ernst & Young LLP December 16, 2003 F-14 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-15 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS ________________________________________________________________________________________________________________ ================================================================================================================ Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES ________________________________________________________________________________________________________________ ================================================================================================================ Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS ________________________________________________________________________________ ================================================================================ Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - -------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - -------------------------------------------------------------------------------- INDEPENDENT TRUSTEES ________________________________________________________________________________ ================================================================================ Bob R. Baker(3) -- 1936 None Trustee - -------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - -------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - -------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - -------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - -------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - -------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - --------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS ___________________________________________________________________________________________________________________ =================================================================================================================== Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - -------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - -------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - -------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - -------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - -------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - -------------------------------------------------------------------------------- OTHER OFFICERS ________________________________________________________________________________ ================================================================================ - -------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - -------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - -------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - -------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - -------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - -------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - --------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP H.S. Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Dent Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Advisors, Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 Inc. 6515 Gwin Road Oakland, CA 94611 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com DDT-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - -------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM EMERGING GROWTH FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM EMERGING GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o The fund's investment return and o The unmanaged Russell 2500--Registered presented is as of 10/31/03 and is based principal value will fluctuate, so an Trademark-- Index measures the performance on total net assets. investor's shares, when redeemed, may be of the 2,500 smallest companies in the worth more or less than their original Russell 3000 --Registered Trademark-- o AIM Emerging Growth Fund's performance cost. Index, which measures the performance of figures are historical, and they reflect the 3,000 largest companies based on fund expenses, the reinvestment of o Industry classifications used in this market capitalization; the Growth subset distributions, and changes in net asset report are generally according to the measures the performance of Russell 2500 value. Global Industry Classification Standard, companies with higher price/book ratios which was developed by and is the and higher forecasted growth values. o When sales charges are included in exclusive property and a service mark of performance figures, Class A share Morgan Stanley Capital International Inc. o The unmanaged Standard & Poor's performance reflects the maximum 5.50% and Standard & Poor's. Composite Index of 500 Stocks (the S&P sales charge, and Class B and Class C 500--Registered Trademark--) is an index share performance reflects the applicable o The fund may participate in the initial of common stocks frequently used as a contingent deferred sales charge (CDSC) public offering (IPO) market in some general measure of U.S. stock market for the period involved. The CDSC on market cycles. Because of the fund's performance. Class B shares declines from 5% beginning small asset base, any investment the fund at the time of purchase to 0% at the may make in IPOs may significantly affect o Bloomberg, Inc. is a well-known beginning of the seventh year. The CDSC the fund's total return. As the fund's independent financial research and on Class C shares is 1% for the first assets grow, the impact of IPO reporting firm. year after purchase. The performance of investments will decline, which may the fund's share classes will differ due reduce the effect of IPO investments on o A direct investment cannot be made in to different sales charge structures and the fund's total return. an index. Unless otherwise indicated, class expenses. index results include reinvested o Investing in small and mid-size dividends, and they do not reflect sales o Effective 9/30/03, Class B shares are companies may involve risks not charges or fund expenses. not available as an investment for associated with investing in more retirement plans maintained pursuant to established companies. Also, small A description of the policies and Section 401 of the Internal Revenue Code, companies may have business risk, procedures that the fund uses to including 401(k) plans, money purchase significant stock price fluctuations and determine how to vote proxies relating to pension plans and profit sharing plans. illiquidity. portfolio securities is available without Plans that have existing accounts charge, upon request, by calling invested in Class B shares will continue 800-959-4246, or on the AIM Web site, to be allowed to make additional purchases. AIMinvestments.com.
===================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or ===================================================== to persons who have received a current prospectus of AIMinvestments.com the fund.
TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--Registered harmful short-term trading. These steps include: Trademark--: o Strengthening daily monitoring of trading activities. As you may be aware, there has been a [PHOTO OF great deal of media coverage recently o Imposing redemption fees on additional funds we believe ROBERT H. about the mutual fund industry and may be vulnerable to harmful short-term trading activity. GRAHAM] allegations of improper activities by certain individuals and companies. As o Implementing an enhanced exchange policy (effective on ROBERT H. GRAHAM part of these widespread investigations, or about March 1, 2004) designed to limit exchanges INVESCO Funds Group (IFG), the former between funds. [PHOTO OF adviser to certain INVESCO Funds, was MARK H. recently named as a defendant in o Employing an enhanced fair value pricing policy on WILLIAMSON] separate civil enforcement actions by certain foreign securities as well as certain illiquid the U.S. Securities and Exchange securities. MARK H. WILLIAMSON Commission (SEC), the Office of the New York Attorney General and the State of None of these tools alone, nor all of them taken together, Colorado over an issue known as "market timing." A number of eliminate the possibility of short-term trading strategies private class or derivative actions also were filed in the that may be detrimental to a fund. Moreover, each of these wake of the regulators' actions. tools involves judgments that are inherently subjective. We have always sought and continue to seek to make these Investors are understandably concerned and frustrated judgments to the best of our abilities and in a manner that about these reports, and we would like to take this we believe is consistent with the best interests of our fund opportunity to assure you that, based on an investigation shareholders. And we remain committed to being as vigilant conducted by an outside firm, IFG and its parent company, as possible in the future to identify and address any AMVESCAP PLC, believe that these civil actions are without harmful market timing investors who have the potential to merit. IFG is contesting the charges. harm our long-term fund shareholders. We encourage you to continue to monitor this situation, We sincerely hope these developments and the media particularly as IFG has the opportunity to address the coverage surrounding them do not result in you or other allegations that have been made. Current information will be shareholders losing confidence in AIM or INVESCO Funds. posted on our Web site at AIMinvestments.com. We will Amidst this storm of controversy in the mutual fund continue to communicate to you on our Web site about our industry, we believe we can find encouragement in the finding, and the actions we are taking to protect and recovering economy and rising equity markets. As we write promote the interests of our shareholders. The independent this letter, for instance, the S&P 500--Registered trustees of the funds are receiving regular reports from Trademark-- Index is up approximately 23% year-to-date. their independent counsel and outside counsel hired by Although past performance is no guarantee of future results, AMVESCAP PLC, the parent of AIM and IFG, to perform an there appear to be indicators that the economy and stock ongoing investigation of market timing. markets are showing signs of welcomed improvement. We encourage you to read the enclosed discussion of your fund's A COMPLEX ISSUE performance during this past reporting period. Market timing is an investment technique not defined in any OUR UNWAVERING COMMITMENT regulation that involves frequent short-term trading of mutual fund shares, sometimes with a goal to exploit At AIM Investments, we have never wavered in our commitment inefficiencies in the way mutual funds price their shares. to helping you build solutions for your financial goals. Our We recognize that fund management companies have tried to company was founded on a core principle of integrity, and we deal with this complex issue in various ways and believe have always worked hard to earn the trust of our that industry-wide guidance is in order. To that end, we shareholders. We are committed to doing all we can to welcome SEC Chairman William Donaldson's pledge to adopt new maintain your trust and confidence. rules designed to curb market timing abuses. Comprehensive rulemaking is necessary and is the best way to establish new Thank you for your continued participation in AIM industry responsibilities designed to protect shareholders. Investments. Please call your financial advisor or one of We support practical rule changes and structural our Client Service representatives at 800-959-4246 if you modifications that are fair, enforceable and, most have any further questions or concerns about your AIM importantly, beneficial for investors. Investments account. AIM Investments has policies in place designed to Sincerely, identify, prevent and eliminate harmful trading or other activities deemed to be detrimental to the funds. We have /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON also recently taken additional steps--implemented Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND DELIVERS POSITIVE RETURN consumer spending was generally stronger, although the job market This report covers the fiscal year ended During this rally, the United States remained weak. October 31, 2003. During this period, and its allies took military action your fund recorded positive returns. At against Iraq and ousted the regime of All sectors of the S&P 500 recorded net asset value, Class A shares produced Saddam Hussein. The nation's gross gains for the fiscal year. Information a total return of 48.30% and domestic product, generally considered technology, materials and utilities were outperformed its indexes. the broadest measure of economic the top-performing sectors while activity, expanded at an annualized rate telecommunication services, MARKET CONDITIONS of 3.3% in the second quarter and 8.2% in the third quarter of 2003. As of the ======================================== Amid a backdrop of generally improving close of the fiscal year, 405 companies economic conditions, the S&P 500 Index, in the S&P 500 had reported SMALL- AND MID-CAP frequently cited as a measure of the third-quarter earnings. A total of 65.4% performance of the U.S. stock market in of those companies reported earnings STOCKS GENERALLY general, returned 20.79% for the year that exceeded expectations compared to ended October 31, 2003. The index rose 60.2% for the third quarter of 2002, OUTPERFORMED LARGE-CAP in November 2002, then declined over the according to Bloomberg. The job market next three months, dropping to its remained weak, however, as the nation's STOCKS. lowest level for the fiscal year on unemployment rate stood at 6.0% at the March 11, 2003. The index then rallied, close of the reporting period. ======================================== posting a gain of 32.67% from its low on March 11 through the end of the For most of the fiscal year, the consumer staples and health care were reporting period. Federal Reserve (the Fed) kept the the weakest-performing sectors. short-term federal funds rate at 1.25%. On June 25, 2003, it lowered that rate Small- and mid-cap stocks generally to 1.00%, its lowest level since 1958. outperformed large-cap stocks. While the At the time, the Fed said it favored a performance of large-cap growth and more expansive monetary policy because large-cap value stocks was similar, mid- the economy had not yet exhibited and small-cap growth stocks generally sustainable growth. By October, the Fed outperformed their value counterparts by reported that economic expansion had wider margins. increased and YOUR FUND At the close of the fiscal year, the portfolio's three largest sector weightings were in information technology, consumer discretionary and health care. These also were the sectors
=================================================================================================================================== PORTFOLIO COMPOSITION BY TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* INVESTMENT TYPE 1. Lamar Advertising Co. 2.0% 1. Broadcasting & Cable TV 4.8% TOTAL NUMBER OF HOLDINGS* 124 TOTAL NET ASSETS $150.3 MILLION 2. UTStarcom, Inc. 1.9 2. Oil & Gas Drilling 4.6 3. AGCO Corp. 1.8 3. Pharmaceuticals 4.4 4. AMIS Holdings, Inc. 1.7 4. Communication Equipment 4.0 5. Caremark Rx, Inc. 1.7 5. Data Processing & Outsourced Services 3.6 6. Fiserv Inc. 1.7 6. Packaged Foods 3.1 7. Patterson-UTI Energy Inc. 1.6 7. Oil & Gas Equipment & Services 3.0 8. Nokia Oyj-ADR (Finland) 1.4 8. Biotechnology 3.0 9. Viacom Inc.-Class B 1.3 9. Semiconductor Equipment 3.0 10. Pfizer Inc. 1.3 10. Advertising 2.6 * Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ===================================================================================================================================
2 that contributed the most to fund A stock that enhanced performance was KARL FARMER performance while those that contributed UTStarcom, a producer of [PHOTO OF Mr. Farmer is a Chartered the least were utilities, telecommunications equipment. In KARL Financial Analyst. Prior telecommunications services and October, UTStarcom reported its 15th FARMER] to joining AIM in July of materials. Because health care was the consecutive quarter of record earnings. 1998, Mr. Farmer spent fund's third-largest sector weighting, six years as a pension actuary with its contribution to fund performance was Detracting from fund performance was William M. Mercer, Inc., focusing on greater than certain other HCA, a hospital operator whose stock retirement plans and other benefit better-performing sectors, such as declined sharply in March and April. The programs. He earned a B.S. in economics energy, which weren't as well fund no longer holds this stock. from Texas A&M University, graduating represented in the portfolio. Although magna cum laude. He subsequently earned materials was one of the IN CLOSING his M.B.A. in finance from The Wharton better-performing sectors, the portfolio School at the University of had relatively little exposure to this We continue to work diligently to meet Pennsylvania. sector, so its impact on performance was the fund's investment objective of less than other sectors which were growth of capital. Regardless of market JAY K. RUSHIN better represented in the fund. trends, we will adhere to the fund's [PHOTO OF Mr. Rushin is a Chartered strategy as outlined in its prospectus, JAY K. Financial Analyst. Mr. In response to improving economic continuing to focus on the stocks of RUSHIN] Rushin began his investment conditions, we increased the number of companies that we believe have favorable career in 1994 when he holdings in the portfolio, concentrating growth prospects. joined AIM as a portfolio administrator. on stocks of more economically sensitive In 1996, he left AIM to work as an companies. History has shown that these associate equity analyst at Prudential stocks tend to perform better in an Securities. He returned to AIM as an improving economic environment. However, See important fund and index equity analyst on AIM's small-cap funds core-growth holdings, the stocks of disclosures inside front cover. in 1998 and was promoted to senior companies with long-term records of analyst in 2000. He assumed his current attractive earnings, continued to be duties as portfolio manager in 2001. A well represented in the portfolio. We native of Gaithersburg, MD, Mr. Rushin took advantage of a market sell-off in holds a B.A. in English from Florida September to buy media, diversified State University. financial services and semiconductor stocks, which were favorably priced. We Assisted by Mid-Cap Growth Team purchased these stocks on the belief they could perform well in an improving economic environment.
======================================== FUND VS. INDEXES Total returns 10/31/02-10/31/03, excluding sales charges ======================================== [BAR CHART] CLASS A SHARES 48.30% CLASS B SHARES 47.41% CLASS C SHARES 47.41% RUSSELL 2500 INDEX 41.69% Source: Lipper, Inc. ======================================== [GRAPHIC] For More Information Visit AIMinvestments.com 3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 3/31/00-10/31/03 [MOUNTAIN CHART]
Date AIM Emerging AIM Emerging AIM Emerging Russell Growth Fund Growth Fund Growth Fund 2500 Class A Shares Class B Shares Class C Shares Index 3/31/00 $ 9450 $10000 $10000 $10000 4/30/00 9119 9650 9640 9462 5/31/00 8089 8550 8550 9008 6/30/00 10413 10999 10990 9600 7/31/00 10168 10730 10729 9356 8/31/00 12265 12950 12940 10161 9/30/00 11293 11910 11899 9831 10/31/00 9932 10470 10459 9561 11/30/00 7636 8051 8050 8719 12/31/00 8121 8554 8553 9470 1/31/01 8537 8985 8984 9782 2/28/01 6790 7146 7145 9152 3/31/01 6145 6462 6462 8650 4/30/01 7058 7419 7407 9414 5/31/01 6998 7345 7344 9697 6/30/01 7435 7808 7796 9834 7/31/01 7077 7430 7418 9483 8/31/01 6264 6568 6567 9172 9/30/01 4675 4908 4896 7985 10/31/01 5419 5675 5674 8398 11/30/01 6045 6337 6325 9077 12/31/01 6472 6778 6767 9586 1/31/02 6184 6473 6462 9467 2/28/02 5419 5675 5674 9301 3/31/02 6015 6284 6284 9944 4/30/02 5757 6011 6010 9919 5/31/02 5677 5937 5926 9628 6/30/02 5102 5328 5317 9086 7/31/02 4397 4582 4582 8001 8/31/02 4238 4424 4424 8026 9/30/02 3851 4014 4014 7390 10/31/02 4090 4256 4256 7631 11/30/02 4507 4687 4687 8254 12/31/02 4278 4445 4445 7880 1/31/03 4318 4487 4487 7671 2/28/03 4199 4361 4351 7486 3/31/03 4288 4456 4445 7558 4/30/03 4596 4771 4760 8231 5/31/03 5013 5202 5202 9041 6/30/03 5211 5402 5401 9214 7/31/03 5519 5728 5717 9709 8/31/03 5837 6043 6043 10158 9/30/03 5738 5937 5938 10020 10/31/03 $ 6067 $ 6094 $ 6273 $10812 Source: Lipper, Inc.
Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. Results for B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the fund at the close of the reporting period and paid the applicable contingent deferred sales charges. ============================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS In addition to returns as of the close Past performance cannot guarantee including sales charges, as of 10/31/03 of the fiscal year, industry regulations comparable future results. DUE TO require us to provide average annual SIGNIFICANT MARKET VOLATILITY, RESULTS CLASS A SHARES total returns as of 9/30/03, the most OF AN INVESTMENT MADE TODAY MAY DIFFER Inception (3/31/00) -13.01% recent calendar quarter-end. SUBSTANTIALLY FROM THE HISTORICAL 1 Year 40.14 PERFORMANCE SHOWN. CALL YOUR FINANCIAL AVERAGE ANNUAL TOTAL RETURNS ADVISOR FOR MORE CURRENT PERFORMANCE. CLASS B SHARES Inception (3/31/00) -12.90% including sales charges, as of 9/30/03, 1 Year 42.41 the most recent calendar quarter-end. CLASS C SHARES CLASS A SHARES Inception (3/31/00) -12.19% Inception (3/31/00) -14.67% 1 Year 46.41 1 Year 40.63 CLASS B SHARES Inception (3/31/00) -14.55% 1 Year 42.91 CLASS C SHARES Inception (3/31/00) -13.84% 1 Year 46.91 ==============================================================================================================================
4 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ----------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-91.12% ADVERTISING-2.55% Lamar Advertising Co.(a) 100,000 $ 3,030,000 - ----------------------------------------------------------------------- Omnicom Group Inc. 10,000 798,000 ======================================================================= 3,828,000 ======================================================================= AEROSPACE & DEFENSE-0.47% L-3 Communications Holdings, Inc.(a) 15,000 701,100 ======================================================================= APPAREL, ACCESSORIES & LUXURY GOODS-0.28% V. F. Corp. 10,000 424,500 ======================================================================= APPLICATION SOFTWARE-1.63% Citrix Systems, Inc.(a) 40,000 1,011,200 - ----------------------------------------------------------------------- Magma Design Automation, Inc.(a) 20,000 484,600 - ----------------------------------------------------------------------- Synopsys, Inc.(a) 30,000 951,600 ======================================================================= 2,447,400 ======================================================================= ASSET MANAGEMENT & CUSTODY BANKS-1.65% Investors Financial Services Corp. 40,000 1,413,200 - ----------------------------------------------------------------------- Janus Capital Group Inc. 75,000 1,060,500 ======================================================================= 2,473,700 ======================================================================= BIOTECHNOLOGY-2.97% Amgen Inc.(a) 12,000 741,120 - ----------------------------------------------------------------------- Angiotech Pharmaceuticals, Inc. (Canada)(a) 20,000 914,600 - ----------------------------------------------------------------------- Gilead Sciences, Inc.(a) 15,000 818,700 - ----------------------------------------------------------------------- ICOS Corp.(a) 9,000 420,480 - ----------------------------------------------------------------------- Myogen, Inc.(a) 42,700 683,200 - ----------------------------------------------------------------------- Serologicals Corp.(a) 55,000 880,000 ======================================================================= 4,458,100 ======================================================================= BROADCASTING & CABLE TV-4.79% Clear Channel Communications, Inc. 45,000 1,836,900 - ----------------------------------------------------------------------- Cox Radio, Inc.-Class A(a) 25,000 553,000 - ----------------------------------------------------------------------- Entravision Communications Corp.-Class A(a) 95,000 909,150 - ----------------------------------------------------------------------- Radio One, Inc.-Class D(a) 30,000 477,000 - ----------------------------------------------------------------------- TiVo Inc.(a) 75,000 601,500 - ----------------------------------------------------------------------- Univision Communications Inc.-Class A(a) 30,000 1,018,500 - ----------------------------------------------------------------------- Westwood One, Inc.(a) 60,000 1,795,800 ======================================================================= 7,191,850 ======================================================================= COMMUNICATIONS EQUIPMENT-3.97% Enterasys Networks, Inc.(a) 125,000 487,500 - -----------------------------------------------------------------------
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MARKET SHARES VALUE COMMUNICATIONS EQUIPMENT-(CONTINUED) McDATA Corp.-Class A(a) 50,000 $ 516,500 - ----------------------------------------------------------------------- Nokia Oyj-ADR (Finland) 125,000 2,123,750 - ----------------------------------------------------------------------- UTStarcom, Inc.(a) 90,000 2,835,000 ======================================================================= 5,962,750 ======================================================================= COMPUTER STORAGE & PERIPHERALS-1.70% Applied Films Corp.(a) 30,000 940,500 - ----------------------------------------------------------------------- Dot Hill Systems Corp.(a) 35,000 469,350 - ----------------------------------------------------------------------- Seagate Technology (Cayman Islands) 50,000 1,149,000 ======================================================================= 2,558,850 ======================================================================= CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-1.80% AGCO Corp.(a) 150,000 2,700,000 ======================================================================= CONSUMER FINANCE-1.74% First Marblehead Corp. (The)(a) 40,000 886,000 - ----------------------------------------------------------------------- MBNA Corp. 70,000 1,732,500 ======================================================================= 2,618,500 ======================================================================= DATA PROCESSING & OUTSOURCED SERVICES-3.60% DST Systems, Inc.(a) 40,000 1,512,800 - ----------------------------------------------------------------------- First Data Corp. 40,000 1,428,000 - ----------------------------------------------------------------------- Fiserv, Inc.(a) 70,000 2,472,400 ======================================================================= 5,413,200 ======================================================================= DEPARTMENT STORES-0.93% Kohl's Corp.(a) 25,000 1,401,750 ======================================================================= DIVERSIFIED CHEMICALS-0.64% Olin Corp. 55,000 957,550 ======================================================================= DIVERSIFIED COMMERCIAL SERVICES-1.44% ARAMARK Corp.-Class B(a) 25,000 668,000 - ----------------------------------------------------------------------- ChoicePoint Inc.(a) 20,000 700,800 - ----------------------------------------------------------------------- Exult Inc.(a) 100,000 793,000 ======================================================================= 2,161,800 ======================================================================= DRUG RETAIL-0.46% Walgreen Co. 20,000 696,400 ======================================================================= ENVIRONMENTAL SERVICES-0.81% Waste Connections, Inc.(a) 35,000 1,213,800 ======================================================================= HEALTH CARE DISTRIBUTORS-0.68% AmerisourceBergen Corp. 10,000 567,700 - -----------------------------------------------------------------------
F-1
MARKET SHARES VALUE - ----------------------------------------------------------------------- HEALTH CARE DISTRIBUTORS-(CONTINUED) McKesson Corp. 15,000 $ 454,050 ======================================================================= 1,021,750 ======================================================================= HEALTH CARE EQUIPMENT-0.55% STERIS Corp.(a) 40,000 832,800 ======================================================================= HEALTH CARE FACILITIES-0.26% Triad Hospitals, Inc.(a) 12,500 384,125 ======================================================================= HEALTH CARE SERVICES-2.22% Caremark Rx, Inc.(a) 100,000 2,505,000 - ----------------------------------------------------------------------- Express Scripts, Inc.(a) 15,000 823,800 ======================================================================= 3,328,800 ======================================================================= HEALTH CARE SUPPLIES-0.60% Regeneration Technologies, Inc.(a) 75,000 900,000 ======================================================================= HOTELS, RESORTS & CRUISE LINES-0.50% Intrawest Corp. (Canada) 45,000 756,450 ======================================================================= HOUSEHOLD APPLIANCES-0.69% Black & Decker Corp. (The) 10,000 478,100 - ----------------------------------------------------------------------- Maytag Corp. 22,000 558,800 ======================================================================= 1,036,900 ======================================================================= HOUSEHOLD PRODUCTS-1.06% Colgate-Palmolive Co. 20,000 1,063,800 - ----------------------------------------------------------------------- Kimberly-Clark Corp. 10,000 528,100 ======================================================================= 1,591,900 ======================================================================= HOUSEWARES & SPECIALTIES-1.14% Newell Rubbermaid Inc.(a) 75,000 1,710,000 ======================================================================= INDUSTRIAL GASES-0.45% Airgas, Inc. 35,000 670,250 ======================================================================= INDUSTRIAL MACHINERY-0.96% SPX Corp.(a) 30,000 1,443,600 ======================================================================= INTEGRATED TELECOMMUNICATION SERVICES-1.75% Telefonos de Mexico S.A. de C.V.-Series L-ADR (Mexico) 40,000 1,286,000 - ----------------------------------------------------------------------- Verizon Communications Inc. 40,000 1,344,000 ======================================================================= 2,630,000 ======================================================================= INTERNET RETAIL-1.22% InterActiveCorp.(a) 50,000 1,835,500 ======================================================================= INVESTMENT BANKING & BROKERAGE-2.05% Bear Stearns Cos. Inc. (The) 10,000 762,500 - ----------------------------------------------------------------------- Lehman Brothers Holdings Inc. 20,000 1,440,000 - -----------------------------------------------------------------------
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MARKET SHARES VALUE INVESTMENT BANKING & BROKERAGE-(CONTINUED) SoundView Technology Group, Inc.(a) 75,000 $ 877,500 ======================================================================= 3,080,000 ======================================================================= LEISURE PRODUCTS-0.77% Mattel, Inc. 60,000 1,161,600 ======================================================================= MANAGED HEALTH CARE-1.14% Anthem, Inc.(a) 25,000 1,710,750 ======================================================================= METAL & GLASS CONTAINERS-0.81% Anchor Glass Container Corp.(a) 75,000 1,211,250 ======================================================================= MOVIES & ENTERTAINMENT-2.22% Pixar, Inc.(a) 9,000 619,290 - ----------------------------------------------------------------------- Regal Entertainment Group-Class A 35,000 717,500 - ----------------------------------------------------------------------- Viacom Inc.-Class B 50,000 1,993,500 ======================================================================= 3,330,290 ======================================================================= MULTI-LINE INSURANCE-1.04% American Financial Group, Inc. 70,000 1,558,900 ======================================================================= OFFICE SERVICES & SUPPLIES-0.87% Avery Dennison Corp. 13,000 683,540 - ----------------------------------------------------------------------- IKON Office Solutions, Inc.(a) 75,000 630,000 ======================================================================= 1,313,540 ======================================================================= OIL & GAS DRILLING-4.57% Diamond Offshore Drilling, Inc. 45,000 830,250 - ----------------------------------------------------------------------- ENSCO International Inc. 65,000 1,712,750 - ----------------------------------------------------------------------- Nabors Industries, Ltd. (Bermuda)(a) 50,000 1,890,000 - ----------------------------------------------------------------------- Patterson-UTI Energy, Inc.(a) 85,000 2,430,150 ======================================================================= 6,863,150 ======================================================================= OIL & GAS EQUIPMENT & SERVICES-2.99% BJ Services Co.(a) 15,000 492,150 - ----------------------------------------------------------------------- Cooper Cameron Corp.(a) 40,000 1,712,800 - ----------------------------------------------------------------------- Key Energy Services, Inc.(a) 60,000 523,800 - ----------------------------------------------------------------------- Varco International, Inc.(a) 100,000 1,759,000 ======================================================================= 4,487,750 ======================================================================= OIL & GAS EXPLORATION & PRODUCTION-1.13% Devon Energy Corp. 35,000 1,697,500 ======================================================================= PACKAGED FOODS & MEATS-3.11% General Mills, Inc. 25,000 1,121,250 - ----------------------------------------------------------------------- Hormel Foods Corp. 30,000 740,700 - ----------------------------------------------------------------------- Kraft Foods Inc.-Class A 25,000 727,500 - ----------------------------------------------------------------------- Smithfield Foods, Inc.(a) 50,000 1,063,000 - -----------------------------------------------------------------------
F-2
MARKET SHARES VALUE - ----------------------------------------------------------------------- PACKAGED FOODS & MEATS-(CONTINUED) Unilever PLC-ADR (United Kingdom) 30,000 $ 1,026,000 ======================================================================= 4,678,450 ======================================================================= PAPER PACKAGING-1.48% Bemis Co., Inc. 25,000 1,156,000 - ----------------------------------------------------------------------- Sonoco Products Co. 50,000 1,063,500 ======================================================================= 2,219,500 ======================================================================= PAPER PRODUCTS-0.78% MeadWestvaco Corp. 45,000 1,166,400 ======================================================================= PHARMACEUTICALS-4.35% Abbott Laboratories 30,000 1,278,600 - ----------------------------------------------------------------------- Forest Laboratories, Inc.(a) 30,000 1,500,300 - ----------------------------------------------------------------------- Kos Pharmaceuticals, Inc.(a) 16,000 635,360 - ----------------------------------------------------------------------- Medicines Co. (The)(a) 18,000 479,700 - ----------------------------------------------------------------------- MGI Pharma, Inc.(a) 20,000 751,200 - ----------------------------------------------------------------------- Pfizer Inc. 60,000 1,896,000 ======================================================================= 6,541,160 ======================================================================= PROPERTY & CASUALTY INSURANCE-0.66% Navigators Group, Inc. (The)(a) 31,500 999,180 ======================================================================= PUBLISHING-0.84% Gannett Co., Inc. 15,000 1,261,650 ======================================================================= RAILROADS-1.14% Norfolk Southern Corp. 85,000 1,712,750 ======================================================================= REGIONAL BANKS-0.27% Texas Capital Bancshares, Inc.(a) 30,000 408,000 ======================================================================= REINSURANCE-1.45% Everest Re Group, Ltd. (Bermuda) 10,000 829,500 - ----------------------------------------------------------------------- PartnerRe Ltd. (Bermuda) 25,000 1,356,750 ======================================================================= 2,186,250 ======================================================================= RESTAURANTS-1.85% Brinker International, Inc.(a) 50,000 1,591,500 - ----------------------------------------------------------------------- Darden Restaurants, Inc. 35,000 733,250 - ----------------------------------------------------------------------- Dave & Buster's, Inc.(a) 35,000 460,250 ======================================================================= 2,785,000 ======================================================================= SEMICONDUCTOR EQUIPMENT-2.95% ATMI, Inc.(a) 55,000 1,264,450 - ----------------------------------------------------------------------- Cabot Microelectronics Corp.(a) 20,000 1,140,000 - ----------------------------------------------------------------------- Entegris Inc.(a) 85,000 1,118,600 - ----------------------------------------------------------------------- KLA-Tencor Corp.(a) 16,000 917,280 ======================================================================= 4,440,330 =======================================================================
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MARKET SHARES VALUE SEMICONDUCTORS-2.24% AMIS Holdings, Inc.(a) 125,000 $ 2,518,750 - ----------------------------------------------------------------------- Integrated Silicon Solution, Inc.(a) 30,000 423,600 - ----------------------------------------------------------------------- Skyworks Solutions, Inc.(a) 50,000 429,000 ======================================================================= 3,371,350 ======================================================================= SOFT DRINKS-1.01% Coca-Cola Enterprises Inc. 75,000 1,512,000 ======================================================================= SPECIALTY CHEMICALS-0.44% International Flavors & Fragrances Inc. 20,000 662,000 ======================================================================= SPECIALTY STORES-1.64% Barnes & Noble, Inc.(a) 25,000 745,000 - ----------------------------------------------------------------------- Hollywood Entertainment Corp.(a) 40,000 608,000 - ----------------------------------------------------------------------- Weight Watchers International, Inc.(a) 30,000 1,107,000 ======================================================================= 2,460,000 ======================================================================= STEEL-0.63% Worthington Industries, Inc. 65,000 947,700 ======================================================================= SYSTEMS SOFTWARE-2.24% Microsoft Corp. 60,000 1,569,000 - ----------------------------------------------------------------------- Oracle Corp.(a) 150,000 1,794,000 ======================================================================= 3,363,000 ======================================================================= THRIFTS & MORTGAGE FINANCE-0.64% PMI Group, Inc. (The) 25,000 955,750 ======================================================================= TRUCKING-1.34% Overnite Corp.(a) 40,000 886,400 - ----------------------------------------------------------------------- P.A.M. Transportation Services, Inc.(a) 60,000 1,134,000 ======================================================================= 2,020,400 ======================================================================= WIRELESS TELECOMMUNICATION SERVICES-0.96% America Movil S.A. de C.V.-Series L ADR (Mexico) 35,000 833,000 - ----------------------------------------------------------------------- NII Holdings Inc.-Class B(a) 8,000 616,720 ======================================================================= 1,449,720 ======================================================================= Total Common Stocks & Other Equity Interests (Cost $128,969,032) 136,906,645 ======================================================================= MONEY MARKET FUNDS-6.74% STIC Liquid Assets Portfolio(b) 5,063,454 5,063,454 - ----------------------------------------------------------------------- STIC Prime Portfolio(b) 5,063,454 5,063,454 ======================================================================= Total Money Market Funds (Cost $10,126,908) 10,126,908 ======================================================================= TOTAL INVESTMENTS-97.86% (excluding investments purchased with cash collateral from securities loaned) (Cost $139,095,940) 147,033,553 =======================================================================
F-3
MARKET SHARES VALUE - ----------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-4.90% STIC Liquid Assets Portfolio(b)(c) 7,368,309 $ 7,368,309 ======================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $7,368,309) 7,368,309 ======================================================================= TOTAL INVESTMENTS-102.76% (Cost $146,464,249) 154,401,862 ======================================================================= OTHER ASSETS LESS LIABILITIES-(2.76%) (4,151,359) ======================================================================= NET ASSETS-100.00% $150,250,503 _______________________________________________________________________ =======================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $128,969,032)* $136,906,645 - ----------------------------------------------------------- Investments in affiliated money market funds (cost $17,495,217) 17,495,217 - ----------------------------------------------------------- Receivables for: Investments sold 15,093,298 - ----------------------------------------------------------- Fund shares sold 181,845 - ----------------------------------------------------------- Dividends 59,188 - ----------------------------------------------------------- Investment for deferred compensation plan 16,463 - ----------------------------------------------------------- Other assets 15,810 =========================================================== Total assets 169,768,466 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 11,663,123 - ----------------------------------------------------------- Fund shares reacquired 173,022 - ----------------------------------------------------------- Deferred compensation plan 16,463 - ----------------------------------------------------------- Collateral upon return of securities loaned 7,368,309 - ----------------------------------------------------------- Accrued distribution fees 85,663 - ----------------------------------------------------------- Accrued trustees' fees 3,500 - ----------------------------------------------------------- Accrued transfer agent fees 116,547 - ----------------------------------------------------------- Accrued operating expenses 91,336 =========================================================== Total liabilities 19,517,963 =========================================================== Net assets applicable to shares outstanding $150,250,503 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $289,815,552 - ----------------------------------------------------------- Undistributed net investment income (loss) (20,376) - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and option contracts (147,482,286) - ----------------------------------------------------------- Unrealized appreciation of investment securities 7,937,613 =========================================================== $150,250,503 ___________________________________________________________ =========================================================== NET ASSETS: Class A $ 81,427,790 ___________________________________________________________ =========================================================== Class B $ 48,830,272 ___________________________________________________________ =========================================================== Class C $ 19,992,441 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 13,334,888 ___________________________________________________________ =========================================================== Class B 8,181,661 ___________________________________________________________ =========================================================== Class C 3,351,466 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 6.11 - ----------------------------------------------------------- Offering price per share: (Net asset value of $6.11 divided by 94.50%) $ 6.47 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 5.97 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 5.97 ___________________________________________________________ ===========================================================
* At October 31, 2003, securities with an aggregate market value of $7,182,622 were on loan to brokers. See Notes to Financial Statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $2,381) $ 576,707 - ------------------------------------------------------------------------- Dividends from affiliated money market funds 133,492 - ------------------------------------------------------------------------- Securities lending 23,891 ========================================================================= Total investment income 734,090 ========================================================================= EXPENSES: Advisory fees 1,059,148 - ------------------------------------------------------------------------- Administrative services fees 50,000 - ------------------------------------------------------------------------- Custodian fees 67,088 - ------------------------------------------------------------------------- Distribution fees Class A 227,193 - ------------------------------------------------------------------------- Class B 416,099 - ------------------------------------------------------------------------- Class C 180,834 - ------------------------------------------------------------------------- Transfer agent fees 803,786 - ------------------------------------------------------------------------- Trustees' fees 11,018 - ------------------------------------------------------------------------- Other 157,648 ========================================================================= Total expenses 2,972,814 ========================================================================= Less: Fees waived and expense offset arrangements (4,923) - ------------------------------------------------------------------------- Net expenses 2,967,891 ========================================================================= Net investment income (loss) (2,233,801) ========================================================================= REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND OPTION CONTRACTS: Net realized gain from: Investment securities 28,425,892 - ------------------------------------------------------------------------- Option contracts written 399,032 ========================================================================= 28,824,924 ========================================================================= Change in net unrealized appreciation of investment securities 21,408,256 ========================================================================= Net gain from investment securities and option contracts 50,233,180 ========================================================================= Net increase in net assets resulting from operations $47,999,379 _________________________________________________________________________ =========================================================================
See Notes to Financial Statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ (2,233,801) $ (2,977,371) - ------------------------------------------------------------------------------------------ Net realized gain (loss) from investment securities, foreign currencies and option contracts 28,824,924 (43,488,298) - ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities 21,408,256 7,080,269 ========================================================================================== Net increase (decrease) in net assets resulting from operations 47,999,379 (39,385,400) ========================================================================================== Share transactions-net: Class A 4,435,295 (10,076,931) - ------------------------------------------------------------------------------------------ Class B (3,079,891) (8,139,807) - ------------------------------------------------------------------------------------------ Class C (4,179,924) (2,937,370) ========================================================================================== Net increase (decrease) in net assets resulting from share transactions (2,824,520) (21,154,108) ========================================================================================== Net increase (decrease) in net assets 45,174,859 (60,539,508) ========================================================================================== NET ASSETS: Beginning of year 105,075,644 165,615,152 ========================================================================================== End of year (including undistributed net investment income (loss) of $(20,376) and $(14,890) for 2003 and 2002, respectively.) $150,250,503 $105,075,644 __________________________________________________________________________________________ ==========================================================================================
NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Emerging Growth Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). F-7 Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1 billion of the Fund's average daily net assets plus 0.80% of the Fund's average daily net assets over $1 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding Rule 12b-1 fees, interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expenses due to offset arrangements, if any) for Class A, Class B and Class C shares to the F-8 extent necessary to limit the total annual fund operating expenses of Class A shares to 2.00%. Voluntary fee waivers and/ or reimbursements may be modified or discontinued at any time without further notice to investors. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $2,037. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $50,000 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Service, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $442,346 for such services. The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $227,193, $416,099 and $180,834, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $30,155 in front-end sales commissions for the sale of Class A shares and $15,298, 158 and $2,859 from Class A, Class B and Class C shares, respectively, from CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $2,600 and reductions in custodian fees of $286 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $2,886. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $2,283 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the F-9 custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $7,182,622 were on loan to brokers. The loans were secured by cash collateral of $7,368,309 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $23,891 for securities lending. NOTE 7--CALL OPTION CONTRACTS
CALL OPTION CONTRACTS ---------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED - ------------------------------------------------------------------------------- Beginning of year -- $ -- - ------------------------------------------------------------------------------- Written 9,450 685,246 - ------------------------------------------------------------------------------- Closed (6,950) (502,703) - ------------------------------------------------------------------------------- Exercised (1,073) (84,720) - ------------------------------------------------------------------------------- Expired (1,427) (97,823) =============================================================================== End of year -- $ -- _______________________________________________________________________________ ===============================================================================
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 7,428,287 - ------------------------------------------------------------------------------------------ Temporary book/tax differences (20,376) - ------------------------------------------------------------------------------------------ Capital loss carryforward (146,972,960) - ------------------------------------------------------------------------------------------ Shares of beneficial interest 289,815,552 ========================================================================================== Total net assets $ 150,250,503 __________________________________________________________________________________________ ==========================================================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - -------------------------------------------------------------------------------- October 31, 2009 $101,674,105 - -------------------------------------------------------------------------------- October 31, 2010 45,298,855 ================================================================================ Total capital loss carryforward $146,972,960 ________________________________________________________________________________ ================================================================================
NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $466,748,659 and $471,513,419, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $ 9,060,561 - ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (1,632,274) =============================================================================== Net unrealized appreciation of investment securities $ 7,428,287 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $146,973,575.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of net operating losses, on October 31, 2003, undistributed net investment income was increased by $2,228,315, undistributed net realized gains (losses) remained unchanged and shares of beneficial interest decreased by $2,228,315. This reclassification had no effect on net assets of the Fund. F-10 NOTE 11--SHARE INFORMATION The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ---------------------------------------------------------- 2003 2002 --------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------ Sold: Class A 14,150,001 $ 71,539,332 8,175,825 $ 45,450,141 - ------------------------------------------------------------------------------------------------------------------------ Class B 2,662,059 13,233,376 1,711,610 9,848,093 - ------------------------------------------------------------------------------------------------------------------------ Class C 1,160,403 5,839,097 1,313,206 7,417,468 ======================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 165,304 856,537 -- -- - ------------------------------------------------------------------------------------------------------------------------ Class B (168,817) (856,537) -- -- ======================================================================================================================== Reacquired: Class A (13,569,593) (67,960,574) (10,450,880) (55,527,072) - ------------------------------------------------------------------------------------------------------------------------ Class B (3,214,850) (15,456,730) (3,545,284) (17,987,900) - ------------------------------------------------------------------------------------------------------------------------ Class C (2,057,518) (10,019,021) (1,969,513) (10,354,838) ======================================================================================================================== (873,011) $ (2,824,520) (4,765,036) $(21,154,108) ________________________________________________________________________________________________________________________ ========================================================================================================================
NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ---------------------------------------------------------- MARCH 31,2000 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------- OCTOBER 31, 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 4.12 $ 5.46 $ 10.50 $ 10.00 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.07)(a) (0.08)(a) (0.10) (0.04) - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.06 (1.26) (4.51) 0.54 ======================================================================================================================== Total from investment operations 1.99 (1.34) (4.61) 0.50 ======================================================================================================================== Less distributions from net realized gains -- -- (0.43) -- ======================================================================================================================== Net asset value, end of period $ 6.11 $ 4.12 $ 5.46 $ 10.50 ________________________________________________________________________________________________________________________ ======================================================================================================================== Total return(b) 48.30% (24.54)% (45.37)% 5.00% ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $81,428 $51,822 $81,114 $147,101 ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratio of expenses to average net assets 2.07%(c) 1.89% 1.71%(d) 1.68%(e) ======================================================================================================================== Ratio of net investment income (loss) to average net assets (1.48)%(c) (1.54)% (1.32)% (1.04)%(e) ________________________________________________________________________________________________________________________ ======================================================================================================================== Portfolio turnover rate(f) 414% 407% 242% 111% ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $64,912,379. (d) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 1.83%. (e) Annualized. (f) Not annualized for periods less than one year. F-11 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B ---------------------------------------------------------- MARCH 31,2000 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------- OCTOBER 31, 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 4.05 $ 5.40 $ 10.47 $ 10.00 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.10)(a) (0.12)(a) (0.14) (0.07) - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.02 (1.23) (4.50) 0.54 ======================================================================================================================== Total from investment operations 1.92 (1.35) (4.64) 0.47 ======================================================================================================================== Less distributions from net realized gains -- -- (0.43) -- ________________________________________________________________________________________________________________________ ======================================================================================================================== Net asset value, end of period $ 5.97 $ 4.05 $ 5.40 $ 10.47 ________________________________________________________________________________________________________________________ ======================================================================================================================== Total return(b) 47.41% (25.00)% (45.81)% 4.70% ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $48,830 $36,060 $58,019 $94,740 ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratio of expenses to average net assets 2.72%(c) 2.55% 2.36%(d) 2.37%(e) ======================================================================================================================== Ratio of net investment income (loss) to average net assets (2.13)%(c) (2.19)% (1.98)% (1.73)%(e) ________________________________________________________________________________________________________________________ ======================================================================================================================== Portfolio turnover rate(f) 414% 407% 242% 111% ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $41,609,853 (d) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 2.48%. (e) Annualized. (f) Not annualized for periods less than one year.
CLASS C ---------------------------------------------------------- MARCH 31,2000 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------- OCTOBER 31, 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 4.05 $ 5.40 $ 10.46 $ 10.00 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.10)(a) (0.12)(a) (0.14) (0.07) - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.02 (1.23) (4.49) 0.53 ======================================================================================================================== Total from investment operations 1.92 (1.35) (4.63) 0.46 ======================================================================================================================== Less distributions from net realized gains -- -- (0.43) -- ======================================================================================================================== Net asset value, end of period $ 5.97 $ 4.05 $ 5.40 $ 10.46 ________________________________________________________________________________________________________________________ ======================================================================================================================== Total return(b) 47.41% (25.00)% (45.76)% 4.60% ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $19,992 $17,194 $26,483 $41,361 ________________________________________________________________________________________________________________________ ======================================================================================================================== Ratio of expenses to average net assets 2.72%(c) 2.55% 2.36%(d) 2.37%(e) ======================================================================================================================== Ratio of net investment income (loss) to average net assets (2.13)%(c) (2.19)% (1.98)% (1.73)%(e) ________________________________________________________________________________________________________________________ ======================================================================================================================== Portfolio turnover rate(f) 414% 407% 242% 111% ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $18,083,423 (d) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 2.48%. (e) Annualized. (f) Not annualized for periods less than one year. F-12 NOTE 13--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-13 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Emerging Growth Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Emerging Growth Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Emerging Growth Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 F-14 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-15 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com EMG-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - --------------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash AIM INVESTMENT LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM LARGE CAP GROWTH FUND Annual Report to Shareholders o October 31, 2003 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- ================================================================================ AIM LARGE CAP GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information IPO investments on the fund's o The unmanaged Lipper Large-Cap Growth presented is as of 10/31/03 and is based performance, please see the fund's Fund Index represents an average of the on total net assets. prospectus. performance of the 30 largest large-capitalization growth funds o AIM Large Cap Growth Fund's performance o Class R shares are available only to tracked by Lipper, Inc., an independent figures are historical, and they reflect certain retirement plans. Please see the mutual fund performance monitor. fund expenses, the reinvestment of prospectus for more information. Class R distributions, and changes in net asset shares are sold at net asset value, that o A direct investment cannot be made in value. is, without up-front sales charges. an index. Unless otherwise indicated, index results include reinvested o When sales charges are included in o Investor Class shares are closed to dividends, and they do not reflect sales performance figures, Class A share most investors. For more information on charges. Performance of an index of performance reflects the maximum 5.50% who may continue to invest in the funds reflects fund expenses; sales charge, and Class B and Class C Investor Class shares, please see the performance of a market index does not. share performance reflects the applicable appropriate prospectus. contingent deferred sales charge (CDSC) A description of the policies and for the period involved. The CDSC on o The fund's investment return and procedures that the fund uses to Class B shares declines from 5% principal value will fluctuate, so an determine how to vote proxies relating beginning at the time of purchase to 0% investor's shares, when redeemed, may be to portfolio securities is available at the beginning of the seventh year. worth more or less than their original without charge, upon request, by calling The CDSC on Class C shares is 1% for the cost. 800-959-4246, or on the AIM Web site, first year after purchase. The AIMinvestments.com. performance of the fund's share classes o Industry classifications used in this will differ due to different sales report are generally according to the charge structures and class expenses. Global Industry Classification Standard, which was developed by and is the o Effective 9/30/03, Class B shares are exclusive property and a service mark of not available as an investment for Morgan Stanley Capital International retirement plans maintained pursuant to Inc. and Standard & Poor's. Section 401 of the Internal Revenue Code, including 401(k) plans, money o The unmanaged Standard & Poor's purchase pension plans and profit Composite Index of 500 Stocks (the S&P sharing plans. Plans that have existing 500--Registered Trademark--) is an index accounts invested in Class B shares will of common stocks frequently used as a continue to be allowed to make general measure of U.S. stock market additional purchases. performance. o A significant portion of the fund's o The unmanaged Russell 1000 returns during certain periods was --Registered Trademark-- Index attributable to its investments in represents the performance of the stocks initial public offerings (IPOs). These of large-capitalization companies. The investments had a magnified impact when unmanaged Russell 1000 --Registered the fund's asset base was relatively Trademark-- Growth Index is a subset of small. As the fund's assets grow, the the unmanaged Russell 1000 Index; the impact of IPO investments will decline, Growth subset measures the performance which may reduce the effect of IPO of Russell 1000 companies with higher investments on the fund's total return. price/book ratios and higher forecasted For additional information regarding the growth values. impact of
=================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report may be distributed only to shareholders or to =================================================== persons who have received a current prospectus of the fund.
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--Registered harmful short-term trading. These steps include: Trademark--: o Strengthening daily monitoring of trading activities. [PHOTO OF As you may be aware, there has been a ROBERT H. great deal of media coverage recently o Imposing redemption fees on additional funds we believe GRAHAM] about the mutual fund industry and may be vulnerable to harmful short-term trading allegations of improper activities by activity. ROBERT H. GRAHAM certain individuals and companies. As part of these widespread o Implementing an enhanced exchange policy (effective on [PHOTO OF investigations, INVESCO Funds Group or about March 1, 2004) designed to limit exchanges MARCK H. (IFG), the former adviser to certain between funds. WILLIAMSON INVESCO Funds, was recently named as a defendant in separate civil enforcement o Employing an enhanced fair value pricing policy on MARK H. WILLIAMSON actions by the U.S. Securities and certain foreign securities as well as certain illiquid Exchange Commission (SEC), the Office securities. of the New York Attorney General and the State of Colorado over an issue known as "market None of these tools alone, nor all of them taken together, timing." A number of private class or derivative actions eliminate the possibility of short-term trading strategies also were filed in the wake of the regulators' actions. that may be detrimental to a fund. Moreover, each of these tools involves judgments that are inherently subjective. We Investors are understandably concerned and frustrated have always sought and continue to seek to make these about these reports, and we would like to take this judgments to the best of our abilities and in a manner that opportunity to assure you that, based on an investigation we believe is consistent with the best interests of our fund conducted by an outside firm, IFG and its parent company, shareholders. And we remain committed to being as vigilant as AMVESCAP PLC, believe that these civil actions are without possible in the future to identify and address any harmful merit. IFG is contesting the charges. market timing investors who have the potential to harm our long-term fund shareholders. We encourage you to continue to monitor this situation, particularly as IFG has the opportunity to address the We sincerely hope these developments and the media allegations that have been made. Current information will be coverage surrounding them do not result in you or other posted on our Web site at AIMinvestments.com. We will shareholders losing confidence in AIM or INVESCO Funds. continue to communicate to you on our Web site about our Amidst this storm of controversy in the mutual fund industry, finding, and the actions we are taking to protect and promote we believe we can find encouragement in the recovering the interests of our shareholders. The independent trustees economy and rising equity markets. As we write this letter, of the funds are receiving regular reports from their for instance, the S&P 500--Registered Trademark-- Index is up independent counsel and outside counsel hired by AMVESCAP approximately 23% year-to-date. Although past performance is PLC, the parent of AIM and IFG, to perform an ongoing no guarantee of future results, there appear to be indicators investigation of market timing. that the economy and stock markets are showing signs of welcomed improvement. We encourage you to read the enclosed A COMPLEX ISSUE discussion of your fund's performance during this past reporting period. Market timing is an investment technique not defined in any regulation that involves frequent short-term trading of OUR UNWAVERING COMMITMENT mutual fund shares, sometimes with a goal to exploit inefficiencies in the way mutual funds price their shares. We At AIM Investments, we have never wavered in our commitment recognize that fund management companies have tried to deal to helping you build solutions for your financial goals. Our with this complex issue in various ways and believe that company was founded on a core principle of integrity, and we industry-wide guidance is in order. To that end, we welcome have always worked hard to earn the trust of our SEC Chairman William Donaldson's pledge to adopt new rules shareholders. We are committed to doing all we can to designed to curb market timing abuses. Comprehensive maintain your trust and confidence. rulemaking is necessary and is the best way to establish new industry responsibilities designed to protect shareholders. Thank you for your continued participation in AIM We support practical rule changes and structural Investments. Please call your financial advisor or one of our modifications that are fair, enforceable and, most Client Service representatives at 800-959-4246 if you have importantly, beneficial for investors. any further questions or concerns about your AIM Investments account. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Sincerely, activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Chairman and President President and CEO The AIM Family of Funds AIM Investments --Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND OUTPERFORMS INDEX OF PEERS YOUR FUND This report covers the fiscal year ended The S&P 500 Index, frequently cited as a AIM Large Cap Growth's objective, October 31, 2003. Class A shares of AIM measure of the performance of the U.S. strategies, and processes remained Large Cap Growth Fund returned 20.49% at stock market in general, returned 20.79% unchanged throughout the fiscal year. net asset value, that is, excluding sales for the year ended October 31, 2003. All The fund's portfolio is built using a charges, for the year. This return is in sectors of the S&P 500 recorded gains for stock-by-stock analysis, so when line with the return for the same period the year. holdings and sector weightings change, of the fund's broad market index and it is a result of our individual stock slightly under its style-specific index. For most of the fiscal year, the selection process. It exceeds its peer-group index, the Federal Reserve Board (the Fed) kept the Lipper Large-Cap Growth Fund Index, which short-term federal funds rate at 1.25%. When the fiscal year began, we returned 18.51%. (A table comparing the On June 25, 2003, it lowered that rate characterized the fund as being fund's performance to that of its indexes to 1.00%, its lowest level since 1958. relatively conservatively positioned. By is found on page 3.) The Fed said it favored a more expansive this we mean that our more aggressive, monetary policy because the economy had cyclical, or economically sensitive MARKET CONDITIONS not yet exhibited sustainable growth. holdings were balanced by our more The Fed met three times between June 25 defensive, less economically sensitive Gross domestic product (GDP) growth and the close of the fiscal year, but it holdings. improved over the reporting period. The did not change the federal funds rate. annualized GDP growth for both the last Information technology and consumer quarter of 2002 and the first quarter of discretionary are considered economically 2003 was 1.4%. For second-quarter 2003, The job market was comparatively weak sensitive holdings because the amount of it was 3.3%, annualized. On November 25, throughout the period, with the U.S. money that businesses and consumers have after the close of the reporting period, unemployment rate measuring 6.0% for the to spend can drastically affect the the preliminary estimate for last two months of 2002, reaching a high returns of these sectors. By contrast, third-quarter GDP growth was announced for the reporting period of 6.4% in health care and consumer staples are as 8.2%, annualized. June, and declining in August and defensive, or less economically sensitive, October to end the period at 6.0%. because certain expenditures will be made even in a poor economy. During the fiscal year, more aggressive holdings began meeting our selection criteria, and we began adding to our holdings in information technology and consumer
=================================================================================================================================== PORTFOLIO COMPOSITION BY SECTOR* TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* Consumer Discretionary 19.7% 1. Intel Corp. 4.8% 1. Systems Software 9.4% Consumer Staples 4.0 2. Cisco Systems, Inc. 4.0 2. Semiconductors 7.9 Financials 6.4 3. Microsoft Corp. 3.4 3. Health Care Equipment 7.1 Health Care 18.4 4. Dell Inc. 2.6 4. Communications Equipment 7.0 Industrials 7.3 5. VERITAS Software Corp. 2.5 5. Computer Storage & Peripherals 4.5 Information Technology 39.6 6. Yahoo! Inc. 2.4 6. Specialty Stores 4.3 Telecommunication Services 1.8 7. Amazon.com, Inc. 2.2 7. Diversified Commercial Services 4.0 8. Cendant Corp. 2.2 8. Consumer Finance 3.9 9. Boston Scientific Corp. 2.2 9. Pharmaceuticals 3.3 10. EMC Corp. 2.2 10. Biotechnology 3.2 TOTAL NUMBER OF HOLDINGS* 77 TOTAL NET ASSETS $322.6 MILLION * Excludes money market funds and is based on total net assets. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ===================================================================================================================================
2 discretionary. Conversely, we reduced advertising. Yahoo! reported a 43% be slow. However, we believe that, for our holdings in the more defensive increase in its third-quarter 2003 net most investors, the inclusion of an sectors, health care and consumer revenues when compared to the same actively managed fund that invests in staples. period of 2002. large-cap market leaders could be an important part of a diversified Stocks that contributed positively to AIM Large Cap Growth Fund has a investment portfolio. We appreciate your the portfolio's return for the period strong sell discipline, evidenced by the continued investment in AIM Large Cap include holdings in the information fact that the five largest detractors to Growth Fund. technology, consumer discretionary and fund performance for the fiscal year health care sectors. Two were no longer held by the fund as of See important fund and index Internet-related stocks provided October 31, 2003, because these holdings disclosures inside front cover. excellent returns. no longer met our investment criteria. One company that detracted from fund Internet retailer Amazon.com, in the performance during the third quarter, consumer discretionary sector, began as which we still held at the end of the an online bookstore and has expanded to period, is health care sector holding offer a wide variety of products and St. Jude Medical. St. Jude Medical services. In its earnings report for the manufactures devices to treat quarter ended September 30, 2003, Amazon cardiovascular disease. Though it reported net sales of $1.3 billion, a experienced a dip in its stock price in 33% increase over net sales for the same September, by the close of the fiscal quarter of the previous year. year, it had made up the ground it had lost. In the information technology sector, Internet software and services provider IN CLOSING For More Information Visit Yahoo! Inc., is the top Internet portal, [GRAPHIC] offering its registered users We are encouraged by the most recent AIMinvestments.com personalized Web pages, e-mail, chat earnings reports and the positive rooms and message boards. In July, economic news of late. We are pleased to Yahoo! inked an agreement to acquire be able to report positive, double-digit Overture, Inc., a global leader in returns for the fiscal year. We believe commercial Internet search services, that market volatility will continue to thereby making Yahoo! the largest player be a factor and that complete recovery in global Internet may ================================================================================================================================ FUND VS. INDEXES Total returns 10/31/02-10/31/03, GEOFFREY V. KEELING excluding sales charges [PHOTO OF Geoff Keeling, Chartered Financial Analyst, is co-manager of AIM Large =========================================== GEOFFREY V. Cap Growth Fund. Mr. Keeling joined AIM in 1995 as an equity analyst CLASS A SHARES 20.49% KEELING specializing in large-cap stocks. He assumed his present CLASS B SHARES 19.58 responsibilities in 1999. CLASS C SHARES 19.56 Mr. Keeling received a B.B.A. in finance from The University of CLASS R SHARES 20.35 Texas at Austin. INVESTOR CLASS SHARES* 20.49 S&P 500 INDEX (BROAD MARKET INDEX) 20.79 RUSSELL 1000 GROWTH INDEX ROBERT L. SHOSS (STYLE-SPECIFIC INDEX) 21.81 [PHOTO OF Robert Shoss is co-manager of AIM Large Cap Growth Fund. Mr. Shoss LIPPER LARGE-CAP GROWTH FUND INDEX ROBERT L. joined AIM in 1995 as an analyst. In 1999, he was promoted to his (PEER-GROUP INDEX) 18.51 SHOSS current position. Mr. Shoss received a bachelor's degree from The University of Texas Source: Lipper, Inc. at Austin and an M.B.A. and a J.D. from the University of Houston. =========================================== Assisted by the Large Cap Growth Team. *The one-year return shown for Investor Class shares is the blended return of Investor Class shares since their inception and the restated one-year performance of the fund's Class A shares at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date of the fund's Class A shares is 3/1/99. The inception date of the fund's Investor Class shares is 9/30/03.
3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT AIM LARGE CAP GROWTH FUND VS. BENCHMARK INDEXES 3/1/99-10/31/03
DATE AIM LARGE CAP LIPPER LARGE-CAP GROWTH FUND GROWTH FUND RUSSELL 1000 RUSSELL 1000 S&P 500 CLASS A SHARES INDEX GROWTH INDEX INDEX INDEX 3/1/1999 $ 9450 $10000 $10000 $10000 $10000 3/31/1999 10116 10568 10527 10383 10400 4/30/1999 9935 10605 10540 10817 10803 5/31/1999 9621 10253 10216 10584 10548 6/30/1999 10354 10966 10932 11123 11132 7/31/1999 10098 10622 10584 10783 10786 8/31/1999 10117 10624 10757 10682 10732 9/30/1999 10098 10516 10531 10389 10438 10/31/1999 10745 11323 11327 11087 11099 11/30/1999 11458 11882 11938 11372 11324 12/31/1999 13180 13202 13179 12057 11990 1/31/2000 13313 12672 12561 11564 11388 2/29/2000 16092 13338 13175 11533 11173 3/31/2000 16692 14274 14119 12584 12265 [MOUNTAIN CHART] 4/30/2000 15808 13170 13447 12164 11896 5/31/2000 14818 12412 12770 11849 11652 6/30/2000 16778 13233 13737 12152 11939 7/31/2000 16911 12965 13165 11950 11753 8/31/2000 19529 14086 14357 12834 12482 9/30/2000 18578 13012 12999 12238 11823 10/31/2000 16883 12324 12384 12091 11773 11/30/2000 13809 10670 10558 10985 10846 12/31/2000 14303 10604 10224 11118 10899 1/31/2001 13770 10912 10930 11484 11285 2/28/2001 10762 9223 9075 10413 10257 3/31/2001 9402 8265 8087 9721 9608 4/30/2001 10497 9152 9110 10502 10354 5/31/2001 10258 9083 8976 10573 10423 6/30/2001 9954 8821 8768 10334 10170 7/31/2001 9582 8505 8549 10193 10069 8/31/2001 8812 7858 7850 9572 9440 9/30/2001 7936 7068 7066 8760 8677 10/31/2001 8393 7361 7437 8943 8843 11/30/2001 9049 8036 8151 9631 9521 12/31/2001 9135 8073 8136 9734 9605 1/31/2002 9021 7890 7992 9610 9465 2/28/2002 8517 7564 7661 9419 9282 3/31/2002 8984 7868 7926 9806 9631 4/30/2002 8365 7344 7279 9244 9047 5/31/2002 8184 7210 7103 9163 8981 6/30/2002 7670 6623 6446 8486 8341 7/31/2002 7147 6125 6091 7858 7691 8/31/2002 7156 6159 6109 7899 7742 9/30/2002 6671 5562 5476 7051 6901 10/31/2002 7014 5990 5978 7637 7508 11/30/2002 7062 6238 6303 8084 7949 12/31/2002 6719 5803 5867 7626 7483 1/31/2003 6586 5670 5725 7441 7287 2/28/2003 6624 5609 5699 7326 7178 3/31/2003 6767 5714 5805 7402 7247 4/30/2003 7129 6132 6234 8000 7844 5/31/2003 7529 6433 6545 8456 8257 6/30/2003 7586 6486 6635 8567 8362 7/31/2003 7748 6674 6800 8738 8510 8/31/2003 7995 6838 6969 8915 8675 9/30/2003 7843 6693 6895 8824 8583 10/31/2003 $ 8449 $ 7099 $ 7282 $ 9341 $ 9069 Source: Lipper, Inc.
Since the last reporting period, the fund has elected to use the S&P 500 as its broad-based market index since the S&P 500 is such a widely recognized gauge of the U.S. equity market. The fund will no longer measure its performance against the Russell 1000 Index, the index published in previous reports to shareholders. Because this is the first reporting period since we have adopted the new index, SEC guidelines require that we compare the fund's performance to both the old and the new index. The fund has also included a style-specific index, the Russell 1000 Growth Index. The fund believes this index more closely reflects the performance of the securities in which the fund invests. In addition, the unmanaged Lipper Large-Cap Growth Fund Index, which may or may not include AIM Large Cap Growth Fund, is included for comparison to a peer group. Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or on sale of fund shares. Performance of the indexes does not reflect the effects of taxes. Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE. ================================================================================================================================== AVERAGE ANNUAL TOTAL RETURNS In addition to fund returns as of the INVESTOR CLASS SHARES** As of 10/31/03, including sales charges close of the fiscal year, industry Inception -3.99% CLASS A SHARES regulations require us to provide 1 Year 17.55 Inception (3/1/99) -3.55% average annual total returns (including 1 Year 13.85 sales charges) for periods ended * The returns shown for these periods 9/30/03, the most recent calendar are the blended returns of the CLASS B SHARES quarter-end, which were as follows. historical performance of the fund's Inception (4/5/99) -5.67% Class R shares since their inception and 1 Year 14.58 AVERAGE ANNUAL TOTAL RETURNS the restated historical performance of As of 9/30/03, including sales charges the fund's Class A shares (for the CLASS C SHARES periods prior to inception of the Class Inception (4/5/99) -5.23% CLASS A SHARES R shares) at net asset value, adjusted 1 Year 18.56 Inception (3/1/99) -5.17% to reflect the higher Rule 12b-1 fees 1 Year 11.05 applicable to the Class R shares. The CLASS R SHARES* inception date of Class A shares is Inception -2.49% CLASS B SHARES 3/1/99. The inception date of the fund's 1 Year 20.35 Inception (4/5/99) -7.33% Class R shares is 6/3/02. 1 Year 11.64 INVESTOR CLASS SHARES** ** The returns shown as of 10/31/03 Inception -2.37% CLASS C SHARES are the blended returns of the 1 Year 20.49 Inception (4/5/99) -6.89% historical performance of Investor Class 1 Year 15.62 shares since their inception and the restated historical performance of the CLASS R SHARES* fund's Class A shares (for the periods Inception -4.12% prior to inception of the Investor Class 1 Year 17.40 shares) at net asset value and reflect the higher Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date of the fund's Class A shares is 3/1/99. The inception date of the fund's Investor Class shares is 9/30/03. Because 9/30/03 is the inception date of the Investor Class shares, performance as of 9/30/03 is the restated historical performance of the fund's Class A shares as described. ==================================================================================================================================
4 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ------------------------------------------------------------------------ COMMON STOCKS & OTHER EQUITY INTERESTS-97.13% AEROSPACE & DEFENSE-0.71% United Technologies Corp. 27,000 $ 2,286,630 ======================================================================== APPAREL RETAIL-0.77% Gap, Inc. (The) 131,000 2,499,480 ======================================================================== APPAREL, ACCESSORIES & LUXURY GOODS-1.45% Coach, Inc.(a) 132,000 4,682,040 ======================================================================== APPLICATION SOFTWARE-1.28% Amdocs Ltd. (United Kingdom)(a) 91,000 1,952,860 - ------------------------------------------------------------------------ SAP A.G.-ADR (Germany) 60,000 2,192,400 ======================================================================== 4,145,260 ======================================================================== BIOTECHNOLOGY-3.17% Amgen Inc.(a) 59,000 3,643,840 - ------------------------------------------------------------------------ Genentech, Inc.(a) 80,300 6,582,191 ======================================================================== 10,226,031 ======================================================================== CASINOS & GAMING-2.04% International Game Technology 201,200 6,589,300 ======================================================================== COMMUNICATIONS EQUIPMENT-6.96% Cisco Systems, Inc.(a) 611,200 12,822,976 - ------------------------------------------------------------------------ Corning Inc.(a) 230,000 2,525,400 - ------------------------------------------------------------------------ Juniper Networks, Inc.(a) 188,000 3,382,120 - ------------------------------------------------------------------------ QLogic Corp.(a) 35,000 1,961,750 - ------------------------------------------------------------------------ UTStarcom, Inc.(a) 56,000 1,764,000 ======================================================================== 22,456,246 ======================================================================== COMPUTER & ELECTRONICS RETAIL-2.13% Best Buy Co., Inc. 118,000 6,880,580 ======================================================================== COMPUTER HARDWARE-2.58% Dell Inc.(a) 230,900 8,340,108 ======================================================================== COMPUTER STORAGE & PERIPHERALS-4.50% EMC Corp.(a) 505,000 6,989,200 - ------------------------------------------------------------------------ Network Appliance, Inc.(a) 132,000 3,257,760 - ------------------------------------------------------------------------ SanDisk Corp.(a) 25,000 2,015,000 - ------------------------------------------------------------------------ Seagate Technology (Cayman Islands) 98,000 2,252,040 ======================================================================== 14,514,000 ======================================================================== CONSUMER FINANCE-3.90% American Express Co. 76,800 3,604,224 - ------------------------------------------------------------------------ Capital One Financial Corp. 32,000 1,945,600 - ------------------------------------------------------------------------ MBNA Corp. 80,000 1,980,000 - ------------------------------------------------------------------------ SLM Corp. 129,000 5,051,640 ======================================================================== 12,581,464 ========================================================================
MARKET SHARES VALUE
- ------------------------------------------------------------------------ DATA PROCESSING & OUTSOURCED SERVICES-0.68% First Data Corp. 61,600 $ 2,199,120 ======================================================================== DIVERSIFIED COMMERCIAL SERVICES-4.01% Apollo Group, Inc.-Class A(a) 92,000 5,844,760 - ------------------------------------------------------------------------ Cendant Corp.(a) 347,000 7,089,210 ======================================================================== 12,933,970 ======================================================================== ELECTRICAL COMPONENTS & EQUIPMENT-0.91% Rockwell Automation, Inc. 95,000 2,949,750 ======================================================================== FOOTWEAR-0.61% NIKE, Inc.-Class B 31,000 1,980,900 ======================================================================== GENERAL MERCHANDISE STORES-0.87% Dollar General Corp. 125,000 2,808,750 ======================================================================== HEALTH CARE EQUIPMENT-7.07% Becton, Dickinson & Co. 65,000 2,376,400 - ------------------------------------------------------------------------ Boston Scientific Corp.(a) 104,000 7,042,880 - ------------------------------------------------------------------------ Guidant Corp. 42,000 2,142,420 - ------------------------------------------------------------------------ St. Jude Medical, Inc.(a) 35,200 2,047,232 - ------------------------------------------------------------------------ Stryker Corp. 40,600 3,293,066 - ------------------------------------------------------------------------ Zimmer Holdings, Inc.(a) 92,800 5,921,568 ======================================================================== 22,823,566 ======================================================================== HEALTH CARE SERVICES-1.60% Caremark Rx, Inc.(a) 124,000 3,106,200 - ------------------------------------------------------------------------ IMS Health Inc. 87,000 2,047,110 ======================================================================== 5,153,310 ======================================================================== HEALTH CARE SUPPLIES-0.80% Alcon, Inc. (Switzerland) 46,700 2,573,637 ======================================================================== HOME ENTERTAINMENT SOFTWARE-1.27% Electronic Arts Inc.(a) 41,300 4,090,352 ======================================================================== HOME IMPROVEMENT RETAIL-2.98% Home Depot, Inc. (The) 126,000 4,670,820 - ------------------------------------------------------------------------ Lowe's Cos., Inc. 84,000 4,950,120 ======================================================================== 9,620,940 ======================================================================== HOUSEWARES & SPECIALTIES-0.78% Fortune Brands, Inc. 38,600 2,514,790 ======================================================================== HYPERMARKETS & SUPER CENTERS-1.88% Wal-Mart Stores, Inc. 102,700 6,054,165 ======================================================================== INDUSTRIAL CONGLOMERATES-1.03% 3M Co. 42,000 3,312,540 ======================================================================== INDUSTRIAL MACHINERY-0.60% Dover Corp. 50,000 1,951,000 ========================================================================
F-1
MARKET SHARES VALUE - ------------------------------------------------------------------------ INTERNET RETAIL-3.03% Amazon.com, Inc.(a) 131,600 $ 7,161,672 - ------------------------------------------------------------------------ eBay Inc.(a) 46,600 2,606,804 ======================================================================== 9,768,476 ======================================================================== INTERNET SOFTWARE & SERVICES-2.44% Yahoo! Inc.(a) 179,900 7,861,630 ======================================================================== IT CONSULTING & OTHER SERVICES-0.80% Accenture Ltd.-Class A (Bermuda)(a) 110,000 2,574,000 ======================================================================== MANAGED HEALTH CARE-2.44% Anthem, Inc.(a) 41,200 2,819,316 - ------------------------------------------------------------------------ UnitedHealth Group Inc. 99,200 5,047,296 ======================================================================== 7,866,612 ======================================================================== OFFICE ELECTRONICS-0.77% Canon Inc. (Japan) 51,000 2,469,239 ======================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-1.81% Citigroup Inc. 123,000 5,830,200 ======================================================================== PERSONAL PRODUCTS-1.23% Avon Products, Inc. 58,300 3,962,068 ======================================================================== PHARMACEUTICALS-3.30% Mylan Laboratories Inc. 106,850 2,580,428 - ------------------------------------------------------------------------ Teva Pharmaceutical Industries Ltd.-ADR (Israel) 86,000 4,892,540 - ------------------------------------------------------------------------ Wyeth 72,000 3,178,080 ======================================================================== 10,651,048 ======================================================================== RESTAURANTS-0.65% Starbucks Corp.(a) 66,000 2,085,600 ======================================================================== SEMICONDUCTOR EQUIPMENT-1.09% Applied Materials, Inc.(a) 150,000 3,505,500 ======================================================================== SEMICONDUCTORS-7.91% Altera Corp.(a) 99,800 2,018,954 - ------------------------------------------------------------------------ Analog Devices, Inc.(a) 58,400 2,588,872 - ------------------------------------------------------------------------ Intel Corp. 467,000 15,434,350 - ------------------------------------------------------------------------ Linear Technology Corp. 76,900 3,276,709 - ------------------------------------------------------------------------ Marvell Technology Group Ltd. (Bermuda)(a) 50,000 2,193,500 ======================================================================== 25,512,385 ======================================================================== SOFT DRINKS-0.90% PepsiCo, Inc. 61,000 2,917,020 ========================================================================
MARKET SHARES VALUE - ------------------------------------------------------------------------
SPECIALTY STORES-4.33% AutoNation, Inc.(a) 100,000 $ 1,870,000 - ------------------------------------------------------------------------ Bed Bath & Beyond Inc.(a) 72,000 3,041,280 - ------------------------------------------------------------------------ Staples, Inc.(a) 199,800 5,358,636 - ------------------------------------------------------------------------ Tiffany & Co. 78,000 3,701,100 ======================================================================== 13,971,016 ======================================================================== SYSTEMS SOFTWARE-9.35% Adobe Systems Inc. 84,000 3,682,560 - ------------------------------------------------------------------------ Computer Associates International, Inc. 72,000 1,693,440 - ------------------------------------------------------------------------ Microsoft Corp. 414,600 10,841,790 - ------------------------------------------------------------------------ Oracle Corp.(a) 212,600 2,542,696 - ------------------------------------------------------------------------ Symantec Corp.(a) 49,000 3,265,850 - ------------------------------------------------------------------------ VERITAS Software Corp.(a) 225,000 8,133,750 ======================================================================== 30,160,086 ======================================================================== THRIFTS & MORTGAGE FINANCE-0.66% Washington Mutual, Inc. 48,700 2,130,625 ======================================================================== WIRELESS TELECOMMUNICATION SERVICES-1.84% Nextel Communications, Inc.-Class A(a) 245,400 5,938,680 ======================================================================== Total Common Stocks & Other Equity Interests (Cost $250,184,300) 313,372,114 ======================================================================== MONEY MARKET FUNDS-3.30% STIC Liquid Assets Portfolio(b) 5,325,601 5,325,601 - ------------------------------------------------------------------------ STIC Prime Portfolio(b) 5,325,601 5,325,601 ======================================================================== Total Money Market Funds (Cost $10,651,202) 10,651,202 ======================================================================== TOTAL INVESTMENTS-100.43% (excluding investments purchased with cash collateral from securities loaned) (Cost $260,835,502) 324,023,316 ======================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-1.85% STIC Liquid Assets Portfolio(b)(c) 5,969,563 5,969,563 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $5,969,563) 5,969,563 ======================================================================== TOTAL INVESTMENTS-102.28% (Cost $266,805,065) 329,992,879 ======================================================================== OTHER ASSETS LESS LIABILITIES-(2.28%) (7,355,958) ======================================================================== NET ASSETS-100.00% $322,636,921 ________________________________________________________________________ ========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-2 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $250,184,300)* $313,372,114 - ----------------------------------------------------------- Investments in affiliated money market funds (cost $16,620,765) 16,620,765 - ----------------------------------------------------------- Foreign currencies, at value (cost $2,276) 2,287 - ----------------------------------------------------------- Receivables for: Investments sold 4,752,804 - ----------------------------------------------------------- Fund shares sold 415,069 - ----------------------------------------------------------- Dividends 184,733 - ----------------------------------------------------------- Investment for deferred compensation plan 25,159 - ----------------------------------------------------------- Other assets 32,756 =========================================================== Total assets 335,405,687 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 5,638,174 - ----------------------------------------------------------- Fund shares reacquired 645,625 - ----------------------------------------------------------- Deferred compensation plan 25,159 - ----------------------------------------------------------- Collateral upon return of securities loaned 5,969,563 - ----------------------------------------------------------- Accrued distribution fees 183,792 - ----------------------------------------------------------- Accrued trustees' fees 5,997 - ----------------------------------------------------------- Accrued transfer agent fees 201,861 - ----------------------------------------------------------- Accrued operating expenses 98,595 =========================================================== Total liabilities 12,768,766 =========================================================== Net assets applicable to shares outstanding $322,636,921 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $661,651,023 - ----------------------------------------------------------- Undistributed net investment income (loss) (32,869) - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities, foreign currencies and futures contracts (402,169,057) - ----------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 63,187,824 =========================================================== $322,636,921 ___________________________________________________________ =========================================================== NET ASSETS: Class A $154,052,105 ___________________________________________________________ =========================================================== Class B $122,011,241 ___________________________________________________________ =========================================================== Class C $ 44,272,422 ___________________________________________________________ =========================================================== Class R $ 2,126,829 ___________________________________________________________ =========================================================== Investor Class $ 174,324 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 17,349,490 ___________________________________________________________ =========================================================== Class B 14,166,195 ___________________________________________________________ =========================================================== Class C 5,137,113 ___________________________________________________________ =========================================================== Class R 239,758 ___________________________________________________________ =========================================================== Investor Class 19,630 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 8.88 - ----------------------------------------------------------- Offering price per share: (Net asset value of $8.88 divided by 94.50%) $ 9.40 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 8.61 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 8.62 ___________________________________________________________ =========================================================== Class R: Net asset value and offering price per share $ 8.87 ___________________________________________________________ =========================================================== Investor Class: Net asset value and offering price per share $ 8.88 ___________________________________________________________ ===========================================================
* At October 31, 2003, securities with an aggregate market value of $5,853,935 were on loan to brokers. See Notes to Financial Statements. F-3 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $24,308) $ 2,022,318 - -------------------------------------------------------------------------- Dividends from affiliated money market funds 101,100 - -------------------------------------------------------------------------- Interest 6,536 - -------------------------------------------------------------------------- Securities lending 5,580 ========================================================================== Total investment income 2,135,534 ========================================================================== EXPENSES: Advisory fees 1,987,347 - -------------------------------------------------------------------------- Administrative services fees 91,795 - -------------------------------------------------------------------------- Custodian fees 54,586 - -------------------------------------------------------------------------- Distribution fees: Class A 416,198 - -------------------------------------------------------------------------- Class B 1,075,412 - -------------------------------------------------------------------------- Class C 376,000 - -------------------------------------------------------------------------- Class R 4,613 - -------------------------------------------------------------------------- Investor Class 5 - -------------------------------------------------------------------------- Transfer agent fees 1,515,190 - -------------------------------------------------------------------------- Trustees' fees 13,398 - -------------------------------------------------------------------------- Other 244,762 ========================================================================== Total expenses 5,779,306 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangements (9,603) ========================================================================== Net expenses 5,769,703 ========================================================================== Net investment income (loss) (3,634,169) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS: Net realized gain (loss) from: Investment securities (11,279,810) - -------------------------------------------------------------------------- Foreign currencies (22,563) - -------------------------------------------------------------------------- Futures contracts (254,779) ========================================================================== (11,557,152) ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 66,633,066 - -------------------------------------------------------------------------- Foreign currencies (138) ========================================================================== 66,632,928 ========================================================================== Net gain from investment securities, foreign currencies and futures contracts 55,075,776 ========================================================================== Net increase in net assets resulting from operations $ 51,441,607 __________________________________________________________________________ ==========================================================================
See Notes to Financial Statements. F-4 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ (3,634,169) $ (4,375,738) - ------------------------------------------------------------------------------------------ Net realized gain (loss) from investment securities, foreign currencies, futures contracts and option contracts (11,557,152) (87,652,595) - ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 66,632,928 38,162,681 ========================================================================================== Net increase (decrease) in net assets resulting from operations 51,441,607 (53,865,652) ========================================================================================== Share transactions-net: Class A 24,813,254 (10,042,539) - ------------------------------------------------------------------------------------------ Class B (2,160,788) (18,237,379) - ------------------------------------------------------------------------------------------ Class C 594,530 (12,801,049) - ------------------------------------------------------------------------------------------ Class R 1,830,726 10,502 - ------------------------------------------------------------------------------------------ Investor Class 173,236 -- ========================================================================================== Net increase (decrease) in net assets resulting from share transactions 25,250,958 (41,070,465) ========================================================================================== Net increase (decrease) in net assets 76,692,565 (94,936,117) ========================================================================================== NET ASSETS: Beginning of year 245,944,356 340,880,473 ========================================================================================== End of year (including undistributed net investment income (loss) of $(32,869) and $(25,407) for 2003 and 2002, respectively) $322,636,921 $245,944,356 __________________________________________________________________________________________ ==========================================================================================
NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Large Cap Growth Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of F-5 making a good faith determination of a security's fair value. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts F-6 are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin. I. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $1 billion of the Fund's average daily net assets, plus 0.70% over $1 billion up to and including $2 billion of the Fund's average daily net assets and 0.625% of the Fund's average daily net assets over $2 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $1,994. Under a prior agreement to limit the aggregate costs of certain shareholder services provided by third party administrators, AIM reimbursed fees of $2,430 for Class A, Class B, Class C and Class R shares based on the relative net assets of those classes. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $91,795 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $793,265 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class R and the Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of the Investor Class shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C, Class R and the Investor Class shares paid $416,198, $1,075,412, $376,000, $4,613 and $5, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $64,104 in front-end sales commissions from the sale of Class A shares and $711, $69, $4,058 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $5,152 and reductions in custodian fees of $27 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $5,179. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $2,539 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties F-7 to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $5,853,935 were on loan to brokers. The loans were secured by cash collateral of $5,969,563 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $5,580 for securities lending. NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 61,303,166 - ------------------------------------------------------------ Temporary book/tax differences (32,869) - ------------------------------------------------------------ Capital loss carryforward (400,284,399) - ------------------------------------------------------------ Shares of beneficial interest 661,651,023 ============================================================ Total net assets $ 322,636,921 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and straddle deferrals. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $10. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ------------------------------------------------------ October 31, 2007 $ 380,100 - ------------------------------------------------------ October 31, 2008 27,182,658 - ------------------------------------------------------ October 31, 2009 267,323,492 - ------------------------------------------------------ October 31, 2010 94,116,910 - ------------------------------------------------------ October 31, 2011 11,281,239 ====================================================== Total capital loss carryforward $400,284,399 ______________________________________________________ ======================================================
NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $332,300,069 and $313,469,304, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ----------------------------------------------------------- Aggregate unrealized appreciation of investment securities $64,755,309 - ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (3,452,153) =========================================================== Net unrealized appreciation of investment securities $61,303,156 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $268,689,723.
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currencies and net operating losses, on October 31, 2003, undistributed net investment income was increased by $3,626,707, undistributed net realized gain was increased by $22,563 and shares of beneficial interest decreased by $3,649,270. This reclassification had no effect on the net assets of the Fund. F-8 NOTE 10--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Investor Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Investor Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2003 2002 ------------------------------ -------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 9,469,394 $73,883,856 5,159,669 $ 44,948,977 - -------------------------------------------------------------------------------------------------------------------------- Class B 4,041,264 29,817,268 3,444,001 28,987,280 - -------------------------------------------------------------------------------------------------------------------------- Class C 2,208,427 16,412,874 1,465,202 12,332,848 - -------------------------------------------------------------------------------------------------------------------------- Class R* 278,067 2,156,076 1,259 10,502 - -------------------------------------------------------------------------------------------------------------------------- Investor Class** 20,194 178,134 -- -- ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 325,063 2,536,902 136,498 1,177,906 - -------------------------------------------------------------------------------------------------------------------------- Class B (334,300) (2,536,902) (139,167) (1,177,906) ========================================================================================================================== Reacquired: Class A (6,726,902) (51,607,504) (6,691,678) (56,169,422) - -------------------------------------------------------------------------------------------------------------------------- Class B (3,989,440) (29,441,154) (5,553,485) (46,046,753) - -------------------------------------------------------------------------------------------------------------------------- Class C (2,147,493) (15,818,344) (3,059,594) (25,133,897) - -------------------------------------------------------------------------------------------------------------------------- Class R* (39,568) (325,350) -- -- - -------------------------------------------------------------------------------------------------------------------------- Investor Class** (564) (4,898) -- -- ========================================================================================================================== 3,104,142 $25,250,958 (5,237,295) $(41,070,465) __________________________________________________________________________________________________________________________ ==========================================================================================================================
* Class R shares commenced sales on June 3, 2002. ** Investor Class shares commenced sales on September 30, 2003. F-9 NOTE 11--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ------------------------------------------------------------------- MARCH 1, 1999 (DATE OPERATIONS YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.37 $ 8.82 $ 17.74 $ 11.29 $10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.08)(a) (0.09)(a) (0.08)(a) (0.15)(a) (0.04) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.59 (1.36) (8.84) 6.60 1.33 ================================================================================================================================= Total from investment operations 1.51 (1.45) (8.92) 6.45 1.29 ================================================================================================================================= Net asset value, end of period $ 8.88 $ 7.37 $ 8.82 $ 17.74 $11.29 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 20.49% (16.44)% (50.28)% 57.13% 13.70% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $154,052 $105,320 $138,269 $225,255 $7,785 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 1.82%(c) 1.70% 1.57% 1.58% 1.53%(d)(e) ================================================================================================================================= Ratio of net investment income (loss) to average net assets (1.01)%(c) (1.01)% (0.72)% (0.82)% (0.59)%(d) _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate(f) 123% 111% 124% 113% 21% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $118,913,817. (d) Annualized. (e) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 3.63% (annualized). (f) Not annualized for periods less than one year.
CLASS B ---------------------------------------------------------------- APRIL 5, 1999 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 7.20 $ 8.67 $ 17.54 $ 11.25 $11.02 - ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a) - ------------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.53 (1.33) (8.71) 6.56 0.31 ============================================================================================================================== Total from investment operations 1.41 (1.47) (8.87) 6.29 0.23 ============================================================================================================================== Net asset value, end of period $ 8.61 $ 7.20 $ 8.67 $ 17.54 $11.25 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Total return(b) 19.58% (16.96)% (50.57)% 55.91% 2.09% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $122,011 $104,040 $144,747 $210,224 $5,183 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratio of expenses to average net assets 2.47%(c) 2.35% 2.23% 2.24% 2.23%(d)(e) ============================================================================================================================== Ratio of net investment income (loss) to average net assets (1.66)%(c) (1.66)% (1.39)% (1.48)% (1.29)%(d) ______________________________________________________________________________________________________________________________ ============================================================================================================================== Portfolio turnover rate(f) 123% 111% 124% 113% 21% ______________________________________________________________________________________________________________________________ ==============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $107,541,190. (d) Annualized. (e) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 4.33% (annualized). (f) Not annualized for periods less than one year. F-10 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C -------------------------------------------------------------- APRIL 5, 1999 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO --------------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.21 $ 8.67 $ 17.55 $ 11.25 $11.02 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.12)(a) (0.14)(a) (0.16)(a) (0.27)(a) (0.08)(a) - ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.53 (1.32) (8.72) 6.57 0.31 ============================================================================================================================ Total from investment operations 1.41 (1.46) (8.88) 6.30 0.23 ============================================================================================================================ Net asset value, end of period $ 8.62 $ 7.21 $ 8.67 $ 17.55 $11.25 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Total return(b) 19.56% (16.84)% (50.60)% 56.00% 2.09% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $44,272 $ 36,575 $ 57,865 $79,392 $ 901 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratio of expenses to average net assets 2.47%(c) 2.35% 2.23% 2.24% 2.23%(d)(e) ============================================================================================================================ Ratio of net investment income (loss) to average net assets (1.66)%(c) (1.66)% (1.39)% (1.48)% (1.29)%(d) ____________________________________________________________________________________________________________________________ ============================================================================================================================ Portfolio turnover rate(f) 123% 111% 124% 113% 21% ____________________________________________________________________________________________________________________________ ============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $37,600,034. (d) Annualized. (e) After fee waivers. Ratio of expenses to average net assets prior to fee waivers was 4.33% (annualized). (f) Not annualized for periods less than one year.
CLASS R ------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.37 $ 8.40 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.09)(a) (0.04)(a) - --------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.59 (0.99) ============================================================================================= Total from investment operations 1.50 (1.03) ============================================================================================= Net asset value, end of period $ 8.87 $ 7.37 _____________________________________________________________________________________________ ============================================================================================= Total return(b) 20.35% (12.26)% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $2,127 $ 9 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets 1.97%(c) 1.85%(d) ============================================================================================= Ratio of net investment income (loss) to average net assets (1.16)%(c) (1.16)%(d) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(e) 123% 111% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $922,495. (d) Annualized. (e) Not annualized for periods less than one year. F-11 NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS ------------------ SEPTEMBER 30, 2003 (DATE SALES COMMENCED) TO OCTOBER 31, 2003 - ---------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.24 - ---------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.01)(a) - ---------------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 0.65 ================================================================================== Total from investment operations 0.64 ================================================================================== Net asset value, end of period $ 8.88 __________________________________________________________________________________ ================================================================================== Total return(b) 7.77% __________________________________________________________________________________ ================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 174 __________________________________________________________________________________ ================================================================================== Ratio of expenses to average net assets 1.56%(c) ================================================================================== Ratio of net investment income (loss) to average net assets (0.75)%(c) __________________________________________________________________________________ ================================================================================== Portfolio turnover rate(d) 123% __________________________________________________________________________________ ==================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are annualized and based on average daily net assets of $24,659. (d) Not annualized for periods less than one year. NOTE 12--SUBSEQUENT EVENTS On November 3, 2003, INVESCO Growth Fund ("Selling Fund") transferred substantially all of its assets to the Fund in exchange for shares of the Selling Fund in a tax-free reorganization. The results of the reorganization are as follows: The acquisition was accomplished by a tax-free exchange of 51,442,688 shares of the Fund for 234,385,533 shares of INVESCO Growth Fund outstanding as of the open of business on November 3, 2003. INVESCO Growth Fund's net assets at that date of $456,983,407 including $93,333,500 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $322,706,968. Included in net assets of the acquired fund is undistributed net investment income (loss) of $(1,103,356) and undistributed net realized gain (loss) of $(1,579,650,080) for INVESCO Growth Fund. Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive F-12 NOTE 12--SUBSEQUENT EVENTS (CONTINUED) relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-13 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Large Cap Growth Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Large Cap Growth Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Large Cap Growth Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ ERNST & YOUNG LLP December 16, 2003 F-14 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-15 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Trust Company 1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103 New York, NY 10022-3852 Boston, MA 02110
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com LCG-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ------------------------------------------------------------------------------------------ Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
AIM WEINGARTEN FUND Annual Report to Shareholders o October 31, 2003 [COVER ART] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- [COVER ART] ================================================================================ AIM WEINGARTEN FUND SEEKS TO PROVIDE GROWTH OF CAPITAL. ================================================================================ ABOUT INFORMATION THROUGHOUT THIS REPORT: o Unless otherwise stated, information o Class R shares are available only to o The unmanaged Standard & Poor's presented is as of 10/31/03 and is certain retirement plans. Please see Composite Index of 500 Stocks (the based on total net assets. the prospectus for more information. S&P 500--Registered Trademark--) is They are sold at net asset value, an index of common stocks frequently o AIM Weingarten Fund's performance that is, without up-front sales used as a general measure of U.S. figures are historical, and they charges. stock market performance. reflect fund expenses, the reinvestment of distributions, and o The fund's investment return and o Bloomberg, Inc. is a well-known changes in net asset value. principal value will fluctuate, so an independent financial research and investor's shares, when redeemed, may reporting firm. o When sales charges are included in be worth more or less than their performance figures, Class A share original cost. o A direct investment cannot be made in performance reflects the maximum an index. Unless otherwise indicated, 5.50% sales charge, and Class B and o Industry classifications used in this index results include reinvested Class C share performance reflects report are generally according to the dividends, and they do not reflect the applicable contingent deferred Global Industry Classification sales charges or fund expenses. sales charge (CDSC) for the period Standard, which was developed by and Performance of an index of funds involved. The CDSC on Class B shares is the exclusive property and a reflects fund expenses; performance declines from 5% beginning at the service mark of Morgan Stanley of a market index does not. time of purchase to 0% at the Capital International Inc. and beginning of the seventh year. The Standard & Poor's. A description of the policies and CDSC on Class C shares is 1% for the procedures that the fund uses to first year after purchase. The o The unmanaged Lipper Large-Cap Growth determine how to vote proxies performance of the fund's share Fund Index represents an average of relating to portfolio securities is classes will differ due to different the performance of the 30 largest available without charge, upon sales charge structures and class large-capitalization growth funds request, by calling 800-959-4246, or expenses. tracked by Lipper, Inc., an on the AIM Web site, independent mutual fund performance AIMinvestments.com. o Effective 9/30/03, Class B shares are monitor. not available as an investment for retirement plans maintained pursuant o The unmanaged Russell to Section 401 of the Internal 1000--Registered Trademark-- Growth Revenue Code, including 401(k) plans, Index is a subset of the unmanaged money purchase pension plans and Russell 1000--Registered Trademark-- profit sharing plans. Plans that have Index, which represents the existing accounts invested in Class B performance of the stocks of shares continued to be allowed to large-capitalization companies. The make additional purchases after Growth subset measures the 9/30/03. performance of Russell 1000 companies with higher price/book ratios and higher forecasted growth values.
====================================================== Not FDIC Insured May lose value No bank guarantee This report may be distributed only to shareholders or to persons who have received a current prospectus of the fund. ======================================================
AIMinvestments.com TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER IN new policies and strengthened existing ones--to discourage THE AIM FAMILY OF FUNDS--Registered harmful short-term trading. These steps include: Trademark--: o Strengthening daily monitoring of trading activities. [PHOTO OF As you may be aware, there has been a ROBERT H. great deal of media coverage recently o Imposing redemption fees on additional funds we believe GRAHAM] about the mutual fund industry and may be vulnerable to harmful short-term trading allegations of improper activities by activity. certain individuals and companies. As ROBERT H. GRAHAM part of these widespread investigations, o Implementing an enhanced exchange policy (effective on INVESCO Funds Group (IFG), the former or about March 1, 2004) designed to limit exchanges adviser to certain INVESCO Funds, was between funds. [PHOTO OF recently named as a defendant in separate MARK H. civil enforcement actions by the U.S. o Employing an enhanced fair value pricing policy on WILLIAMSON] Securities and Exchange Commission (SEC), certain foreign securities as well as certain illiquid the Office of the New York Attorney securities. MARK H. WILLIAMSON General and the State of Colorado over an issue known as "market timing." A number None of these tools alone, nor all of them taken together, of private class or derivative actions also were filed in the eliminate the possibility of short-term trading strategies wake of the regulators' actions. that may be detrimental to a fund. Moreover, each of these tools involves judgments that are inherently subjective. We Investors are understandably concerned and frustrated have always sought and continue to seek to make these about these reports, and we would like to take this judgments to the best of our abilities and in a manner that opportunity to assure you that, based on an investigation we believe is consistent with the best interests of our fund conducted by an outside firm, IFG and its parent company, shareholders. And we remain committed to being as vigilant as AMVESCAP PLC, believe that these civil actions are without possible in the future to identify and address any harmful merit. IFG is contesting the charges. market timing investors who have the potential to harm our long-term fund shareholders. We encourage you to continue to monitor this situation, particularly as IFG has the opportunity to address the We sincerely hope these developments and the media allegations that have been made. Current information will be coverage surrounding them do not result in you or other posted on our Web site at AIMinvestments.com. We will shareholders losing confidence in AIM or INVESCO Funds. continue to communicate to you on our Web site about our Amidst this storm of controversy in the mutual fund industry, finding, and the actions we are taking to protect and promote we believe we can find encouragement in the recovering the interests of our shareholders. The independent trustees economy and rising equity markets. As we write this letter, of the funds are receiving regular reports from their for instance, the S&P 500--Registered Trademark-- Index is up independent counsel and outside counsel hired by AMVESCAP approximately 23% year-to-date. Although past performance is PLC, the parent of AIM and IFG, to perform an ongoing no guarantee of future results, there appear to be indicators investigation of market timing. that the economy and stock markets are showing signs of welcomed improvement. We encourage you to read the enclosed A COMPLEX ISSUE discussion of your fund's performance during this past reporting period. Market timing is an investment technique not defined in any regulation that involves frequent short-term trading of OUR UNWAVERING COMMITMENT mutual fund shares, sometimes with a goal to exploit inefficiencies in the way mutual funds price their shares. We At AIM Investments, we have never wavered in our commitment recognize that fund management companies have tried to deal to helping you build solutions for your financial goals. Our with this complex issue in various ways and believe that company was founded on a core principle of integrity, and we industry-wide guidance is in order. To that end, we welcome have always worked hard to earn the trust of our SEC Chairman William Donaldson's pledge to adopt new rules shareholders. We are committed to doing all we can to designed to curb market timing abuses. Comprehensive maintain your trust and confidence. rulemaking is necessary and is the best way to establish new industry responsibilities designed to protect shareholders. Thank you for your continued participation in AIM We support practical rule changes and structural Investments. Please call your financial advisor or one of our modifications that are fair, enforceable and, most Client Service representatives at 800-959-4246 if you have importantly, beneficial for investors. any further questions or concerns about your AIM Investments account. AIM Investments has policies in place designed to identify, prevent and eliminate harmful trading or other Sincerely, activities deemed to be detrimental to the funds. We have also recently taken additional steps--implemented /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson Chairman and President President and CEO The AIM Family of AIM Investments Funds--Registered Trademark-- December 18, 2003
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE SIGNS OF ECONOMIC rations that had reported third-quarter RECOVERY BENEFIT FUND 2003 earnings exceeded analysts' expectations. Signs of a strengthening economy MARKET CONDITIONS benefited the broad U.S. stock market and For most of the fiscal year, the AIM Weingarten Fund for the fiscal year Signs of a generally improving economy Federal Reserve (the Fed) kept the ended October 31, 2003. For the fiscal helped the U.S. stock market rise for short-term federal funds rate at 1.25%. year covered by this report, the fund's much of the fiscal year ended October 31, On June 25, 2003, it lowered that rate to Class A, Class B, Class C, and Class R 2003. The S&P 500 rose in November 2002, 1.00%, its lowest level since 1958, shares returned 22.26%, 21.43%, 21.40%, but then declined for several months, saying that it favored a more expansive and 21.94%, respectively, at net asset reaching a low for the fiscal year on monetary policy because the economy had value. For the fiscal year, AIM March 11, 2003. The market rallied for not yet exhibited sustainable growth. By Weingarten Fund outperformed the S&P 500, the remainder of the fiscal year. October, the Fed reported that the pace which returned 20.79%, and the Lipper of economic expansion had picked up, Large-Cap Growth Fund Index, which The start of the market's rally consumer spending generally strengthened, returned 18.51%. It paced the Russell coincided with the commencement of and residential real estate was 1000 Growth Index, which returned 21.81% Operation Iraqi Freedom on March 19, strong--but that commercial real estate for the fiscal year. 2003. U.S. and allied forces quickly was sluggish and that labor markets toppled the regime of Saddam Hussein, and remained weak. Indeed, the nation's ========================================= by May 1 President Bush was able to unemployment rate was 6.0% at the close announce that major combat operations in of the fiscal year. FOR THE FISCAL YEAR, AIM Iraq had ended. For the fiscal year: WEINGARTEN FUND The U.S. economy expanded during the fiscal year. Gross domestic product, the o All sectors of the S&P 500 recorded OUTPERFORMED THE broadest measure of economic activity, gains. grew at an annualized rate of 1.4% in the S&P 500... AND THE first quarter of 2003, 3.3% in the second o Information technology, materials, and quarter, and 8.2% in the third quarter. utilities were the top-performing LIPPER LARGE-CAP Corporate earnings also showed signs of sectors while telecommunication strength. According to Bloomberg, as of services, consumer staples, and health GROWTH FUND INDEX.... the close of the fiscal year, more than care were the weakest-performing 65% of S&P 500 corpo- sectors. ========================================= o Small- and mid-cap stocks generally outperformed large-cap stocks, the type of stocks in which the fund primarily invests.
==================================================================================================================================== TOTAL NUMBER OF HOLDINGS* 92 TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* TOTAL NET ASSETS $2.8 billion 1. Microsoft Corp. 3.3% 1. Semiconductors 9.3% PORTFOLIO COMPOSITION BY SECTOR* 2. Cisco Systems, Inc. 3.0 2. Systems Software 7.3 Information Technology 37.8% 3. Citigroup Inc. 2.5 3. Communications Equipment 6.3 Health Care 18.1 4. Tyco International Ltd. (Bermuda) 2.2 4. Pharmaceuticals 5.5 Consumer Discretionary 14.9 5. Novellus Systems, Inc. 2.2 5. Investment Banking & Brokerage 4.9 Financials 13.6 6. Intel Corp. 2.1 6. Health Care Equipment 4.3 Industrials 6.8 7. Boston Scientific Corp. 2.1 7. Internet Retail 3.5 All Others 8.8 8. Aetna Inc. 2.0 8. Biotechnology 3.3 9. Amazon.com, Inc. 1.9 9. Semiconductor Equipment 3.2 10. VERITAS Software Corp. 1.9 10. Managed Health Care 3.1 *Excludes money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ====================================================================================================================================
2 YOUR FUND Amazon.com. In August, Cisco reported JAMES G. BIRDSALL fiscal 2003 net income of $3.6 billion, [PHOTO OF Mr. Birdsall is a portfolio At the close of the fiscal year, the fund up sharply from $1.9 billion for fiscal JAMES G. manager of AIM Weingarten was overweight consumer discretionary, 2002. In our view, Cisco is one of a BIRDSALL] Fund. He has been financials, and information technology growing number of companies benefiting associated with AIM since stocks, and underweight consumer staples, from the ongoing economic recovery. By 1995, and assumed his current position in health care, and industrials stocks aggressively cutting prices and offering 1999. Mr. Birdsall received his B.B.A. relative to the Russell 1000 Growth customers free shipping, Amazon has with a concentration in finance from Index. For the fiscal year, information sharply increased its sales and Stephen F. Austin State University before technology, health care, consumer profitability. For the third quarter, earning his M.B.A. with a concentration discretionary, and financials stocks sales rose from $851 million in 2002 to in finance and international business contributed most significantly to the $1.13 billion in 2003, transforming a $10 from the University of St. Thomas. fund's positive performance. million third-quarter loss in 2002 into a Telecommunications services was the only $52 million third-quarter profit in 2003 sector that negatively affected fund and boosting the company's share price. MONIKA H. DEGAN performance for the year. [PHOTO OF Ms. Degan, Chartered ========================================= MONIKA H. Financial Analyst, is a While the number of equities in the DEGAN] senior portfolio manager of fund declined significantly--from 135 at FOR THE FISCAL YEAR, AIM Weingarten Fund. She the start of the fiscal year to 92 at its joined AIM in 1995 as an investment close-- the weighting of top 10 holdings INFORMATION TECHNOLOGY, officer and portfolio analyst for equity remained relatively steady at securities and was promoted to her approximately 23% of total net assets. HEALTH CARE, current position in 1997. She has been in The decrease in the number of fund the investment business since 1991. Ms. holdings resulted from our growing CONSUMER DISCRETIONARY, Degan received a B.B.A. in finance and an confidence about the economic recovery M.B.A. in finance and international and the increasing likelihood of AND FINANCIALS STOCKS business, both from the University of subsequent improvements in business and Houston. earnings fundamentals. CONTRIBUTED MOST LANNY H. SACHNOWITZ As our outlook for corporate earnings SIGNIFICANTLY TO [PHOTO OF Mr. Sachnowitz is the lead improved and corporations met or exceeded LANNY H. portfolio manager of AIM their earnings expectations, we reduced THE FUND'S POSITIVE SACHNOWITZ] Weingarten Fund. He joined the number of holdings in an attempt to AIM in 1987 as a money focus on those companies that we believed PERFORMANCE. market trader and research analyst. In represented the most compelling 1990, Mr. Sachnowitz's trading investment opportunities--while still ========================================= responsibilities were expanded to include being mindful of the benefits of head of equity trading. He was named to remaining diversified across enough IN CLOSING his current position in 1991. Mr. individual holdings and industries. This Sachnowitz received a B.S. in finance diversification helps mitigate the fund's As the fiscal year ended, there were from the University of Southern downside risk of earnings signs that the economy was strengthening; California and an M.B.A. from the disappointments, which undoubtedly will time will tell whether that recovery is University of Houston. arise as increasing earnings expectations sustainable. Regardless, we will continue are reflected in higher stock prices. The to seek out investments primarily in Assisted by the Large Cap Growth Team. percentage of total net assets invested larger-capitalized companies in large-cap stocks rose, from 78% to demonstrating market-leading 85%, over the course of the fiscal year, characteristics with excellent prospects while the percentage invested in mid-cap of near-term and long-term earnings and stocks declined from 21% to 15%. revenue growth in an attempt to achieve the fund's investment objective. Stocks that contributed to fund [GRAPHIC] For More Information Visit performance included Cisco, a worldwide See important fund and index leader in networking for the Internet, disclosures inside front cover. AIMinvestments.com and online retailer
3 FUND PERFORMANCE RESULTS OF A $10,000 INVESTMENT 6/17/69-10/31/03 [MOUNTAIN CHART]
Date AIM Weingarten Fund S&P 500 Class A Shares Index 6/17/1969 $ 9450 $ 10000 10/31/1969 9412 10063 10/31/1970 8239 8948 10/31/1971 11479 10456 10/31/1972 14242 12748 10/31/1973 12901 12749 10/31/1974 8113 9080 10/31/1975 10270 11438 10/31/1976 10492 13744 10/31/1977 12919 12914 10/31/1978 15590 13734 10/31/1979 21778 15855 10/31/1980 40403 20946 10/31/1981 40775 21066 10/31/1982 46283 24496 10/31/1983 65454 31342 10/31/1984 63085 33338 10/31/1985 75461 39782 10/31/1986 107199 52984 10/31/1987 113273 56374 10/31/1988 127769 64694 10/31/1989 172650 81744 10/31/1990 165700 75630 10/31/1991 240064 100902 10/31/1992 256524 110940 10/31/1993 272346 127481 10/31/1994 282539 132398 10/31/1995 362254 167362 10/31/1996 415916 207665 10/31/1997 527513 274323 10/31/1998 592670 334707 10/31/1999 821856 420602 10/31/2000 908729 446165 10/31/2001 478173 335120 10/31/2002 358332 284528 10/31/2003 $438256 $343672 Source: Lipper, Inc. ===========================================================================================================================
AVERAGE ANNUAL TOTAL RETURNS CLASS R SHARES* CLASS B SHARES As of 10/31/03, including sales charges 10 Years 4.66% Inception (6/26/95) 1.94% 5 Years -6.05 5 Years -7.02 CLASS A SHARES 1 Year 21.94 1 Year 19.94 Inception (6/17/69) 11.63% 10 Years 4.27 In addition to returns as of the close of CLASS C SHARES 5 Years -6.92 the fiscal year, industry regulations Inception (8/4/97) -4.96% 1 Year 15.55 require us to provide average annual 5 Years -6.75 total returns (including sales charges) 1 Year 23.91 CLASS B SHARES for periods ended 9/30/03, the most Inception (6/26/95) 2.68% recent calendar quarter-end. CLASS R SHARES* 5 Years -6.82 10 Years 4.08% 1 Year 16.43 AVERAGE ANNUAL TOTAL RETURNS 5 Years -6.23 As of 9/30/03, including sales charges 1 Year 25.81 CLASS C SHARES Inception (8/4/97) -3.95% CLASS A SHARES *The returns shown for these periods are 5 Years -6.56 Inception (6/17/69) 11.45% the blended returns of the historical 1 Year 20.40 10 Years 3.69 performance of the fund's Class R shares 5 Years -7.11 since their inception and the restated 1 Year 19.02 historical performance of the fund's Class A shares (for the periods prior to inception of the Class R
4 Your fund's total return includes sales charges, expenses and management fees. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. For fund performance calculations and indexes used in this report, please see the inside front cover. Performance shown in the chart and table does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the index does not reflect the effects of taxes. This growth chart uses a logarithmic scale, which means the price scale (vertical axis) is structured so that a given distance always represents the same percent change in price, rather [CHART] than the same absolute change in price. For example, the distance from one to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is 10 times greater on a linear chart. A logarithmic scale better illustrates performance in the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. S&P 500 Index data from 6/30/69. Source: Lipper Inc. - -------------------------------------------------------------------------------------------------------------------------- shares) at net asset value, adjusted to reflect FUND VS. INDEX the higher Rule 12b-1 fees applicable to the Class Total returns 10/31/02-10/31/03, excluding sales charges R shares. The inception date of Class A shares is 6/17/69. The inception date of the fund's Class R [BAR CHART] shares is 6/3/02. Calculation of blended returns as of 10/31/03 is from 10/31/93. Calculation of AIM WEINGARTEN FUND blended returns as of 9/30/03 is from 9/30/93. CLASS A SHARES 22.26% Past performance cannot guarantee comparable AIM WEINGARTEN FUND future results. Due to significant market CLASS B SHARES 21.43% volatility, results of an investment made today may differ substantially from the historical AIM WEINGARTEN FUND performance shown. Call your financial advisor for CLASS C SHARES 21.40% more current performance. AIM WEINGARTEN FUND CLASS R SHARES 21.94% S&P 500 INDEX 20.79% Source: Lipper, Inc.
5 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/03 AIM WEINGARTEN FUND INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is not For periods ended 10/31/03 indicative of future results. More The following information has been recent returns may be more or less than prepared to provide Institutional Class INCEPTION (10/8/91) 5.90% those shown. All returns assume shareholders with a performance overview 10 Years 5.37 reinvestment of distributions at net specific to their holdings. 5 Years -5.39 asset value. Investment return and Institutional Class shares are offered 1 Year 23.11 principal value will fluctuate so your exclusively to institutional investors, shares, when redeemed, may be worth more including defined contribution plans AVERAGE ANNUAL TOTAL RETURNS or less than their original cost. See that meet certain criteria. Performance For periods ended 9/30/03 full report for information on of Institutional Class shares will (most recent calendar quarter-end) comparative benchmarks. If you have differ from performance of Class A questions, please consult your fund shares due to differing sales charges INCEPTION (10/8/91) 5.39% prospectus or call 800-451-4246. A I M and class expenses. 10 Years 4.78 Distributors, Inc. 5 Years -5.59 1 Year 26.77
FOR INSTITUTIONAL INVESTOR USE ONLY This material is prepared for institutional investor use only and may not be quoted, reproduced or shown to members of the public, nor used in written form as sales literature for public use. YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Servicemark-- --Servicemark-- AIMinvestments.com WEI-INS-1 10/03 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2003
MARKET SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-96.50% ADVERTISING-0.85% Omnicom Group Inc. 300,000 $ 23,940,000 ============================================================================= APPAREL RETAIL-1.53% Gap, Inc. (The) 2,250,000 42,930,000 ============================================================================= APPLICATION SOFTWARE-0.55% PeopleSoft, Inc.(a) 750,000 15,570,000 ============================================================================= ASSET MANAGEMENT & CUSTODY BANKS-0.67% Franklin Resources, Inc. 400,000 18,968,000 ============================================================================= BIOTECHNOLOGY-3.30% Amgen Inc.(a) 750,000 46,320,000 - ----------------------------------------------------------------------------- Genentech, Inc.(a) 400,000 32,788,000 - ----------------------------------------------------------------------------- Gilead Sciences, Inc.(a) 250,000 13,645,000 ============================================================================= 92,753,000 ============================================================================= BREWERS-0.53% Anheuser-Busch Cos., Inc. 300,000 14,778,000 ============================================================================= CASINOS & GAMING-0.76% International Game Technology 650,000 21,287,500 ============================================================================= COMMUNICATIONS EQUIPMENT-6.32% Cisco Systems, Inc.(a) 4,000,000 83,920,000 - ----------------------------------------------------------------------------- Corning Inc.(a) 2,000,000 21,960,000 - ----------------------------------------------------------------------------- Juniper Networks, Inc.(a) 1,250,000 22,487,500 - ----------------------------------------------------------------------------- Motorola, Inc. 2,000,000 27,060,000 - ----------------------------------------------------------------------------- Nortel Networks Corp. (Canada)(a) 5,000,000 22,250,000 ============================================================================= 177,677,500 ============================================================================= COMPUTER & ELECTRONICS RETAIL-1.66% Best Buy Co., Inc. 800,000 46,648,000 ============================================================================= COMPUTER HARDWARE-2.60% Dell Inc.(a) 1,400,000 50,568,000 - ----------------------------------------------------------------------------- International Business Machines Corp. 250,000 22,370,000 ============================================================================= 72,938,000 ============================================================================= COMPUTER STORAGE & PERIPHERALS-2.05% EMC Corp.(a) 3,000,000 41,520,000 - ----------------------------------------------------------------------------- Seagate Technology (Cayman Islands) 700,000 16,086,000 ============================================================================= 57,606,000 ============================================================================= CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.54% Deere & Co. 250,000 15,155,000 =============================================================================
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MARKET SHARES VALUE CONSUMER FINANCE-3.03% American Express Co. 750,000 $ 35,197,500 - ----------------------------------------------------------------------------- MBNA Corp. 1,150,000 28,462,500 - ----------------------------------------------------------------------------- SLM Corp. 550,000 21,538,000 ============================================================================= 85,198,000 ============================================================================= DATA PROCESSING & OUTSOURCED SERVICES-2.15% Affiliated Computer Services, Inc.-Class A(a) 300,000 14,679,000 - ----------------------------------------------------------------------------- First Data Corp. 300,000 10,710,000 - ----------------------------------------------------------------------------- Fiserv, Inc.(a) 550,000 19,426,000 - ----------------------------------------------------------------------------- Paychex, Inc. 400,000 15,568,000 ============================================================================= 60,383,000 ============================================================================= DIVERSIFIED BANKS-0.57% Wachovia Corp. 350,000 16,054,500 ============================================================================= DIVERSIFIED CAPITAL MARKETS-1.15% J.P. Morgan Chase & Co. 900,000 32,310,000 ============================================================================= DIVERSIFIED COMMERCIAL SERVICES-2.90% Apollo Group, Inc.-Class A(a) 300,000 19,059,000 - ----------------------------------------------------------------------------- Cendant Corp.(a) 2,250,000 45,967,500 - ----------------------------------------------------------------------------- H&R Block, Inc. 350,000 16,481,500 ============================================================================= 81,508,000 ============================================================================= DRUG RETAIL-0.50% CVS Corp. 400,000 14,072,000 ============================================================================= ELECTRONIC EQUIPMENT MANUFACTURERS-0.80% Agilent Technologies, Inc.(a) 900,000 22,428,000 ============================================================================= FOOTWEAR-0.57% NIKE, Inc.-Class B 250,000 15,975,000 ============================================================================= GENERAL MERCHANDISE STORES-1.25% Family Dollar Stores, Inc. 350,000 15,263,500 - ----------------------------------------------------------------------------- Target Corp. 500,000 19,870,000 ============================================================================= 35,133,500 ============================================================================= HEALTH CARE EQUIPMENT-4.32% Becton, Dickinson & Co. 350,000 12,796,000 - ----------------------------------------------------------------------------- Boston Scientific Corp.(a) 850,000 57,562,000 - ----------------------------------------------------------------------------- Guidant Corp. 400,000 20,404,000 - ----------------------------------------------------------------------------- Medtronic, Inc. 250,000 11,392,500 - -----------------------------------------------------------------------------
F-1
MARKET SHARES VALUE - ----------------------------------------------------------------------------- HEALTH CARE EQUIPMENT-(CONTINUED) Zimmer Holdings, Inc.(a) 300,000 $ 19,143,000 ============================================================================= 121,297,500 ============================================================================= HEALTH CARE SERVICES-0.89% Caremark Rx, Inc.(a) 1,000,000 25,050,000 ============================================================================= HEALTH CARE SUPPLIES-0.98% Alcon, Inc. (Switzerland) 500,000 27,555,000 ============================================================================= HOME ENTERTAINMENT SOFTWARE-0.88% Electronic Arts Inc.(a) 250,000 24,760,000 ============================================================================= HOME IMPROVEMENT RETAIL-1.65% Home Depot, Inc. (The) 1,250,000 46,337,500 ============================================================================= HOTELS, RESORTS & CRUISE LINES-0.48% Starwood Hotels & Resorts Worldwide, Inc. 400,000 13,492,000 ============================================================================= HOUSEHOLD PRODUCTS-1.91% Colgate-Palmolive Co. 175,000 9,308,250 - ----------------------------------------------------------------------------- Procter & Gamble Co. (The) 450,000 44,230,500 ============================================================================= 53,538,750 ============================================================================= INDUSTRIAL CONGLOMERATES-2.23% Tyco International Ltd. (Bermuda) 3,000,000 62,640,000 ============================================================================= INDUSTRIAL MACHINERY-1.17% Danaher Corp. 250,000 20,712,500 - ----------------------------------------------------------------------------- Ingersoll-Rand Co.-Class A (Bermuda) 200,000 12,080,000 ============================================================================= 32,792,500 ============================================================================= INTERNET RETAIL-3.45% Amazon.com, Inc.(a) 1,000,000 54,420,000 - ----------------------------------------------------------------------------- eBay Inc.(a) 400,000 22,376,000 - ----------------------------------------------------------------------------- InterActiveCorp.(a) 550,000 20,190,500 ============================================================================= 96,986,500 ============================================================================= INTERNET SOFTWARE & SERVICES-1.55% Yahoo! Inc.(a) 1,000,000 43,700,000 ============================================================================= INVESTMENT BANKING & BROKERAGE-4.93% Charles Schwab Corp. (The) 1,650,000 22,374,000 - ----------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 500,000 46,950,000 - ----------------------------------------------------------------------------- Lehman Brothers Holdings Inc. 550,000 39,600,000 - ----------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 500,000 29,600,000 ============================================================================= 138,524,000 ============================================================================= IT CONSULTING & OTHER SERVICES-1.04% Accenture Ltd.-Class A (Bermuda)(a) 1,250,000 29,250,000 ============================================================================= MANAGED HEALTH CARE-3.13% Aetna Inc. 1,000,000 57,410,000 - -----------------------------------------------------------------------------
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MARKET SHARES VALUE MANAGED HEALTH CARE-(CONTINUED) UnitedHealth Group Inc. 600,000 $ 30,528,000 ============================================================================= 87,938,000 ============================================================================= MOTORCYCLE MANUFACTURERS-0.42% Harley-Davidson, Inc. 250,000 11,852,500 ============================================================================= MOVIES & ENTERTAINMENT-0.99% Viacom Inc.-Class B 700,000 27,909,000 ============================================================================= MULTI-LINE INSURANCE-0.76% American International Group, Inc. 350,000 21,290,500 ============================================================================= OIL & GAS DRILLING-0.73% ENSCO International Inc. 350,000 9,222,500 - ----------------------------------------------------------------------------- Nabors Industries, Ltd. (Bermuda)(a) 300,000 11,340,000 ============================================================================= 20,562,500 ============================================================================= OIL & GAS EQUIPMENT & SERVICES-0.33% Schlumberger Ltd. (Netherlands) 200,000 9,394,000 ============================================================================= OTHER DIVERSIFIED FINANCIAL SERVICES-2.53% Citigroup Inc. 1,500,000 71,100,000 ============================================================================= PHARMACEUTICALS-5.47% Johnson & Johnson 550,000 27,681,500 - ----------------------------------------------------------------------------- Lilly (Eli) & Co. 325,000 21,651,500 - ----------------------------------------------------------------------------- Pfizer Inc. 1,350,000 42,660,000 - ----------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd.-ADR (Israel) 350,000 19,911,500 - ----------------------------------------------------------------------------- Wyeth 950,000 41,933,000 ============================================================================= 153,837,500 ============================================================================= SEMICONDUCTOR EQUIPMENT-3.24% Applied Materials, Inc.(a) 1,250,000 29,212,500 - ----------------------------------------------------------------------------- Novellus Systems, Inc.(a) 1,500,000 61,935,000 ============================================================================= 91,147,500 ============================================================================= SEMICONDUCTORS-9.26% Analog Devices, Inc.(a) 1,000,000 44,330,000 - ----------------------------------------------------------------------------- Intel Corp. 1,800,000 59,490,000 - ----------------------------------------------------------------------------- Linear Technology Corp. 700,000 29,827,000 - ----------------------------------------------------------------------------- Maxim Integrated Products, Inc. 600,000 29,826,000 - ----------------------------------------------------------------------------- Microchip Technology Inc. 1,000,000 32,710,000 - ----------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd.-ADR (Taiwan) 2,000,000 22,120,000 - ----------------------------------------------------------------------------- Texas Instruments Inc. 1,450,000 41,934,000 ============================================================================= 260,237,000 ============================================================================= SOFT DRINKS-0.77% PepsiCo, Inc. 450,000 21,519,000 =============================================================================
F-2
MARKET SHARES VALUE - ----------------------------------------------------------------------------- SPECIALTY CHEMICALS-0.48% Ecolab Inc. 500,000 $ 13,445,000 ============================================================================= SPECIALTY STORES-1.32% Bed Bath & Beyond Inc.(a) 500,000 21,120,000 - ----------------------------------------------------------------------------- Staples, Inc.(a) 600,000 16,092,000 ============================================================================= 37,212,000 ============================================================================= SYSTEMS SOFTWARE-7.31% Computer Associates International, Inc. 1,850,000 43,512,000 - ----------------------------------------------------------------------------- Microsoft Corp. 3,500,000 91,525,000 - ----------------------------------------------------------------------------- Oracle Corp.(a) 1,500,000 17,940,000 - ----------------------------------------------------------------------------- VERITAS Software Corp.(a) 1,450,000 52,417,500 ============================================================================= 205,394,500 ============================================================================= Total Common Stocks & Other Equity Interests (Cost $2,125,580,640) 2,712,075,750 ============================================================================= MONEY MARKET FUNDS-2.59% STIC Liquid Assets Portfolio(b) 36,428,079 36,428,079 - ----------------------------------------------------------------------------- STIC Prime Portfolio(b) 36,428,079 36,428,079 ============================================================================= Total Money Market Funds (Cost $72,856,158) 72,856,158 ============================================================================= TOTAL INVESTMENTS-99.09% (excluding investments purchased with cash collateral from securities loaned) (Cost $2,198,436,798) 2,784,931,908 =============================================================================
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MARKET SHARES VALUE INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-1.39% STIC Liquid Assets Portfolio(b)(c) 38,996,800 $ 38,996,800 ============================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $38,996,800) 38,996,800 ============================================================================= TOTAL INVESTMENTS-100.48% (Cost $2,237,433,598) 2,823,928,708 ============================================================================= OTHER ASSETS LESS LIABILITIES-(0.48%) (13,478,280) ============================================================================= NET ASSETS-100.00% $2,810,450,428 _____________________________________________________________________________ =============================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) The money market fund and the Fund are affiliated by having the same investment advisor. (c) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Notes to Financial Statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 ASSETS: Investments, at market value (cost $2,125,580,640)* $ 2,712,075,750 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $111,852,958) 111,852,958 - ------------------------------------------------------------ Foreign currencies, at value (cost $361) 368 - ------------------------------------------------------------ Cash 38,826 - ------------------------------------------------------------ Receivables for: Investments sold 56,632,123 - ------------------------------------------------------------ Fund shares sold 752,372 - ------------------------------------------------------------ Dividends 1,956,386 - ------------------------------------------------------------ Investment for deferred compensation plan 202,866 - ------------------------------------------------------------ Other assets 118,747 ============================================================ Total assets 2,883,630,396 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 24,490,221 - ------------------------------------------------------------ Fund shares reacquired 5,738,163 - ------------------------------------------------------------ Deferred compensation plan 202,866 - ------------------------------------------------------------ Collateral upon return of securities loaned 38,996,800 - ------------------------------------------------------------ Accrued distribution fees 1,089,622 - ------------------------------------------------------------ Accrued trustees' fees 267,499 - ------------------------------------------------------------ Accrued transfer agent fees 1,913,397 - ------------------------------------------------------------ Accrued operating expenses 481,400 ============================================================ Total liabilities 73,179,968 ============================================================ Net assets applicable to shares outstanding $ 2,810,450,428 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 5,800,081,560 - ------------------------------------------------------------ Undistributed net investment income (loss) (462,775) - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities, foreign currencies and option contracts (3,575,663,474) - ------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies and option contracts 586,495,117 ============================================================ $ 2,810,450,428 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 2,160,823,000 ____________________________________________________________ ============================================================ Class B $ 555,778,704 ____________________________________________________________ ============================================================ Class C $ 91,324,993 ____________________________________________________________ ============================================================ Class R $ 311,194 ____________________________________________________________ ============================================================ Institutional Class $ 2,212,537 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 186,477,767 ____________________________________________________________ ============================================================ Class B 51,888,597 ____________________________________________________________ ============================================================ Class C 8,518,684 ____________________________________________________________ ============================================================ Class R 26,927 ____________________________________________________________ ============================================================ Institutional Class 181,315 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 11.59 - ------------------------------------------------------------ Offering price per share: (Net asset value of $11.59 divided by 94.50%) $ 12.26 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 10.71 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 10.72 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 11.56 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 12.20 ____________________________________________________________ ============================================================
* At October 31, 2003, securities with an aggregate market value of $37,694,563 were on loan to brokers. See Notes to Financial Statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2003 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $119,306) $ 20,368,727 - --------------------------------------------------------------------------- Dividends from affiliated money market funds 414,720 - --------------------------------------------------------------------------- Interest 3,316 - --------------------------------------------------------------------------- Securities lending 71,442 =========================================================================== Total investment income 20,858,205 =========================================================================== EXPENSES: Advisory fees 17,030,956 - --------------------------------------------------------------------------- Administrative services fees 519,857 - --------------------------------------------------------------------------- Custodian fees 187,065 - --------------------------------------------------------------------------- Distribution fees: Class A 6,092,977 - --------------------------------------------------------------------------- Class B 5,246,170 - --------------------------------------------------------------------------- Class C 852,575 - --------------------------------------------------------------------------- Class R 920 - --------------------------------------------------------------------------- Transfer agent fees 12,045,211 - --------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 1,175 - --------------------------------------------------------------------------- Trustees' fees 56,657 - --------------------------------------------------------------------------- Other 1,125,910 =========================================================================== Total expenses 43,159,473 =========================================================================== Less: Fees waived and expense offset arrangements (56,902) =========================================================================== Net expenses 43,102,571 =========================================================================== Net investment income (loss) (22,244,366) =========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities (151,651,661) - --------------------------------------------------------------------------- Foreign currencies 115,427 - --------------------------------------------------------------------------- Option contracts written (1,282,993) =========================================================================== (152,819,227) =========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 703,746,614 - --------------------------------------------------------------------------- Foreign currencies (19) - --------------------------------------------------------------------------- Option contracts written (44,617) =========================================================================== 703,701,978 =========================================================================== Net gain from investment securities, foreign currencies and option contracts 550,882,751 =========================================================================== Net increase in net assets resulting from operations $ 528,638,385 ___________________________________________________________________________ ===========================================================================
See Notes to Financial Statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2003 and 2002
2003 2002 - ----------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (22,244,366) $ (32,392,421) - ----------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities, foreign currencies, futures contracts and option contracts (152,819,227) (796,583,815) - ----------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies and option contracts 703,701,978 (246,187,556) =============================================================================================== Net increase (decrease) in net assets resulting from operations 528,638,385 (1,075,163,792) =============================================================================================== Share transactions-net: Class A (354,029,189) (1,064,806,254) - ----------------------------------------------------------------------------------------------- Class B (78,758,321) (180,109,268) - ----------------------------------------------------------------------------------------------- Class C (11,803,823) (30,575,415) - ----------------------------------------------------------------------------------------------- Class R 190,176 72,385 - ----------------------------------------------------------------------------------------------- Institutional Class (83,682) (5,419,461) =============================================================================================== Net increase (decrease) in net assets resulting from share transactions (444,484,839) (1,280,838,013) =============================================================================================== Net increase (decrease) in net assets 84,153,546 (2,356,001,805) =============================================================================================== NET ASSETS: Beginning of year 2,726,296,882 5,082,298,687 =============================================================================================== End of year (including undistributed net investment income (loss) of $(462,775) and $(437,153) for 2003 and 2002, respectively) $2,810,450,428 $ 2,726,296,882 _______________________________________________________________________________________________ ===============================================================================================
NOTES TO FINANCIAL STATEMENTS October 31, 2003 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of fifteen separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to provide growth of capital. Each company listed in the Schedule of Investments is organized in the United States unless otherwise noted. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. Short- F-6 term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code. E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of F-7 the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold. I. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks also include to varying degrees, the risk of loss in excess of the variation margin. J. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the first $30 million of the Fund's average daily net assets, plus 0.75% of the Fund's average daily net assets in excess of $30 million up to and including $350 million, plus 0.625% of the Fund's average daily net assets in excess of $350 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $8,168. Under the terms of a master sub-advisory agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2003, AIM was paid $519,857 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as AIM Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the year ended October 31, 2003, AISI retained $6,264,097 for such services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B, Class C and Class R shares paid $6,092,977, $5,246,170, $852,575 and $920, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $286,925 in front-end sales commissions from the sale of Class A shares and $3,720, $0, $7,667 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--EXPENSE OFFSET ARRANGEMENTS For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $47,339 and reductions in custodian fees of $1,395 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $48,734. NOTE 4--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan. During the year ended October 31, 2003, the Fund paid legal fees of $6,495 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as F-8 counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. Effective June 26, 2003, the Fund became a participant in an uncommitted unsecured revolving line of credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003. During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility. Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points. NOTE 6--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. At October 31, 2003, securities with an aggregate value of $37,694,563 were on loan to brokers. The loans were secured by cash collateral of $38,996,800 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $71,442 for securities lending. NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD - ------------------------------------------------------------ CALL OPTION CONTRACTS ------------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED - ------------------------------------------------------------ Beginning of year 2,500 $ 585,867 - ------------------------------------------------------------ Written 87,660 14,767,945 - ------------------------------------------------------------ Closed (68,350) (12,127,993) - ------------------------------------------------------------ Exercised (20,307) (2,862,014) - ------------------------------------------------------------ Expired (1,503) (363,805) ============================================================ End of year -- $ -- ____________________________________________________________ ============================================================
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS Distributions to Shareholders: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002. Tax Components of Net Assets: As of October 31, 2003, the components of net assets on a tax basis were as follows: Unrealized appreciation -- investments $ 529,571,996 - ------------------------------------------------------------ Temporary book/tax differences (462,775) - ------------------------------------------------------------ Capital loss carryforward (3,518,740,353) - ------------------------------------------------------------ Shares of beneficial interest 5,800,081,560 ============================================================ Total net assets $ 2,810,450,428 ____________________________________________________________ ============================================================
The difference between book-basis and tax-basis unrealized appreciation is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the tax deferral of losses on wash sales and the tax deferral of losses on certain option transactions. Amount includes appreciation on foreign currencies of $7. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the deferral of trustee compensation and trustee retirement plan expenses. F-9 The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD - ------------------------------------------------------------------------------ October 31, 2009 $2,559,101,338 - ------------------------------------------------------------------------------ October 31, 2010 763,027,747 - ------------------------------------------------------------------------------ October 31, 2011 196,611,268 ============================================================================== Total capital loss carryforward $3,518,740,353 ______________________________________________________________________________ ==============================================================================
NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $2,894,591,510 and $3,402,084,060, respectively.
UNREALIZED APPRECIATION (DEPRECIATION)OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $572,406,984 - ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (42,834,995) ============================================================================== Net unrealized appreciation of investment securities $529,571,989 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $2,294,356,719.
NOTE 10--RECLASSIFICATIONS OF PERMANENT DIFFERENCES As a result of differing book/tax treatment of foreign currency transactions and net operating losses on October 31, 2003, undistributed net investment income increased by $22,218,744, undistributed net realized gains decreased by $115,427 and shares of beneficial interest decreased by $22,103,317. This reclassification had no effect on the net assets of the Fund. NOTE 11--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and the Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and the Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - ----------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2003 2002 ---------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------------------------------------- Sold: Class A 10,192,956 $ 102,256,843 16,597,940 $ 199,251,597 - ----------------------------------------------------------------------------------------------------------------------------- Class B 5,051,931 47,044,808 5,995,984 66,787,479 - ----------------------------------------------------------------------------------------------------------------------------- Class C 1,715,252 15,941,057 1,919,777 21,362,371 - ----------------------------------------------------------------------------------------------------------------------------- Class R* 23,136 234,973 7,975 72,385 - ----------------------------------------------------------------------------------------------------------------------------- Institutional Class 16,638 177,847 45,598 504,589 ============================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 1,369,192 14,331,798 368,013 4,307,233 - ----------------------------------------------------------------------------------------------------------------------------- Class B (1,477,850) (14,331,798) (393,806) (4,307,233) ============================================================================================================================= Reacquired: Class A (47,251,093) (470,617,830) (111,225,206) (1,268,365,084) - ----------------------------------------------------------------------------------------------------------------------------- Class B (12,154,199) (111,471,331) (22,942,810) (242,589,514) - ----------------------------------------------------------------------------------------------------------------------------- Class C (2,990,841) (27,744,880) (4,815,984) (51,937,786) - ----------------------------------------------------------------------------------------------------------------------------- Class R* (4,184) (44,797) -- -- - ----------------------------------------------------------------------------------------------------------------------------- Institutional Class (25,361) (261,529) (438,298) (5,924,050) ============================================================================================================================= (45,534,423) $(444,484,839) (114,880,817) $(1,280,838,013) _____________________________________________________________________________________________________________________________ =============================================================================================================================
* Class R shares commenced sales on June 3, 2002. F-10 NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.47 $ 12.65 $ 28.16 $ 28.31 $ 21.72 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.07) (0.07)(a) (0.10) (0.14)(a) (0.10) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.19 (3.11) (11.87) 3.18 8.16 ================================================================================================================================= Total from investment operations 2.12 (3.18) (11.97) 3.04 8.06 ================================================================================================================================= Less distributions: Dividends from net investment income -- -- -- -- (0.01) - --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- (3.54) (3.19) (1.46) ================================================================================================================================= Total distributions -- -- (3.54) (3.19) (1.47) ================================================================================================================================= Net asset value, end of period $ 11.59 $ 9.47 $ 12.65 $ 28.16 $ 28.31 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 22.39% (25.14)% (47.38)% 10.61% 38.62% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $2,160,823 $2,104,660 $4,001,552 $8,948,781 $8,089,739 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers 1.47%(c) 1.33% 1.21% 1.03% 1.03% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 1.47%(c) 1.33% 1.22% 1.07% 1.08% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.68)%(c) (0.64)% (0.56)% (0.45)% (0.38)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 111% 217% 240% 145% 124% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $2,030,992,456.
CLASS B ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.82 $ 11.86 $ 26.82 $ 27.29 $ 21.12 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a) - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.03 (2.89) (11.21) 3.08 7.93 =============================================================================================================================== Total from investment operations 1.89 (3.04) (11.42) 2.72 7.63 =============================================================================================================================== Less distributions from net realized gains -- -- (3.54) (3.19) (1.46) =============================================================================================================================== Net asset value, end of period $ 10.71 $ 8.82 $ 11.86 $ 26.82 $ 27.29 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Total return(b) 21.43% (25.63)% (47.75)% 9.76% 37.59% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $555,779 $533,224 $922,476 $1,927,514 $1,291,456 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratio of expenses to average net assets: With fee waivers 2.17%(c) 2.04% 1.92% 1.78% 1.82% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.17%(c) 2.04% 1.93% 1.82% 1.87% =============================================================================================================================== Ratio of net investment income (loss) to average net assets (1.38)%(c) (1.34)% (1.27)% (1.20)% (1.17)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Portfolio turnover rate 111% 217% 240% 145% 124% _______________________________________________________________________________________________________________________________ ===============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $524,617,004. F-11 AIM WEINGARTEN FUND NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C ----------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.83 $ 11.87 $ 26.85 $ 27.30 $ 21.14 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.14) (0.15)(a) (0.21) (0.36)(a) (0.30)(a) - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.03 (2.89) (11.23) 3.10 7.92 =============================================================================================================================== Total from investment operations 1.89 (3.04) (11.44) 2.74 7.62 =============================================================================================================================== Less distributions from net realized gains -- -- (3.54) (3.19) (1.46) =============================================================================================================================== Net asset value, end of period $ 10.72 $ 8.83 $ 11.87 $ 26.85 $ 27.30 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Total return(b) 21.40% (25.61)% (47.77)% 9.83% 37.50% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $91,325 $86,455 $150,604 $301,590 $105,420 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratio of expenses to average net assets: With fee waivers 2.17%(c) 2.04% 1.92% 1.78% 1.82% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers 2.17%(c) 2.04% 1.93% 1.82% 1.87% =============================================================================================================================== Ratio of net investment income (loss) to average net assets (1.38)%(c) (1.34)% (1.27)% (1.20)% (1.17)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Portfolio turnover rate 111% 217% 240% 145% 124% _______________________________________________________________________________________________________________________________ ===============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges. (c) Ratios are based on average daily net assets of $85,257,460.
CLASS R --------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2003 2002 - ----------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.47 $ 11.36 - ----------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.06) (0.03)(a) - ----------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.15 (1.86) =============================================================================================== Total from investment operations 2.09 (1.89) =============================================================================================== Net asset value, end of period $11.56 $ 9.47 _______________________________________________________________________________________________ =============================================================================================== Total return(b) 22.07% (16.64)% _______________________________________________________________________________________________ =============================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 311 $ 76 _______________________________________________________________________________________________ =============================================================================================== Ratio of expenses to average net assets: 1.67%(c) 1.53%(d) _______________________________________________________________________________________________ =============================================================================================== Ratio of net investment income (loss) to average net assets (0.88)%(c) (0.84)%(d) _______________________________________________________________________________________________ =============================================================================================== Portfolio turnover rate(e) 111% 217% _______________________________________________________________________________________________ ===============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $184,086. (d) Annualized. (e) Not annualized for periods less than one year. F-12 AIM WEINGARTEN FUND NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS -------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------- 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.91 $ 13.16 $ 29.00 $ 28.96 $ 22.18 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.00 (0.01)(a) (0.01) (0.06)(a) 0.02 - ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.29 (3.24) (12.29) 3.29 8.32 ============================================================================================================================ Total from investment operations 2.29 (3.25) (12.30) 3.23 8.34 ============================================================================================================================ Less distributions: Dividends from net investment income -- -- -- -- (0.10) - ---------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- (3.54) (3.19) (1.46) ============================================================================================================================ Total distributions -- -- (3.54) (3.19) (1.56) ============================================================================================================================ Net asset value, end of period $12.20 $ 9.91 $ 13.16 $ 29.00 $ 28.96 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Total return(b) 23.11% (24.70)% (47.11)% 11.07% 39.20% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $2,213 $ 1,883 $ 7,667 $18,634 $114,076 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratio of expenses to average net assets: With fee waivers 0.78%(c) 0.82% 0.69% 0.64% 0.63% - ---------------------------------------------------------------------------------------------------------------------------- Without fee waivers 0.78%(c) 0.82% 0.70% 0.68% 0.68% ============================================================================================================================ Ratio of net investment income (loss) to average net assets 0.01%(c) (0.12)% (0.04)% (0.04)% 0.02% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Portfolio turnover rate 111% 217% 240% 145% 124% ____________________________________________________________________________________________________________________________ ============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America. (c) Ratios are based on average daily net assets of $1,901,891. NOTE 13--SUBSEQUENT EVENTS Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds. On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings. The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief. The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief. If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. F-13 NOTE 13--SUBSEQUENT EVENTS (CONTINUED) AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries. In addition to the complaints described above, multiple lawsuits, including purported class action and shareholder derivative suits, have been filed against certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily based upon the allegations in the complaints described above, but also regarding the funds' fair valuation pricing methodology. Such lawsuits allege a variety of theories for recovery including, but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; interest and the payment of attorneys' and experts' fees. Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the Funds, INVESCO, AIM, AMVESCAP and related parties in the future. As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition. F-14 REPORT OF INDEPENDENT AUDITORS To the Shareholders of AIM Weingarten Fund And Board of Trustees of AIM Equity Funds: We have audited the accompanying statement of assets and liabilities of AIM Weingarten Fund (a portfolio of AIM Equity Funds), including the schedule of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through October 31, 2000 were audited by other auditors whose report dated December 6, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Weingarten Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. Houston, Texas -s- ERNST & YOUNG LLP December 16, 2003 F-15 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Equity Funds, a Delaware statutory trust, was held on October 21, 2003. The meeting was held for the following purpose: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: 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. and Mark H. Williamson. The results of the voting on the above matters were as follows:
WITHHOLDING DIRECTORS/MATTER VOTES FOR AUTHORITY - --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 983,597,298 14,109,942 Frank S. Bayley.............................. 983,595,385 14,111,855 James T. Bunch............................... 983,970,384 13,736,856 Bruce L. Crockett............................ 983,967,974 13,739,266 Albert R. Dowden............................. 983,892,850 13,814,390 Edward K. Dunn, Jr........................... 983,672,087 14,035,153 Jack M. Fields............................... 983,987,281 13,719,959 Carl Frischling.............................. 983,352,244 14,354,996 Robert H. Graham............................. 983,794,290 13,912,950 Gerald J. Lewis.............................. 983,317,525 14,389,715 Prema Mathai-Davis........................... 983,676,086 14,031,154 Lewis F. Pennock............................. 983,703,651 14,003,589 Ruth H. Quigley.............................. 983,356,521 14,350,719 Louis S. Sklar............................... 983,812,619 13,894,621 Larry Soll, Ph.D............................. 983,820,425 13,886,815 Mark H. Williamson........................... 983,676,844 14,030,396
* Proposal required approval by a combined vote of all the portfolios of AIM Equity Funds F-16 OTHER INFORMATION TRUSTEES AND OFFICERS As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (The Trust), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) TRUST SINCE DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS - ---------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1988 Director and Chairman, A I M Management Group Inc. Trustee, Chairman and (financial services holding company); and Director and Vice President 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); and Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products - ---------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, A I M Trustee and Executive Vice Management Group Inc. (financial services holding company); President Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent); and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 2003 Consultant Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Trustee - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 2003 Co-President and Founder, Green, Manning & Bunch Ltd., Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Formerly: General Counsel and Director, Boettcher & Co.; and Chairman and Managing Partner, law firm of Davis, Graham & Stubbs - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates (technology Trustee consulting company) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business Trustee corporations, including the Boss Group Ltd. (private investment and management) and Magellan Insurance Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo Group companies - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Formerly: Chairman, Mercantile Mortgage Corp.; President and Trustee Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Trustee (government affairs company) and Texana Timber LP - ---------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND POSITION(S) HELD WITH THE OTHER DIRECTORSHIP(S) TRUST HELD BY TRUSTEE - -------------------------------- ---------------------- INTERESTED PERSONS - ------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 None Trustee, Chairman and President - ------------------------------------------------------------------------------------------------------ Mark H. Williamson(2) -- 1951 Director and Chairman, Trustee and Executive Vice INVESCO Bond Funds, President Inc., INVESCO Combination Stock & Bond Funds, Inc., INVESCO Counselor Series Funds, Inc., INVESCO International Funds, Inc., INVESCO Manager Series Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc., INVESCO Stock Funds, Inc., INVESCO Treasurer's Series Funds, Inc. and INVESCO Variable Investment Funds, Inc. - ---------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------- Bob R. Baker(3) -- 1936 None Trustee - ---------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 Badgley Funds, Inc. Trustee (registered investment company) - ---------------------------------------------------------------------------------------------------------------- James T. Bunch(3) -- 1942 None Trustee - ---------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 ACE Limited (insurance Trustee company); and Captaris, Inc. (unified messaging provider) - ---------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 Cortland Trust, Inc. Trustee (Chairman) (registered investment company); Annuity and Life Re (Holdings), Ltd. (insurance company) - ---------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 None Trustee - ---------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 Administaff Trustee - ----------------------------------------------------------------------------------------------------------------
(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. (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. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003. (3) Elected trustee of the Trust on October 21, 2003. Trustees and Officers (continued) As of January 1, 2003 The address of each trustee and officer of AIM Equity Funds (The Trust) is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 132 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.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1988 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Trustee - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 2003 Chairman, Lawsuit Resolution Services (San Diego, Trustee California) Formerly: Associate Justice of the California Court of Appeals - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1988 Partner, law firm of Pennock & Cooper Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1989 Executive Vice President, Development and Operations Hines Trustee Interests Limited Partnership (real estate development company) - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 2003 Retired Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 2003 Director, Senior Vice President, Secretary and General Senior Vice President Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Vice President, A I M Capital Management, Inc., A I M Distributors, Inc. and AIM Investment Services, Inc.; and Director, Vice President and General Counsel, Fund Management Company Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 1988 Director, Chairman and Director of Investments, A I M Senior Vice President Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC Formerly: Chief Executive Officer and President, A I M Capital Management Inc. - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer -- Fixed Vice President Income, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, A I M Advisors, Vice President Inc. and A I M Capital Management, Inc.; and Vice President, AIM Investment Services, Inc. - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 1999 Vice President, A I M Advisors, Inc., and President, Chief Vice President Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 1988 Vice President and Fund Treasurer, A I M Advisors, Inc. Vice President and Treasurer - ------------------------------------------------------------------------------------------------------------------- NAME, YEAR OF BIRTH AND OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST HELD BY TRUSTEE - --------------------------------- ---------------------- Carl Frischling -- 1937 Cortland Trust, Inc. Trustee (registered investment company) - ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis(3) -- 1933 General Chemical Trustee Group, Inc., Wheelabrator Technologies, Inc. (waste management company), Fisher Scientific, Inc., Henley Manufacturing, Inc. (laboratory supplies), and California Coastal Properties, Inc. - ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 None Trustee - ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 None Trustee - ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 None Trustee - ------------------------------------------------------------------------------------------------------------------- Larry Soll, Ph.D.(3) -- 1942 None Trustee - ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome(4) -- 1956 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Gary T. Crum(5) -- 1947 N/A Senior Vice President - ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Melville B. Cox -- 1943 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen(5) -- 1940 N/A Vice President - ------------------------------------------------------------------------------------------------------------------- Dana R. Sutton -- 1959 N/A Vice President and Treasurer - -------------------------------------------------------------------------------------------------------------------
(3) Elected trustee of the Trust on October 21, 2003. (4) Mr. Carome became Senior Vice President of the Trust on May 13, 2003. (5) Information is current as of January 10, 2003. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. Ernst & Young LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 5 Houston Center Houston, TX 77046 Suite 100 Suite 100 1401 McKinney, Suite 1200 Houston, TX 77046 Houston, TX 77046-1173 Houston, TX 77010-4035 COUNSEL TO THE FUND Ballard Spahr COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Andrews & Ingersoll, LLP Kramer, Levin, Naftalis & AIM Investment Services, State Street Bank and 1735 Market Street Frankel LLP Inc. Trust Company Philadelphia, PA 19103 919 Third Avenue P.O. Box 4739 225 Franklin Street New York, NY 10022-3852 Houston, TX 77210-4739 Boston, MA 02110 OFFICE OF THE FUND SUB-ADVISOR 11 Greenway Plaza A I M Capital Management, Suite 100 Inc. Houston, TX 77046 11 Greenway Plaza Suite 100 Houston, TX 77046 COUNSEL TO THE FUND Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street Philadelphia, PA 19103
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund AIM Short Term Bond Fund AIM Diversified Dividend Fund(1) AIM International Growth Fund AIM Total Return Bond Fund AIM Emerging Growth Fund AIM Trimark Fund INVESCO U.S. Government Money Fund AIM Large Cap Basic Value Fund INVESCO International Core Equity Fund(5) AIM Large Cap Growth Fund TAX-FREE AIM Libra Fund SECTOR EQUITY AIM Mid Cap Basic Value Fund AIM High Income Municipal Fund AIM Mid Cap Core Equity Fund AIM Global Health Care Fund AIM Municipal Bond Fund AIM Mid Cap Growth Fund AIM Real Estate Fund AIM Tax-Exempt Cash Fund AIM Opportunities I Fund INVESCO Advantage Health Sciences Fund AIM Tax-Free Intermediate Fund AIM Opportunities II Fund INVESCO Energy Fund AIM Opportunities III Fund INVESCO Financial Services Fund AIM Premier Equity Fund INVESCO Gold & Precious Metals Fund AIM Select Equity Fund INVESCO Health Sciences Fund AIM Small Cap Equity Fund(2) INVESCO Leisure Fund AIM Small Cap Growth Fund(3) INVESCO Multi-Sector Fund AIM Trimark Endeavor Fund INVESCO Technology Fund AM Trimark Small Companies Fund INVESCO Utilities Fund AIM Weingarten Fund INVESCO Core Equity Fund INVESCO Dynamics Fund INVESCO Mid-Cap Growth Fund INVESCO Small Company Growth Fund INVESCO S&P 500 Index Fund INVESCO Total Return Fund*
* Domestic equity and income fund (1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM Diversified Dividend Fund. (2) AIM Small Cap Equity Fund was closed to most investors on December 19, 2003. For information on who may continue to invest in AIM Small Cap Equity Fund, please contact your financial advisor. (3) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (4) Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global Value Fund. (5) Effective November 24, 2003, INVESCO International Blue Chip Value Fund was renamed INVESCO International Core Equity Fund. For more complete information about any AIM or INVESCO fund, including sales charges and expenses, ask your financial advisor for a prospectus. Please read it carefully before investing. If used after January 20, 2004, this brochure must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $142 billion in assets for approximately 11 million shareholders, including individual investors, corporate clients and financial institutions. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $345 billion in assets under management. Data as of September 30, 2003. AIMinvestments.com WEI-AR-1 YOUR GOALS. OUR SOLUTIONS.--Servicemark-- - ---------------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Servicemark-- Plans Accounts
ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, Registrant had adopted a code of ethics (the "Code") that applies to the Registrant's principal executive office ("PEO") and principal financial officer ("PFO"). There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Prema Mathai-Davis. Ms. Mathai-Davis is "independent" within the meaning of that term used in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) As of December 18, 2003, an evaluation was performed under the supervision and with the participation of the officers of AIM Equity Funds (the "Company"), including the Principal Executive Officer (PEO") and Principal Financial Officer ("PFO"), to assess the effectiveness of the Company's disclosure controls and procedures, as that term in defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act"), as amended. Based on that evaluation, the Company's officers, including the PEO and PFO, concluded that, as of December 18, 2003, the Company's disclosure controls and procedures were reasonably designed so as to ensure: (1) that information required to be disclosed by the Company on Form N-C SR is recorded, processed, summarized and reported with in the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Company is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. 1 (b) There have been no changes in the Company's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the Company's last fiscal half-year (the Company's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 10. EXHIBITS. CODE OF ETHICS. (a)(1) Code of Ethics. (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Act. (b) Certification of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Act and Section 906 of the Sarbanes-Oxley Act of 2002. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Registrant: AIM Equity Funds By: /s/ ROBERT H. GRAHAM ----------------------------------- Robert H. Graham Principal Executive Officer Date: December 18, 2003 --------------------------------- By: /s/ DANA R. SUTTON --------------------------------- Dana R. Sutton Principal Financial Officer Date: December 18, 2003 --------------------------------- EXHIBIT INDEX 10(a)(1) Code of Ethics 10(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended. (b) Certification of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002. EX-99.CODE ETH 3 h10324exv99wcodeeth.txt CODE OF ETHICS Item 10(a)(1) THE AIM FAMILY OF FUNDS CODE OF ETHICS FOR SENIOR OFFICERS I. INTRODUCTION The Boards of Directors/Trustees ("Board") of The AIM Family of Funds (the "Companies") have adopted this code of ethics (this "Code") applicable to their Principal Executive Officer and Principal Financial and Accounting Officer (the "Covered Officers") to promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in documents filed with the Securities and Exchange Commission ("SEC") and in other public communications; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code; and o accountability for adherence to the Code. II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Covered Officer named in Exhibit A to this Code owes a duty to the Companies to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Covered Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Companies' policies; o observe both the form and spirit of laws and governmental rules and regulations, accounting standards and policies of the Companies; o adhere to a high standard of business ethics; and o place the interests of the Companies before the Covered Officer's own personal interests. Business practices Covered Officers should be guided by and adhere to these fiduciary standards. III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST GUIDING PRINCIPLES. A "conflict of interest" occurs when an individual's private interest interferes with the interests of the Companies. A conflict of interest can arise when a Covered Officer takes actions or has interests that may make it difficult to perform his or her work for the Companies objectively and effectively. For example, a conflict of interest would arise if a Covered Officer, or a member or his family, receives improper personal benefits as a result of his or her position in any of the Companies. In addition, investment companies should be sensitive to situations that create apparent, but not actual, conflicts of interest. Service to the Companies should never be subordinated to personal gain and advantage. Certain conflicts of interest covered by this Code arise out of the relationships between Covered Officers and the Companies that already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended and the Investment Advisers Act of 1940, as amended. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Companies because of their status as "affiliated persons" of the Companies. Therefore, as to the existing statutory and regulatory prohibitions on individual behavior, they will be deemed to be incorporated in this Code and therefore any material violation will also be deemed a violation of this Code. Covered Officers must in all cases comply with applicable statutes and regulations. As to conflicts arising from, or as a result of the contractual relationship between, the Companies and the investment adviser of which the Covered Officers are also officers or employees, it is recognized by the Board that, subject to the adviser's fiduciary duties to the Companies, the Covered Officers will in the normal course of their duties (whether formally for the Companies or for the adviser, or for both) be involved in establishing policies and implementing decisions which will have different effects on the adviser and the Companies. The Board recognizes that the participation of the Covered Officers in such activities is inherent in the contractual relationship between the Companies and the adviser and is consistent with the expectation of the Board of the performance by the Covered Officers of their duties as officers of the Companies. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of other investment companies advised by the same adviser and the codes which apply to senior officers of those investment companies will apply to the Covered Officers acting in those distinct capacities. Each Covered Officer must: o avoid conflicts of interest wherever possible; o handle any actual or apparent conflict of interest ethically; o not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by an investment company whereby the Covered Officer would benefit personally to the detriment of any of the Companies; o not cause an investment company to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of such company; o not use knowledge of portfolio transactions made or contemplated for an investment company to profit or cause others to profit, by the market effect of such transactions; and o as described in more detail below, discuss any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest with the Chief Legal Officer of the AIM Funds (the "Chief Legal Officer"). Some conflict of interest situations that should always be discussed with the Chief Legal Officer, if material, include the following: o any outside business activity that detracts from an individual's ability to devote appropriate time and attention to his or her responsibilities with the Companies; o being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member; o any direct ownership interest in, or any consulting or employment relationship with, any of the Companies' service providers, other than its investment adviser, distributor or other AMVESCAP affiliated entities and other than a de minimis ownership interest (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest); and o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Companies for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officer's employment with AIM, its subsidiaries, its parent organizations and any affiliates or subsidiaries thereof, such as compensation or equity ownership, and other than an interest arising from a de minimis ownership interest in a company with which the Companies execute portfolios transactions or a company that receives commissions or other fees related to its sales and redemptions of shares of the Companies (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest). IV. DISCLOSURE Each Covered Officer is required to be familiar, and comply, with the Companies' disclosure controls and procedures so that the Companies' subject reports and documents filed with the SEC comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each Covered Officer having direct or supervisory authority regarding these SEC filings or the Companies' other public communications should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Companies and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure. Each Covered Officer must: o familiarize himself/herself with the disclosure requirements applicable to the Companies as well as the business and financial operations of the Companies; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Companies to others, whether within or outside the Companies, including representations to the Companies' internal auditors, independent Directors/Trustees, independent auditors, and to governmental regulators and self-regulatory organizations. V. COMPLIANCE It is the Companies' policy to comply in all material respects with all applicable governmental laws, rules and regulations. It is the personal responsibility of each Covered Officer to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters. VI. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon receipt of the Code, sign and submit to the Chief Compliance Officer of the Companies an acknowledgement stating that he or she has received, read, and understands the Code. o annually thereafter submit a form to the Chief Compliance Officer of the Companies confirming that he or she has received, read and understands the Code and has complied with the requirements of the Code. o not retaliate against any employee or other Covered Officer for reports of potential violations that are made in good faith. o notify the Chief Legal Officer promptly if he becomes aware of any existing or potential violation of this Code. Failure to do so is itself a violation of this Code. Except as described otherwise below, the Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented to him or her and has the authority to interpret this Code in any particular situation. The Chief Legal Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported to him or her. The Chief Legal Officer is authorized to consult, as appropriate, with the Chairman of the Audit Committees of the Board, counsel to the Companies and counsel to the independent Directors/Trustees, and is encouraged to do so. The Chief Legal Officer is responsible for granting waivers and determining sanctions, as appropriate. In addition, approvals, interpretations, or waivers sought by the Covered Officers may also be considered by the Chairman of the AIM Funds Audit Committees. The Companies will follow these procedures in investigating and enforcing this Code, and in reporting on the Code: o the Chief Legal Officer will take all appropriate action to investigate any violations reported to him or her; o violations and potential violations will be reported to the Chairman of the Audit Committees of the Board after such investigation; o if the Chairman of the Audit Committees determines that a violation has occurred, he or she will inform the Board, which will take all appropriate disciplinary or preventive action; o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification to the SEC or other appropriate law enforcement authorities; o the Chief Legal Officer will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed on Form N-CSR as provided by SEC rules. VII. OTHER POLICIES AND PROCEDURES The Companies' and the Advisers' and Principal Underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and the Advisers' more detailed policies and procedures set forth in its Compliance and Supervisory Procedures Manual are separate requirements applying to Covered Officers and others, and are not part of this Code. VIII. AMENDMENTS This Code may not be amended except in written form, which is specifically approved by a majority vote of the Companies' Board, including a majority of independent Directors/Trustees. IX. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the members of the Companies' Board, counsel to the Companies, and counsel to the independent Directors/Trustees. Date: September 17, 2003 EXHIBIT A Persons Covered by this Code of Ethics: Robert H. Graham Dana R. Sutton Date: September 27, 2003 THE AIM FAMILY OF FUNDS CODE OF ETHICS--ACKNOWLEDGEMENT I hereby acknowledge that I am a Principal Officer of the Companies and I am aware of and subject to the Companies' Code of Ethics. Accordingly, I have read and understood the requirements of the Code of Ethics and I am committed to fully comply with the Code of Ethics. I recognize my obligation to promote: 1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2. Full, fair, accurate, timely, and understandable disclosure in reports and documents that the Companies file with, or submit to, the Commission and in other public communications made by the Companies; and 3. Compliance with applicable governmental laws, rules, and regulations. - --------------------------- ---------------------------------------------- Date Name: Title: EX-99.CERT 4 h10324exv99wcert.txt CERTIFICATIONS PURSUANT TO SECTION 302 Sarbanes Oxley - 302 Certification I, Robert H. Graham, certify that: 1. I have reviewed this report on Form N-CSR of AIM Equity Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 18, 2003 \S\ Robert H. Graham --------------------- --------------------------------------------- Robert H. Graham, Principal Executive Officer Sarbanes Oxley - 302 Certification I, Dana R. Sutton, certify that: 1. I have reviewed this report on Form N-CSR of AIM Equity Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 18, 2003 \S\ Dana R. Sutton ---------------------- ------------------------------------------- Dana R. Sutton, Principal Financial Officer EX-99.906CERT 5 h10324exv99w906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 Sarbanes Oxley - 906 Certification CERTIFICATION OF SHAREHOLDER In connection with the Certified Shareholder Report of AIM Equity Funds (the "Company") on Form N-CSR for the period ended October 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert H. Graham, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 18, 2003 \S\ Robert H. Graham ----------------------------------- Robert H. Graham Principal Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Sarbanes Oxley - 906 Certification CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM Equity Funds (the "Company") on Form N-CSR for the period ended October 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dana R. Sutton, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 18, 2003 \S\ Dana R. Sutton ----------------------------------- Dana R. Sutton Principal Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----