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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 811-1540
----------------------------------------------
AIM Funds Group
- --------------------------------------------------------------------------------
(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: 12/31
------------------
Date of reporting period: 6/30/03
-----------------
[COVER ART]
AIM BALANCED FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Balanced Fund seeks to achieve as high a total return as possible,
consistent with preservation of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS LOGO]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY INVESTMENT TYPE
[PIE CHART]
CORPORATE BONDS 18%
STOCKS 61%
CASH & OTHER 4%
U.S. GOVERNMENT & AGENCY
NON-MORTGAGE-BACKED
SECURITIES 6%
MORTGAGE-BACKED SECURITIES 11%
Source: Lipper, Inc.
TOTAL NUMBER OF HOLDINGS* 433
EQUITY HOLDINGS 73
FIXED INCOME HOLDINGS 360
TOTAL NET ASSETS $2.4 BILLION
AVERAGE CREDIT QUALITY RATING (BONDS) AA
AVERAGE MATURITY (BONDS) 5.89 YEARS
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (3/31/78) 9.21%
10 Years 6.80
5 Years -2.52
1 Year -4.81
CLASS B SHARES
Inception (10/18/93) 5.82%
5 Years -2.69
1 Year -5.68
CLASS C SHARES
Inception (8/4/97) 0.16%
5 Years -2.32
1 Year -1.77
CLASS R SHARES**
10 Years 7.06%
5 Years -1.80
1 Year -0.24
** Class R shares are generally only available to retirement plans such as
section 401 and 457 plans, section 403 plans sponsored by a section 501(c)(3)
organization and IRA rollovers from such plans if an AIM fund was offered. They
are sold at net asset value, that is, without up-front sales charges. Class R
shares were first offered on June 3, 2002. Returns prior to that date are
hypothetical results based on Class A share performance at net asset value from
6/30/93, adjusted to reflect Class R 12b-1 fees. Class R share returns do not
include a 0.75% contingent deferred sales charge that may be imposed on a total
redemption of retirement plan assets within the first year.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 7.66%
CLASS B SHARES 7.27
CLASS C SHARES 7.26
CLASS R SHARES 7.57
S&P 500 INDEX (Broad Market Index) 11.75
60% RUSSELL 3000--Registered Trademark-- INDEX/
40% LEHMAN AGGREGATE BOND INDEX 9.92
(Custom Style-specific Index)
Lipper Balanced Fund Index 8.87
(Peer Group Index)
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.
Source: Lipper, Inc.
================================================================================
<Table>
<Caption>
===================================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 FIXED-INCOME ISSUERS* TOP 10 INDUSTRIES*
- -----------------------------------------------------------------------------------------------------------------------------------
1. Citigroup Inc. 1.8% 1. Federal National Mortgage 1. U.S. Government Agency Securities 2.3%
Association (FNMA) 8.6%
2. Pfizer Inc. 1.8 2. Other Diversified Financial
2. U.S. Treasury Notes 4.6 Services 7.2
3. Microsoft Corp. 1.5
3. Federal Home Loan Mortgage 3. Pharmaceuticals 6.2
4. United Technologies Corp. 1.5 Corp. (FHLMC) 2.2
4. U.S. Treasury Securities 5.1
5. Black & Decker Corp. (The) 1.5 4. Government National Mortgage
Association (GNMA) 1.5 5. Diversified Banks 3.7
6. Bank of America Corp. 1.4
5. General Motors Acceptance Corp. 0.8 6. Integrated Oil & Gas 3.7
7. Target Corp. 1.4
6. General Electric Capital Corp. 0.8 7. Investment Banking & Brokerage 2.8
8. Cisco Systems, Inc. 1.4
7. Ford Motor Credit Co. 0.6 8. Household Products 2.8
9. Exxon Mobil Corp. 1.3
8. Sprint Capital Corp. 0.5 9. Data Processing & Outsourced
10. DST Systems, Inc. 1.3 Services 2.6
9. Citicorp Lease 0.5
10. Systems Software 2.4
10. Auburn Hills Trust 0.5
*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.
===================================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Balanced Fund's performance figures are historical, and they reflect
fund expenses, the reinvestment of distributions, and changes in net asset
value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class
C share performance reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. The performance of the fund's share classes will differ due to
different sales charge structures and class expenses.
o Had the advisor not waived fees and/or absorbed expenses in the past, Class
A and Class R share returns would have been lower.
o International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values of
other currencies, the custody arrangements made for the fund's foreign
holdings, differences in accounting, political risks and the lesser degree
of public information required to be provided by non-U.S. companies.
o The average credit quality of the holdings in the fund is historical and is
based on A I M Advisors, Inc.'s assessment through an analysis of the
portfolio's credit quality, composition, management, and weekly portfolio
reviews.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The fund uses a custom index composed of 60% Russell 3000--Registered
Trademark-- Index and 40% Lehman Aggregate Bond Index. The unmanaged
Russell 3000 Index is an index of common stocks that measures performance
of the largest 3,000 U.S. companies based on market capitalization. The
unmanaged Lehman Aggregate Bond Index, which represents the U.S.
investment-grade fixed-rate bond market (including government and corporate
securities, mortgage pass-through securities and asset-backed securities),
is compiled by Lehman Brothers, a global investment bank.
o The unmanaged Lehman U.S. Treasury Index is an index of public obligations
of the U.S. Treasury with a remaining maturity of one year or more. It is
compiled by Lehman Brothers, a global investment bank.
o The unmanaged Lipper Balanced Fund Index represents an average of the 30
largest balanced funds tracked by Lipper, Inc., an independent mutual fund
performance monitor. It is calculated daily, with adjustments for
distributions as of the ex-dividend dates.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Balanced Fund for the six months
ROBERT H. ended June 30, 2003. Important information such as top
GRAHAM] holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
DESPITE ECONOMIC will provide an overview of the markets and your fund during
SLUGGISHNESS, the six months covered by this report.
DOMESTIC EQUITY
MARKETS PERFORMED As always, timely information about your fund and the
WELL, PARTICULARLY markets in general is available at our Web site,
DURING THE SECOND aiminvestments.com. From our home page, click on Products
HALF OF THE and Performance, then Mutual Funds, then AIM funds, and then
REPORTING PERIOD. select the type of information you wish to view.
ROBERT H. GRAHAM
MARKET CONDITIONS
Economic sluggishness continued during the reporting period. U.S. gross domestic
product (GDP) increased at an annualized rate of only 1.4% in the first quarter
of 2003 and 2.4%, according to the advance estimate, in the second quarter.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, service sector weakness, and slow
commercial construction and real estate markets. The Fed kept the short-term
federal funds rate at 1.25% for most of the reporting period, then lowered it to
1.00% on June 25, its lowest level since 1958. The Fed said it favored a more
expansive monetary policy because the economy had not yet exhibited sustainable
growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but was up 15.39% for
the second, bringing its total return for the six months to 11.75%.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecommunications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
Yield spreads for corporate bonds--the difference in yield between a
corporate bond and a Treasury issue of equivalent maturity--narrowed over the
period. The Lehman U.S. Treasury Index returned 3.75% for the six-month period,
while the U.S. investment-grade bond market, as represented by the Lehman
Aggregate Bond Index, posted a 3.93% total return.
YOUR FUND
As the broad U.S. stock market posted positive results, AIM Balanced Fund's
Class A shares returned 7.66% at net asset value for the six months ended June
30, 2003. Fund managers Robert G. Alley, Claude C. Cody IV, Jan H. Friedli, Scot
W. Johnson, Craig A. Smith, and Meggan M. Walsh continued investing in a broadly
diversified portfolio, targeting approximately 60% equity and 40% fixed-income
securities.
The managers increased holdings in information technology stocks, which
provided the fund's best returns over the period. They reduced positions in the
consumer staples sector, which was the fund's poorest performer during the six
months, and continued reducing positions in stocks they considered expensive.
At the close of the reporting period, the equity portfolio's largest
sectors were financial, information technology and consumer discretionary. In
the fixed-income portfolio, corporate bonds accounted for approximately 18% of
the fund's net assets, mortgage-backed securities for about 11%, and U.S.
government and agency non-mortgage-backed securities for about 6%, with the
remainder in cash and other instruments.
IN CLOSING
I thank you for your continued participation in AIM Balanced Fund, and look
forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
SUPPLEMENT TO SEMIANNUAL REPORT DATED 6/30/03
AIM BALANCED FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria. Performance of
Institutional Class shares will differ from performance of Class A shares due to
differing sales charges and class expenses.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended 6/30/03
Inception (3/15/02) -8.29%
1 Year 0.43
6 Months 7.93*
*Not annualized
================================================================================
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at net asset value. Investment return and
principal value will fluctuate so your shares, when redeemed, may be worth more
or less than their original cost. See full report for information on comparative
benchmarks. If you have questions, please consult your fund prospectus or call
AIM toll free at 800-451-4246.
A I M Distributors, Inc. BAL-INS-2 [AIM INVESTMENT LOGO APPEARS HERE]
--Servicemark--
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------------
STOCKS & OTHER EQUITY INTERESTS-61.48%
ADVERTISING-1.87%
Lamar Advertising Co.(a) 503,000 $ 17,710,630
- ----------------------------------------------------------------------------
Omnicom Group Inc. 380,000 27,246,000
============================================================================
44,956,630
============================================================================
AEROSPACE & DEFENSE-2.09%
Honeywell International Inc. 531,000 14,257,350
- ----------------------------------------------------------------------------
United Technologies Corp. 507,700 35,960,391
============================================================================
50,217,741
============================================================================
APPAREL RETAIL-0.86%
Limited Brands 1,334,000 20,677,000
============================================================================
APPLICATION SOFTWARE-0.74%
SAP A.G.-ADR (Germany) 606,300 17,716,086
============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.52%
Federated Investors, Inc.-Class B 456,000 12,503,520
============================================================================
BREWERS-0.57%
Anheuser-Busch Cos., Inc. 269,400 13,752,870
============================================================================
BROADCASTING & CABLE TV-0.64%
Univision Communications Inc.-Class A(a) 509,100 15,476,640
============================================================================
BUILDING PRODUCTS-1.84%
American Standard Cos. Inc.(a) 273,200 20,197,676
- ----------------------------------------------------------------------------
Masco Corp. 999,300 23,833,305
============================================================================
44,030,981
============================================================================
COMMUNICATIONS EQUIPMENT-1.91%
Cisco Systems, Inc.(a) 2,006,100 33,481,809
- ----------------------------------------------------------------------------
Motorola, Inc. 1,300,000 12,259,000
============================================================================
45,740,809
============================================================================
COMPUTER HARDWARE-1.27%
Hewlett-Packard Co. 562,500 11,981,250
- ----------------------------------------------------------------------------
International Business Machines Corp. 223,300 18,422,250
============================================================================
30,403,500
============================================================================
CONSUMER FINANCE-0.93%
American Express Co. 531,300 22,213,653
============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.63%
DST Systems, Inc.(a) 837,700 31,832,600
- ----------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 1,204,300 31,203,413
============================================================================
63,036,013
============================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------------
DIVERSIFIED BANKS-2.02%
Bank of America Corp. 434,700 $ 34,354,341
- ----------------------------------------------------------------------------
U.S. Bancorp 575,000 14,087,500
============================================================================
48,441,841
============================================================================
FOOTWEAR-0.54%
NIKE, Inc.-Class B 243,000 12,998,070
============================================================================
GENERAL MERCHANDISE STORES-1.41%
Target Corp. 892,300 33,764,632
============================================================================
HEALTH CARE DISTRIBUTORS-0.87%
Cardinal Health, Inc. 323,400 20,794,620
============================================================================
HEALTH CARE EQUIPMENT-0.67%
Becton, Dickinson & Co. 415,000 16,122,750
============================================================================
HEALTH CARE SUPPLIES-0.83%
Alcon, Inc. (Switzerland) 433,900 19,829,230
============================================================================
HOME IMPROVEMENT RETAIL-1.45%
Home Depot, Inc. (The) 630,000 20,865,600
- ----------------------------------------------------------------------------
Lowe's Cos., Inc. 324,000 13,915,800
============================================================================
34,781,400
============================================================================
HOUSEHOLD APPLIANCES-1.44%
Black & Decker Corp. (The) 798,000 34,673,100
============================================================================
HOUSEHOLD PRODUCTS-2.78%
Colgate-Palmolive Co. 456,500 26,454,175
- ----------------------------------------------------------------------------
Kimberly-Clark Corp. 426,900 22,258,566
- ----------------------------------------------------------------------------
Procter & Gamble Co. (The) 202,000 18,014,360
============================================================================
66,727,101
============================================================================
HYPERMARKETS & SUPER CENTERS-1.10%
Wal-Mart Stores, Inc. 491,000 26,351,970
============================================================================
INDUSTRIAL CONGLOMERATES-0.70%
General Electric Co. 582,100 16,694,628
============================================================================
INSURANCE BROKERS-1.07%
Marsh & McLennan Cos., Inc. 272,700 13,926,789
- ----------------------------------------------------------------------------
Willis Group Holdings Ltd. (Bermuda) 386,000 11,869,500
============================================================================
25,796,289
============================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------------
INTEGRATED OIL & GAS-3.42%
BP PLC-ADR (United Kingdom) 353,900 $ 14,870,878
- ----------------------------------------------------------------------------
ConocoPhillips 230,000 12,604,000
- ----------------------------------------------------------------------------
Exxon Mobil Corp. 889,400 31,938,354
- ----------------------------------------------------------------------------
Total S.A. (France) 149,256 22,617,866
============================================================================
82,031,098
============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.09%
Verizon Communications Inc. 663,900 26,190,855
============================================================================
INVESTMENT BANKING & BROKERAGE-2.20%
Goldman Sachs Group, Inc. (The) 218,500 18,299,375
- ----------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 173,300 11,520,984
- ----------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 492,000 22,966,560
============================================================================
52,786,919
============================================================================
LIFE & HEALTH INSURANCE-1.26%
Nationwide Financial Services, Inc.-Class A 318,500 10,351,250
- ----------------------------------------------------------------------------
Prudential Financial, Inc. 588,300 19,796,295
============================================================================
30,147,545
============================================================================
MOVIES & ENTERTAINMENT-0.75%
Viacom Inc.-Class B(a) 411,559 17,968,666
============================================================================
MULTI-LINE INSURANCE-1.39%
American International Group, Inc. 250,960 13,847,973
- ----------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 387,700 19,524,572
============================================================================
33,372,545
============================================================================
OIL & GAS DRILLING-0.51%
Noble Corp. (Cayman Islands)(a) 357,400 12,258,820
============================================================================
OIL & GAS EQUIPMENT & SERVICES-0.97%
Cooper Cameron Corp.(a) 459,800 23,164,724
============================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.64%
Apache Corp. 165,540 10,770,032
- ----------------------------------------------------------------------------
Burlington Resources Inc. 247,000 13,355,290
- ----------------------------------------------------------------------------
Kerr-McGee Corp.-$1.83 Pfd. DECS 318,800 15,181,256
============================================================================
39,306,578
============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.77%
Citigroup Inc. 991,433 42,433,332
============================================================================
PACKAGED FOODS & MEATS-0.67%
Sara Lee Corp. 849,000 15,969,690
============================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------------
PHARMACEUTICALS-6.08%
Abbott Laboratories 442,600 $ 19,368,176
- ----------------------------------------------------------------------------
Johnson & Johnson 601,900 31,118,230
- ----------------------------------------------------------------------------
Merck & Co. Inc. 461,400 27,937,770
- ----------------------------------------------------------------------------
Pfizer Inc. 1,229,500 41,987,425
- ----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 238,000 13,549,340
- ----------------------------------------------------------------------------
Wyeth 261,600 11,915,880
============================================================================
145,876,821
============================================================================
PROPERTY & CASUALTY INSURANCE-0.52%
Chubb Corp. (The) 206,450 12,387,000
============================================================================
REAL ESTATE INVESTMENT TRUSTS-0.38%
Regency Centers Corp. 257,500 9,007,350
- ----------------------------------------------------------------------------
Wyndham International, Inc. Voting Trust
(Acquired 08/27/99-06/30/03; Cost
$277,413)(b)(c) 3,668 14,091
============================================================================
9,021,441
============================================================================
RESTAURANTS-0.65%
Darden Restaurants, Inc. 825,000 15,658,500
============================================================================
SEMICONDUCTOR EQUIPMENT-0.61%
Applied Materials, Inc.(a) 928,500 14,726,010
============================================================================
SEMICONDUCTORS-1.78%
Analog Devices, Inc.(a) 685,700 23,876,074
- ----------------------------------------------------------------------------
Intel Corp. 901,400 18,734,698
============================================================================
42,610,772
============================================================================
SPECIALTY STORES-0.91%
Bed Bath & Beyond Inc.(a) 561,700 21,799,577
============================================================================
SYSTEMS SOFTWARE-2.42%
Microsoft Corp. 1,417,800 36,309,858
- ----------------------------------------------------------------------------
Oracle Corp.(a) 1,806,100 21,709,322
============================================================================
58,019,180
============================================================================
THRIFTS & MORTGAGE FINANCE-1.71%
Fannie Mae 267,300 18,026,712
- ----------------------------------------------------------------------------
MGIC Investment Corp. 492,900 22,988,856
============================================================================
41,015,568
============================================================================
Total Stocks & Other Equity Interests
(Cost $1,328,201,686) 1,474,446,715
============================================================================
</Table>
F-2
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
BONDS & NOTES-17.04%
AEROSPACE & DEFENSE-0.03%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06 $ 300,000 $ 354,084
- ----------------------------------------------------------------------------
Raytheon Co., Sr. Unsec. Notes, 6.30%,
03/15/05 405,000 434,298
============================================================================
788,382
============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.04%
Bank of New York Co., Inc. (The), Sub. Medium
Term Notes, 7.14%, 03/24/28(d) 5,500,000 1,065,020
============================================================================
AUTOMOBILE MANUFACTURERS-0.07%
DaimlerChrysler N.A. Holding Corp.-Series D,
Gtd. Medium Term Notes, 3.40%, 12/15/04 1,615,000 1,640,905
============================================================================
BROADCASTING & CABLE TV-1.09%
Clear Channel Communications, Inc.,
Sr. Unsec. Gtd. Notes, 8.00%, 11/01/08 1,200,000 1,417,500
- ----------------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 06/15/05 500,000 553,855
- ----------------------------------------------------------------------------
Comcast Cable Communications, Inc., Unsec.
Unsub. Notes, 8.88%, 05/01/17 1,000,000 1,335,580
- ----------------------------------------------------------------------------
Comcast Corp., Sr. Sub. Notes 10.50%,
06/15/06 800,000 952,000
- ----------------------------------------------------------------------------
Cox Communications, Inc.,
Notes, 4.63%, 06/01/13 900,000 905,391
- ----------------------------------------------------------------------------
Sr. Unsec. Putable Deb., 6.53%, 02/01/08 4,350,000 4,894,533
- ----------------------------------------------------------------------------
Jones Intercable, Inc., Sr. Unsec. Notes,
8.88%, 04/01/07 2,960,000 3,144,586
- ----------------------------------------------------------------------------
TCI Communications Finance, Gtd. Bonds,
9.65%, 03/31/27 1,200,000 1,406,172
- ----------------------------------------------------------------------------
TCI Communications, Inc., Sr. Notes, 8.65%,
09/15/04 2,545,000 2,739,311
- ----------------------------------------------------------------------------
Time Warner Inc.,
Sr. Unsec. Gtd. Deb, 6.88%, 06/15/18 5,055,000 5,687,684
- ----------------------------------------------------------------------------
Unsec. Notes, 7.75%, 06/15/05 2,500,000 2,745,300
- ----------------------------------------------------------------------------
Turner Broadcasting System, Inc., Sr. Notes,
7.40%, 02/01/04 450,000 464,566
============================================================================
26,246,478
============================================================================
CONSUMER FINANCE-0.06%
Capital One Bank, Notes, 4.88%, 05/15/08 1,400,000 1,420,342
============================================================================
DISTILLERS & VINTNERS-0.05%
Diageo PLC, Sr. Unsec. Gtd. Putable Notes,
7.45%, 04/15/05 825,000 1,077,070
============================================================================
DIVERSIFIED BANKS-1.69%
American Savings Bank, Notes, 6.63%, 02/15/06
(Acquired 03/05/03; Cost $554,525)(b) 500,000 548,140
- ----------------------------------------------------------------------------
Bank of America Corp.-Series B, Putable Sub.
Medium Term Notes, 8.57%, 11/15/04 1,000,000 1,379,200
- ----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
DIVERSIFIED BANKS-(CONTINUED)
BankAmerica Institutional Capital-Series B,
Gtd. Bonds, 7.70%, 12/31/26 (Acquired
06/18/03; Cost $1,296,680)(b) $ 1,100,000 $ 1,257,421
- ----------------------------------------------------------------------------
Barclays O/S Investment Co. B.V.
(Netherlands), Unsec. Gtd. Unsub. Floating
Rate Euro Notes, 1.50%, 11/29/49(e) 2,000,000 1,672,152
- ----------------------------------------------------------------------------
Barnett Banks, Inc., Sub. Notes, 6.90%,
09/01/05 1,780,000 1,986,409
- ----------------------------------------------------------------------------
Barnett Capital I, Gtd. Notes, 8.06%,
12/01/26 1,000,000 1,192,760
- ----------------------------------------------------------------------------
Barnett Capital II, Gtd. Bonds, 7.95%,
12/01/26 500,000 589,790
- ----------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Notes, 8.85%,
06/01/27 (Acquired 05/22/03; Cost
$1,771,602)(b) 1,400,000 1,661,408
- ----------------------------------------------------------------------------
Comerica Inc., Sub. Notes, 4.80%, 05/01/15 3,000,000 3,078,060
- ----------------------------------------------------------------------------
Corporacion Andina de Fomento (Venezuela),
Unsec. Global Notes,
5.20%, 05/21/13 1,000,000 1,018,810
- ----------------------------------------------------------------------------
6.88%, 03/15/12 1,000,000 1,137,400
- ----------------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom)-Series 1,
Unsec. Sub. Floating Rate Euro Notes,
1.25%, 06/29/49(e) 3,870,000 3,069,045
- ----------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Putable Sub.
Deb., 8.25%, 11/01/04 3,290,000 4,390,373
- ----------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (United
Kingdom), Sub. Yankee Notes, 4.70%,
07/03/18 3,940,000 3,937,163
- ----------------------------------------------------------------------------
Santander Financial Issuances (Cayman
Islands), Unsec. Gtd. Sub. Yankee Notes,
7.00%, 04/01/06 4,850,000 5,473,031
- ----------------------------------------------------------------------------
Scotland International Finance No.2 B.V.
(Netherlands), Sub. Notes, 4.25%, 05/23/13
(Acquired 05/20/03; Cost $1,695,750)(b) 1,700,000 1,702,023
- ----------------------------------------------------------------------------
U.S. Bank, N.A., Sub. Global Notes, 4.80%,
04/15/15 6,175,000 6,365,375
============================================================================
40,458,560
============================================================================
DIVERSIFIED CAPITAL MARKETS-0.07%
UBS Preferred Funding Trust I, Gtd. Global
Bonds, 8.62%, 10/29/49 1,385,000 1,790,376
============================================================================
ELECTRIC UTILITIES-1.71%
AmerenEnergy Generating Co.-Series C, Sr.
Unsec. Global Notes, 7.75%, 11/01/05 350,000 390,421
- ----------------------------------------------------------------------------
American Electric Power Company, Inc., Sr.
Unsec. Unsub. Notes, 5.25%, 06/01/15 900,000 906,444
- ----------------------------------------------------------------------------
CenterPoint Energy, Inc.,
Bonds, 6.85%, 06/01/15 (Acquired 05/21/03;
Cost $1,547,750)(b) 1,510,000 1,542,540
- ----------------------------------------------------------------------------
Notes, 5.88%, 06/01/08 (Acquired 05/21/03;
Cost $907,668)(b) 900,000 918,270
- ----------------------------------------------------------------------------
Cinergy Corp., Unsec. Sub. Global Deb.,
6.25%, 09/01/04 650,000 682,695
- ----------------------------------------------------------------------------
</Table>
F-3
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
ELECTRIC UTILITIES-(CONTINUED)
Cleveland Electric Illuminating Co. (The),
First Mortgage Bonds, 6.86%, 10/01/08 $ 6,080,000 $ 6,844,499
- ----------------------------------------------------------------------------
Duke Energy Corp.,
Bonds, 6.45%, 10/15/32 1,980,000 2,148,122
- ----------------------------------------------------------------------------
First Mortgage Bonds, 3.75%, 03/05/08
(Acquired 02/20/03; Cost $348,982)(b) 350,000 362,246
- ----------------------------------------------------------------------------
Hydro-Quebec (Canada),
Gtd. Yankee Bonds, 9.40%, 02/01/21(f) 1,470,000 2,191,711
- ----------------------------------------------------------------------------
Series B, Gtd. Medium Term Notes, 8.62%,
12/15/11 2,150,000 2,860,424
- ----------------------------------------------------------------------------
Series GL, Gtd. Floating Rate Euro Notes,
1.31%, 09/29/49(e) 5,050,000 4,416,876
- ----------------------------------------------------------------------------
MidAmerican Energy Holdings Co., Sr. Unsec.
Notes, 3.50%, 05/15/08 (Acquired 05/13/03;
Cost $1,996,820)(b) 2,000,000 2,013,460
- ----------------------------------------------------------------------------
Public Service Co. of Colorado, First
Mortgage Bonds, 4.88%, 03/01/13 (Acquired
03/07/03; Cost $604,117)(b) 605,000 627,445
- ----------------------------------------------------------------------------
Public Service Co. of New Mexico-Series A,
Sr. Unsec. Notes, 7.10%, 08/01/05 7,850,000 8,492,287
- ----------------------------------------------------------------------------
Sutton Bridge Financing Ltd. (United
Kingdom), Gtd. Euro Bonds, 8.63%,
06/30/22(g) GBP 2,828,670 4,836,088
- ----------------------------------------------------------------------------
TXU Corp.-Series B, Sr. Unsec. Notes, 6.38%,
10/01/04(f) 700,000 740,901
- ----------------------------------------------------------------------------
Xcel Energy, Inc., Sr. Notes, 3.40%, 07/01/08
(Acquired 06/19/03; Cost $1,097,877)(b) 1,100,000 1,090,078
============================================================================
41,064,507
============================================================================
ENVIRONMENTAL SERVICES-0.10%
Waste Management, Inc., Unsec. Putable Notes,
7.10%, 08/01/03 2,050,000 2,344,114
============================================================================
GAS UTILITIES-0.40%
CenterPoint Energy Resources Corp., Unsec.
Deb., 6.50%, 02/01/08 1,145,000 1,238,879
- ----------------------------------------------------------------------------
MCN Corp., First Mortgage Bonds, 5.70%,
03/15/33 1,260,000 1,315,579
- ----------------------------------------------------------------------------
Tennessee Gas Pipeline Co., Unsec. Deb.,
7.63%, 04/01/37 7,000,000 7,105,000
============================================================================
9,659,458
============================================================================
HEALTH CARE FACILITIES-0.05%
HCA Inc., Notes, 6.25%, 02/15/13 1,225,000 1,251,864
============================================================================
HOMEBUILDING-0.18%
Pulte Homes, Inc., Sr. Unsec. Notes, 6.38%,
05/15/33 4,200,000 4,340,574
============================================================================
HYPERMARKETS & SUPER CENTERS-0.14%
Wal-Mart Stores, Inc., Unsec. Deb., 8.50%,
09/15/24 2,895,000 3,239,216
============================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
INTEGRATED OIL & GAS-0.28%
Occidental Petroleum Corp., Sr. Unsec. Notes,
7.38%, 11/15/08 $ 2,630,000 $ 3,109,607
- ----------------------------------------------------------------------------
Repsol International Finance B.V.
(Netherlands), Unsec. Gtd. Global Notes,
7.45%, 07/15/05 1,590,000 1,754,565
- ----------------------------------------------------------------------------
TGT Pipeline LLC, Bonds, 5.20%, 06/01/18
(Acquired 05/22/03; Cost $1,795,356)(b) 1,800,000 1,768,248
============================================================================
6,632,420
============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.32%
AT&T Corp., Sr. Unsec. Global Notes, 7.00%,
11/15/06 500,000 554,230
- ----------------------------------------------------------------------------
British Telecommunications PLC (United
Kingdom), Global Notes 7.88%, 12/15/05 140,000 159,386
- ----------------------------------------------------------------------------
Deutsche Telekom International Finance B.V.
(Netherlands), Unsec. Gtd. Unsub. Global
Bonds, 8.25%, 06/15/05 1,650,000 1,840,724
- ----------------------------------------------------------------------------
France Telecom S.A. (France), Unsec. Global
Notes, 10.00%, 03/01/31 1,130,000 1,562,880
- ----------------------------------------------------------------------------
GTE Hawaiian Telephone Co., Inc.-Series A,
Unsec. Deb., 7.00%, 02/01/06 2,655,000 2,989,424
- ----------------------------------------------------------------------------
New England Telephone & Telegraph Co., Unsec.
Notes, 7.65%, 06/15/07 1,000,000 1,166,250
- ----------------------------------------------------------------------------
SBC Communications Capital Corp.-Series D,
Medium Term Notes, 7.11%, 08/14/06 200,000 229,512
- ----------------------------------------------------------------------------
Sprint Capital Corp.,
Sr. Unsec. Gtd. Global Notes, 6.00%,
01/15/07 3,855,000 4,159,545
- ----------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes, 7.13%,
01/30/06 4,710,000 5,122,078
- ----------------------------------------------------------------------------
Sr. Unsec. Unsub. Gtd. Global Notes, 6.13%,
11/15/08 500,000 544,500
- ----------------------------------------------------------------------------
Unsec. Gtd. Global Notes, 7.90%, 03/15/05 2,200,000 2,388,914
- ----------------------------------------------------------------------------
Sprint Corp., Deb., 9.00%, 10/15/19 2,200,000 2,534,180
- ----------------------------------------------------------------------------
Verizon Global Funding Corp., Sr. Unsec.
Unsub. Global Notes, 7.75%, 12/01/30 1,865,000 2,345,778
- ----------------------------------------------------------------------------
Verizon Pennsylvania Inc.-Series A, Global
Notes, 5.65%, 11/15/11 5,435,000 6,000,620
============================================================================
31,598,021
============================================================================
INVESTMENT BANKING & BROKERAGE-0.62%
Bear Stearns, Cos. Inc. (The), Sr. Unsec.
Global Notes, 3.00%, 03/30/06 1,405,000 1,440,490
- ----------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Global
Bonds, 7.63%, 08/17/05 4,075,000 4,579,444
- ----------------------------------------------------------------------------
Lehman Brothers Inc.,
Sr. Sub. Deb., 11.63%, 05/15/05 2,645,000 3,087,799
- ----------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 7.63%, 06/01/06 1,000,000 1,153,390
- ----------------------------------------------------------------------------
</Table>
F-4
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-(CONTINUED)
Merrill Lynch & Co., Inc.,
Series B, Medium Term Notes, 4.54%,
03/08/05 $ 1,415,000 $ 1,483,161
- ----------------------------------------------------------------------------
Series E, Floating Rate Medium Term Euro
Notes, 1.37%, 06/28/04(h) 1,500,000 1,502,628
- ----------------------------------------------------------------------------
Morgan Stanley, Sr. Global Notes, 7.75%,
06/15/05 1,375,000 1,533,469
============================================================================
14,780,381
============================================================================
LIFE & HEALTH INSURANCE-0.76%
John Hancock Global Funding II, Notes, 5.00%,
07/27/07 (Acquired 06/12/02; Cost
$2,323,721)(b) 2,325,000 2,505,374
- ----------------------------------------------------------------------------
Lincoln National Corp., Unsec. Deb., 9.13%,
10/01/24 4,870,000 5,438,183
- ----------------------------------------------------------------------------
ReliaStar Financial Corp. Unsec. Notes,
8.00%, 10/30/06 600,000 693,168
- ----------------------------------------------------------------------------
Torchmark Corp., Notes,
7.38%, 08/01/13 3,000,000 3,689,850
- ----------------------------------------------------------------------------
7.88%, 05/15/23 4,845,000 5,989,922
============================================================================
18,316,497
============================================================================
MOVIES & ENTERTAINMENT-0.07%
Viacom Inc., Global Bonds, 5.50%, 05/15/33 1,750,000 1,737,575
============================================================================
MUNICIPALITIES-0.34%
Illinois (State of); Unlimited Tax Series
2003 GO, 5.10%, 06/01/33 8,295,000 8,157,054
============================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.36%
Burlington Resources Finance Co. (Canada),
Sr. Unsec. Gtd. Bonds, 7.20%, 08/15/31 845,000 1,041,801
- ----------------------------------------------------------------------------
Kern River Funding Corp., Sr. Gtd. Notes,
4.89%, 04/30/18 (Acquired 04/28/03-
05/20/03; Cost $3,526,135)(b) 3,490,000 3,616,896
- ----------------------------------------------------------------------------
Norcen Energy Resources Ltd. (Canada), Unsec.
Yankee Deb., 7.38%, 05/15/06 3,485,000 3,980,323
============================================================================
8,639,020
============================================================================
OIL & GAS REFINING & MARKETING &
TRANSPORTATION-0.06%
Petroleos Mexicanos (Mexico), Unsec. Unsub.
Gtd. Global Notes, 6.50%, 02/01/05 1,310,000 1,394,823
============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.83%
American General Finance Corp.-Series H,
Medium Term Notes, 2.75%, 06/15/08 1,000,000 986,640
- ----------------------------------------------------------------------------
ASIF Global Financing XIX, Sec. Notes, 4.90%,
01/17/13 (Acquired 01/08/03; Cost
$3,987,480)(b) 4,000,000 4,202,560
- ----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
ASIF Global Financing XX, Sec. Notes, 2.65%,
01/17/06 (Acquired 01/08/03; Cost
$2,211,500)(b) $ 2,215,000 $ 2,263,043
- ----------------------------------------------------------------------------
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 7,910,000 11,765,255
- ----------------------------------------------------------------------------
CIT Group Inc.,
Global Notes, 5.63%, 05/17/04 1,465,000 1,513,272
- ----------------------------------------------------------------------------
Sr. Floating Rate Medium Term Global Notes,
2.29%, 11/25/03(h) 2,530,000 2,534,984
- ----------------------------------------------------------------------------
Sr. Global Notes, 7.13%, 10/15/04 1,110,000 1,181,129
- ----------------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 8,800,000 10,423,864
- ----------------------------------------------------------------------------
Corestates Capital Trust I, Bonds, 8.00%,
12/15/26 (Acquired 06/18/03; Cost
$1,072,395)(b) 900,000 1,075,122
- ----------------------------------------------------------------------------
First Industrial Realty Trust, Inc., Putable
PATS, 7.38%, 05/15/04 (Acquired 02/06/03;
Cost $1,111,410)(b) 1,060,000 1,104,414
- ----------------------------------------------------------------------------
Ford Motor Credit Co.,
Notes, 7.50%, 06/15/04 205,000 214,018
- ----------------------------------------------------------------------------
Unsec. Global Notes, 6.70%, 07/16/04 4,945,000 5,142,849
- ----------------------------------------------------------------------------
Unsec. Global Notes, 6.88%, 02/01/06 8,880,000 9,367,334
- ----------------------------------------------------------------------------
General Electric Capital Corp.,
Gtd. Sub. Notes, 8.13%, 05/15/12 2,600,000 3,286,400
- ----------------------------------------------------------------------------
Series A, Medium Term Global Notes, 2.85%,
01/30/06 400,000 411,436
- ----------------------------------------------------------------------------
Series A, Medium Term Global Notes, 5.00%,
06/15/07 1,175,000 1,280,268
- ----------------------------------------------------------------------------
Series A, Medium Term Global Notes, 6.00%,
06/15/12 1,000,000 1,132,920
- ----------------------------------------------------------------------------
Series A, Medium Term Global Notes, 6.80%,
11/01/05 10,705,000 11,952,025
- ----------------------------------------------------------------------------
General Motors Acceptance Corp.,
Global Bonds, 8.00%, 11/01/31 1,750,000 1,722,210
- ----------------------------------------------------------------------------
Global Notes, 4.50%, 07/15/06 2,000,000 2,012,300
- ----------------------------------------------------------------------------
Global Notes, 5.13%, 05/09/08 1,700,000 1,685,397
- ----------------------------------------------------------------------------
Medium Term Notes, 4.15%, 02/07/05 5,650,000 5,729,891
- ----------------------------------------------------------------------------
Medium Term Notes, 6.38%, 01/30/04 1,200,000 1,228,788
- ----------------------------------------------------------------------------
Unsec. Unsub. Notes, 7.63%, 06/15/04 5,540,000 5,800,269
- ----------------------------------------------------------------------------
Heller Financial, Inc.,
Sr. Unsec. Global Notes, 8.00%, 06/15/05 2,425,000 2,718,789
- ----------------------------------------------------------------------------
Unsec. Global Notes, 7.38%, 11/01/09 1,740,000 2,106,705
- ----------------------------------------------------------------------------
Household Finance Corp.,
Global Notes, 6.38%, 10/15/11 1,620,000 1,846,784
- ----------------------------------------------------------------------------
Medium Term Notes, 3.38%, 02/21/06 470,000 483,494
- ----------------------------------------------------------------------------
Sr. Unsec. Global Notes, 6.50%, 01/24/06 1,265,000 1,401,709
- ----------------------------------------------------------------------------
International Lease Finance Corp., Notes,
5.13%, 08/01/04 350,000 363,409
- ----------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Sr. Notes,
8.75%, 03/15/05 3,610,000 4,027,677
- ----------------------------------------------------------------------------
Pemex Finance Ltd. (Cayman Islands)- Series
1999-2, Class A1, Global Bonds, 9.69%,
08/15/09 2,900,000 3,501,402
- ----------------------------------------------------------------------------
</Table>
F-5
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Pemex Project Funding Master Trust, Notes,
7.38%, 12/15/14 (Acquired 05/28/03; Cost
$1,211,529)(b) $ 1,100,000 $ 1,199,990
- ----------------------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Notes, 7.38%,
06/15/17 2,590,000 3,350,528
- ----------------------------------------------------------------------------
USL Capital Corp., Sr. Global Notes, 5.95%,
10/15/03 4,525,000 4,570,114
- ----------------------------------------------------------------------------
Washington Mutual Financial Corp., Sr. Unsec.
Notes, 8.25%, 06/15/05 2,050,000 2,307,644
============================================================================
115,894,633
============================================================================
PACKAGED FOODS & MEATS-0.07%
Kraft Foods Inc., Global Notes,
5.63%, 11/01/11 650,000 707,194
- ----------------------------------------------------------------------------
6.25%, 06/01/12 875,000 988,803
============================================================================
1,695,997
============================================================================
PHARMACEUTICALS-0.13%
Lilly (Eli) & Co., Unsec. Unsub. Global
Notes, 2.90%, 03/15/08 3,075,000 3,120,633
============================================================================
PROPERTY & CASUALTY INSURANCE-0.03%
Travelers Property Casualty Corp., Sr. Unsec.
Notes, 6.75%, 11/15/06 700,000 774,725
============================================================================
PUBLISHING-0.34%
News America Holdings, Sr. Unsec. Gtd. Deb.,
7.70%, 10/30/25 1,615,000 1,916,585
- ----------------------------------------------------------------------------
News America Inc., Sr. Putable Deb., 6.75%,
01/09/10 5,523,000 6,235,522
============================================================================
8,152,107
============================================================================
REAL ESTATE-0.58%
EOP Operating L.P.,
Sr. Unsec. Notes, 7.25%, 06/15/28 1,900,000 2,141,452
- ----------------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 2,205,000 2,546,158
- ----------------------------------------------------------------------------
Unsec. Notes, 8.38%, 03/15/06 1,250,000 1,441,375
- ----------------------------------------------------------------------------
Simon Property Group, L.P., Notes, 5.45%,
03/15/13 (Acquired 03/13/03; Cost
$2,030,991)(b) 2,035,000 2,147,983
- ----------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub. Deb.,
7.35%, 12/01/17 4,600,000 5,605,882
============================================================================
13,882,850
============================================================================
REGIONAL BANKS-0.34%
Greater Bay Bancorp, Sr. Notes, 5.25%,
03/31/08 (Acquired 03/19/03; Cost
$2,967,480)(b) 3,000,000 3,065,700
- ----------------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 2,005,000 2,095,345
- ----------------------------------------------------------------------------
U.S. Bancorp-Series N, Sr. Medium Term Notes,
2.75%, 03/30/06 3,000,000 3,055,950
============================================================================
8,216,995
============================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
SOVEREIGN DEBT-0.81%
Japan Bank for International Cooperation
(Japan), Unsec. Gtd. Euro Bonds, 6.50%,
10/06/05 $ 4,600,000 $ 5,069,826
- ----------------------------------------------------------------------------
New Brunswick (Province of) (Canada), Yankee
Deb., 6.75%, 08/15/13 940,000 1,168,072
- ----------------------------------------------------------------------------
Quebec (Province of) (Canada), Yankee Deb.,
7.50%, 07/15/23 1,400,000 1,825,040
- ----------------------------------------------------------------------------
United Mexican States (Mexico),
Global Notes, 6.63%, 03/03/15 1,000,000 1,066,250
- ----------------------------------------------------------------------------
Global Notes, 7.50%, 04/08/33 3,900,000 4,148,625
- ----------------------------------------------------------------------------
Medium Term Global Notes, 4.63%, 10/08/08 610,000 622,963
- ----------------------------------------------------------------------------
Medium Term Global Notes, 6.38%, 01/16/13 5,250,000 5,578,125
============================================================================
19,478,901
============================================================================
THRIFTS & MORTGAGE FINANCE-0.12%
Countrywide Home Loans, Inc.,
Series J, Gtd. Medium Term Global Notes,
5.25%, 06/15/04 500,000 518,175
- ----------------------------------------------------------------------------
Series K, Medium Term Global Notes, 3.50%,
12/19/05 2,260,000 2,338,671
============================================================================
2,856,846
============================================================================
TRUCKING-0.06%
Roadway Corp., Sr. Unsec. Gtd. Global Notes,
8.25%, 12/01/08 1,200,000 1,403,556
============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.24%
AT&T Wireless Services Inc., Sr. Unsec.
Unsub. Global Notes, 8.75%, 03/01/31 840,000 1,050,260
- ----------------------------------------------------------------------------
Cingular Wireless LLC, Sr. Unsec. Global
Notes, 5.63%, 12/15/06 150,000 165,552
- ----------------------------------------------------------------------------
Telecorp PCS, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 10.63%, 07/15/10 3,000,000 3,667,500
- ----------------------------------------------------------------------------
Tritel PCS Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 10.38%, 01/15/11 750,000 924,375
============================================================================
5,807,687
============================================================================
Total Bonds & Notes (Cost $386,049,499) 408,927,587
============================================================================
ASSET-BACKED SECURITIES-0.84%
AUTOMOBILE MANUFACTURERS-0.20%
DaimlerChrysler N.A. Holding Corp., Gtd. ROCS
Series CHR-1998-1, Collateral Trust, 6.50%,
08/01/18 4,520,127 4,735,850
============================================================================
</Table>
F-6
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-0.64%
Citicorp Lease,
Series 1999-1, Class A1, Pass Through
Ctfs., 7.22%, 06/15/05 (Acquired 05/08/02;
Cost $3,876,783)(b) $ 3,676,941 $ 3,990,989
- ----------------------------------------------------------------------------
Series 1999-1, Class A2, Pass Through
Ctfs., 8.04%, 12/15/19 (Acquired 06/01/00-
08/20/02; Cost $6,610,373)(b) 6,600,000 7,979,598
- ----------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp., Sr. Sec. Global Collateral Trust,
6.00%, 05/15/06 3,200,000 3,552,096
============================================================================
15,522,683
============================================================================
Total Asset-Backed Securities (Cost
$18,158,317) 20,258,533
============================================================================
U.S. GOVERNMENT AGENCY SECURITIES-12.28%
FEDERAL HOME LOAN BANK-0.04%
Unsec. Bonds,
4.88%, 04/16/04 820,000 845,141
============================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-2.18%
Pass Through Ctfs.,
7.00%, 06/01/15 to 06/01/32 11,403,415 11,964,891
- ----------------------------------------------------------------------------
6.50%, 05/01/16 to 08/01/32 19,147,840 19,940,773
- ----------------------------------------------------------------------------
6.00%, 04/01/17 to 02/01/33 15,062,839 15,654,007
- ----------------------------------------------------------------------------
8.00%, 01/01/27 2,260,681 2,445,699
- ----------------------------------------------------------------------------
7.50%, 12/01/30 to 03/01/32 2,177,255 2,314,633
============================================================================
52,320,003
============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-8.56%
Pass Through Ctfs.,
8.50%, 03/01/10 to 02/01/28 5,029,227 5,494,573
- ----------------------------------------------------------------------------
6.50%, 11/01/14 to 01/01/33 35,919,642 37,578,507
- ----------------------------------------------------------------------------
7.50%, 11/01/15 to 05/01/32 5,038,616 5,366,802
- ----------------------------------------------------------------------------
7.00%, 12/01/15 to 09/01/32 15,325,423 16,200,455
- ----------------------------------------------------------------------------
6.00%, 01/01/17 to 04/01/33 26,513,812 27,574,884
- ----------------------------------------------------------------------------
5.50%, 04/01/18 to 06/01/18 12,387,591 12,871,997
- ----------------------------------------------------------------------------
5.00%, 06/01/18 15,000,000 15,518,126
- ----------------------------------------------------------------------------
8.00%, 08/01/21 to 10/01/30 3,449,811 3,750,760
- ----------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 07/01/18 5,250,000 5,422,266
- ----------------------------------------------------------------------------
5.50%, 07/01/33(i) 44,545,000 46,126,348
- ----------------------------------------------------------------------------
Unsec. Bonds,
6.63%, 11/15/30 955,000 1,173,657
- ----------------------------------------------------------------------------
Unsec. Notes,
5.25%, 06/15/06 3,500,000 3,845,030
- ----------------------------------------------------------------------------
6.20%, 06/13/17 5,550,000 6,066,039
- ----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-(CONTINUED)
Unsec. Sub. Notes,
4.75%, 01/02/07 $ 8,800,000 $ 9,595,432
- ----------------------------------------------------------------------------
5.25%, 08/01/12 8,075,000 8,757,176
============================================================================
205,342,052
============================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-1.50%
Pass Through Ctfs.,
7.00%, 10/15/08 to 05/15/32 9,066,758 9,583,168
- ----------------------------------------------------------------------------
6.50%, 10/15/08 to 07/15/32 10,256,620 10,775,169
- ----------------------------------------------------------------------------
6.00%, 11/15/08 to 06/15/32 6,623,882 6,951,510
- ----------------------------------------------------------------------------
8.00%, 08/15/22 to 01/20/31 1,953,915 2,126,656
- ----------------------------------------------------------------------------
7.50%, 06/15/23 to 05/15/32 5,947,524 6,341,832
- ----------------------------------------------------------------------------
8.50%, 11/15/24 to 02/15/25 195,043 212,922
============================================================================
35,991,257
============================================================================
Total U.S. Government Agency Securities
(Cost $288,778,921) 294,498,453
============================================================================
U.S. TREASURY SECURITIES-5.05%
U.S. TREASURY NOTES-4.56%
2.13%, 10/31/04 27,445,000 27,800,962
- ----------------------------------------------------------------------------
6.75%, 05/15/05 5,550,000 6,113,658
- ----------------------------------------------------------------------------
6.88%, 05/15/06 950,000 1,089,232
- ----------------------------------------------------------------------------
6.50%, 10/15/06 23,865,000 27,426,135
- ----------------------------------------------------------------------------
3.50%, 11/15/06(j) 14,800,000 15,602,456
- ----------------------------------------------------------------------------
4.75%, 11/15/08 14,300,000 15,857,413
- ----------------------------------------------------------------------------
5.00%, 02/15/11 9,900,000 11,115,819
- ----------------------------------------------------------------------------
3.88%, 02/15/13 4,200,000 4,324,026
============================================================================
109,329,701
============================================================================
U.S. TREASURY BONDS-0.49%
7.25%, 05/15/16 765,000 1,018,284
- ----------------------------------------------------------------------------
7.50%, 11/15/16 4,850,000 6,591,441
- ----------------------------------------------------------------------------
6.25%, 08/15/23 3,320,000 4,068,560
============================================================================
11,678,285
============================================================================
Total U.S. Treasury Securities (Cost
$115,400,127) 121,007,986
============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-5.92%
STIC Liquid Assets Portfolio(k) 70,940,820 70,940,820
- ----------------------------------------------------------------------------
STIC Prime Portfolio(k) 70,940,820 70,940,820
============================================================================
Total Money Market Funds (Cost
$141,881,640) 141,881,640
============================================================================
TOTAL INVESTMENTS-102.61% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$2,278,470,190) 2,461,020,914
============================================================================
</Table>
F-7
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-10.47%
STIC Liquid Assets Portfolio(k)(l) 125,512,010 $ 125,512,010
- ----------------------------------------------------------------------------
STIC Prime Portfolio(k)(l) 125,512,010 125,512,010
============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $251,024,020) 251,024,020
============================================================================
TOTAL INVESTMENTS-113.08% (Cost
$2,529,494,210) 2,712,044,934
============================================================================
OTHER ASSETS LESS LIABILITIES-(13.08%) (313,736,079)
============================================================================
NET ASSETS-100.00% $2,398,308,855
____________________________________________________________________________
============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
Deb. - Debentures
DECS - Debt Exchangeable into Common Shares
GBP - British Pound Sterling
GO - General Obligation Bonds
Gtd. - Guaranteed
Jr. - Junior
PATS - Pass Through Asset Trust Securities
Pfd. - Preferred
ROCS - Receipts on Corporate Securities Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
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 06/30/03 was $46,657,039,
which represented 1.95% of the Fund's net assets. These securities are
considered illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(e) Interest rates are redetermined semi-annually. Rates shown are rates in
effect on 06/30/03.
(f) Principal and interest are secured by bond insurance provided by one of the
following companies: Ambac Assurance Corp. or MBIA Insurance Co.
(g) Foreign denominated security. Par value is denominated in currency
indicated.
(h) Interest rates are redetermined monthly. Rates shown are rates in effect on
06/30/03.
(i) Security purchased on forward commitment basis. These securities are subject
to dollar roll transactions. See Note 1 section C.
(j) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1 section H and Note 8.
(k) The money market fund and the Fund are affiliated by having the same
investment advisor.
(l) 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-8
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$2,529,494,210)* $2,712,044,934
- ------------------------------------------------------------
Foreign currencies, at value (cost $107) 112
- ------------------------------------------------------------
Receivables for:
Investments matured (Note 10) 1,325,636
- ------------------------------------------------------------
Investments sold 19,681,856
- ------------------------------------------------------------
Fund shares sold 3,883,599
- ------------------------------------------------------------
Dividends and interest 9,832,019
- ------------------------------------------------------------
Investment for deferred compensation plan 106,192
- ------------------------------------------------------------
Other assets 52,217
============================================================
Total assets 2,746,926,565
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 73,843,883
- ------------------------------------------------------------
Fund shares reacquired 18,915,195
- ------------------------------------------------------------
Deferred compensation plan 106,192
- ------------------------------------------------------------
Collateral upon return of securities
loaned 251,024,020
- ------------------------------------------------------------
Accrued distribution fees 2,325,473
- ------------------------------------------------------------
Accrued transfer agent fees 2,002,369
- ------------------------------------------------------------
Accrued operating expenses 400,578
============================================================
Total liabilities 348,617,710
============================================================
Net assets applicable to shares outstanding $2,398,308,855
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,175,281,745
- ------------------------------------------------------------
Undistributed net investment income (6,735,553)
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
futures contracts and option contracts (952,698,517)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
contracts 182,461,180
============================================================
2,398,308,855
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,370,076,934
____________________________________________________________
============================================================
Class B $ 740,257,579
____________________________________________________________
============================================================
Class C $ 285,140,971
____________________________________________________________
============================================================
Class R $ 2,824,430
____________________________________________________________
============================================================
Institutional Class $ 8,941
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 61,789,807
____________________________________________________________
============================================================
Class B 33,452,642
____________________________________________________________
============================================================
Class C 12,866,410
____________________________________________________________
============================================================
Class R 127,246
____________________________________________________________
============================================================
Institutional Class 403
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 22.17
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $22.17 divided by
95.25%) $ 23.28
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 22.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 22.16
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 22.20
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 22.19
____________________________________________________________
============================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $245,172,250
were on loan to brokers.
See Notes to Financial Statements.
F-9
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 23,551,884
- ---------------------------------------------------------------------------
Dividends (net of foreign withholding tax of $130,155) 9,853,297
- ---------------------------------------------------------------------------
Dividends from affiliated money market funds 673,404
- ---------------------------------------------------------------------------
Security lending income 378,300
===========================================================================
Total investment income 34,456,885
===========================================================================
EXPENSES:
Advisory fees 6,144,947
- ---------------------------------------------------------------------------
Administrative services fees 249,153
- ---------------------------------------------------------------------------
Custodian fees 113,383
- ---------------------------------------------------------------------------
Distribution fees -- Class A 1,713,495
- ---------------------------------------------------------------------------
Distribution fees -- Class B 3,631,290
- ---------------------------------------------------------------------------
Distribution fees -- Class C 1,421,941
- ---------------------------------------------------------------------------
Distribution fees -- Class R 5,363
- ---------------------------------------------------------------------------
Transfer agent fees 3,330,910
- ---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 28
- ---------------------------------------------------------------------------
Trustees' fees 12,502
- ---------------------------------------------------------------------------
Other 360,271
===========================================================================
Total expenses 16,983,283
===========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (39,350)
===========================================================================
Net expenses 16,943,933
===========================================================================
Net investment income 17,512,952
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (105,039,935)
- ---------------------------------------------------------------------------
Foreign currencies 20,025
- ---------------------------------------------------------------------------
Futures contracts 721,802
- ---------------------------------------------------------------------------
Option contracts written 607,773
===========================================================================
(103,690,335)
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 257,417,663
- ---------------------------------------------------------------------------
Foreign currencies (18,406)
- ---------------------------------------------------------------------------
Futures contracts 1,480,233
===========================================================================
258,879,490
===========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 155,189,155
===========================================================================
Net increase in net assets resulting from operations $ 172,702,107
___________________________________________________________________________
===========================================================================
</Table>
See Notes to Financial Statements.
F-10
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 17,512,952 $ 58,143,822
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts (103,690,335) (509,645,234)
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and futures
contracts 258,879,490 (226,603,332)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations 172,702,107 (678,104,744)
===============================================================================================
Distributions to shareholders from net investment income:
Class A (14,609,293) (43,040,026)
- -----------------------------------------------------------------------------------------------
Class B (4,927,887) (14,672,799)
- -----------------------------------------------------------------------------------------------
Class C (1,921,732) (5,912,859)
- -----------------------------------------------------------------------------------------------
Class R (22,500) (2,356)
- -----------------------------------------------------------------------------------------------
Institutional Class (108) (233)
===============================================================================================
Decrease in net assets resulting from distributions (21,481,520) (63,628,273)
===============================================================================================
Share transactions-net:
Class A (152,527,863) (418,695,124)
- -----------------------------------------------------------------------------------------------
Class B (71,218,005) (189,750,544)
- -----------------------------------------------------------------------------------------------
Class C (34,730,849) (92,084,801)
- -----------------------------------------------------------------------------------------------
Class R 2,423,352 295,439
- -----------------------------------------------------------------------------------------------
Institutional Class 108 10,233
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (256,053,257) (700,224,797)
===============================================================================================
Net increase (decrease) in net assets (104,832,670) (1,441,957,814)
===============================================================================================
NET ASSETS:
Beginning of period 2,503,141,525 3,945,099,339
===============================================================================================
End of period $2,398,308,855 $ 2,503,141,525
_______________________________________________________________________________________________
===============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (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 twelve 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 as high a total return as
possible, consistent with preservation 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 at 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
F-11
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.
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 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. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or
broker-dealer, and simultaneously agrees to repurchase a substantially
similar security (same type, coupon and maturity) from the institution at a
later date at an agreed upon price. The mortgage-backed securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any
additional fee income received on the sale, could generate income for the
Fund exceeding the yield on the security sold. The Fund will segregate
assets to cover its obligations under dollar roll transactions. The
difference between the selling price and the future repurchase price is
recorded as an adjustment to interest income.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event that the buyer of securities in a dollar roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of
the proceeds from the sale of the securities may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities. The return
earned by the Fund with the proceeds of the dollar roll transaction may not
exceed transaction costs.
D. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly
and are recorded on ex-dividend date. Distributions from net realized
capital gains, 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.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the Statement
of Operations.
G. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in
F-12
order to "lock in" the U.S. dollar price of that security. The Fund could
be exposed to risk if counterparties to the contracts are unable to meet
the terms of their contracts or if the value of the foreign currency
changes unfavorably.
H. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks also include to
varying degrees, the risk of loss in excess of the variation margin
disclosed in the Statement of Assets and Liabilities.
I. 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.
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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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
$150 million of the Fund's average daily net assets, plus 0.50% 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 six months ended June
30, 2003, AIM waived fees of $13,122.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $249,153 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $1,042,443 for such services and reimbursed fees of $24 on the
Institutional Class shares.
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, the Fund may pay a service fee of 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 the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. NASD Rules also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by any class of
shares of the Fund. Pursuant to the Plans, for the six months ended June 30,
2003, the Class A, Class B, Class C and Class R shares paid $1,713,495,
$3,631,290, $1,421,941 and $5,363, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $85,384 in front-end sales commissions from the sale of
Class A shares and $1,840, $425, $6,272 and $0 for Class A, Class B, Class C and
Class R shares, respectively, for CDSCs imposed upon redemptions by
shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$3,956 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $24,098 and
F-13
reductions in custodian fees of $2,106 under expense offset arrangements which
resulted in a reduction of the Fund's total expenses of $26,204.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 were parties to the line of credit could 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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $245,172,250 were on
loan to brokers. The loans were secured by cash collateral of $251,024,020,
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2003, the Fund received fees of $378,300 for
securities lending.
NOTE 7--CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------
Beginning of period -- $ --
- -----------------------------------------------------------
Written 13,365 1,803,105
- -----------------------------------------------------------
Closed (6,930) (795,931)
- -----------------------------------------------------------
Exercised (5,580) (961,860)
- -----------------------------------------------------------
Expired (855) (45,314)
===========================================================
End of period -- $ --
___________________________________________________________
===========================================================
</Table>
NOTE 8--FUTURES CONTRACTS
On June 30, 2003, $2,445,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts as of June 30, 2003 were as follows:
<Table>
<Caption>
NUMBER UNREALIZED
OF MONTH/ MARKET APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------
S&P 500 Index 50 Sep-03/Long $12,166,250 $(93,210)
_____________________________________________________________________________
=============================================================================
</Table>
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2009 $294,839,562
- ----------------------------------------------------------
December 31, 2010 533,892,842
==========================================================
Total capital loss carryforward $828,732,404
__________________________________________________________
==========================================================
</Table>
F-14
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $849,199,824 and $1,178,048,121, 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 $25,012,000 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.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $228,602,100
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (70,727,534)
===========================================================
Net unrealized appreciation of investment
securities $157,874,566
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $2,555,496,004.
</Table>
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 a 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 CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 9,596,871 $ 200,644,654 18,401,640 $ 428,141,266
- --------------------------------------------------------------------------------------------------------------------------
Class B 1,468,012 30,847,253 4,099,333 94,890,497
- --------------------------------------------------------------------------------------------------------------------------
Class C 563,464 11,797,884 1,843,250 43,002,479
- --------------------------------------------------------------------------------------------------------------------------
Class R* 121,564 2,599,497 14,347 301,147
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class** -- -- 388 10,000
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 666,623 14,227,473 1,819,979 40,991,840
- --------------------------------------------------------------------------------------------------------------------------
Class B 212,961 4,532,525 587,872 13,234,876
- --------------------------------------------------------------------------------------------------------------------------
Class C 83,211 1,772,274 232,973 5,254,228
- --------------------------------------------------------------------------------------------------------------------------
Class R* 1,047 22,500 114 2,356
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class** 5 108 10 233
==========================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 236,859 5,022,360 706,603 16,411,135
- --------------------------------------------------------------------------------------------------------------------------
Class B (237,422) (5,022,360) (708,036) (16,411,135)
==========================================================================================================================
Reacquired:
Class A (17,623,486) (372,422,350) (40,105,433) (904,239,365)
- --------------------------------------------------------------------------------------------------------------------------
Class B (4,889,241) (101,575,423) (12,551,569) (281,464,782)
- --------------------------------------------------------------------------------------------------------------------------
Class C (2,316,656) (48,301,007) (6,202,124) (140,341,508)
- --------------------------------------------------------------------------------------------------------------------------
Class R* (9,443) (198,645) (383) (8,064)
==========================================================================================================================
(12,125,631) $(256,053,257) (31,861,036) $(700,224,797)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
* Class R shares commenced sales on June 3, 2002.
** Institutional class shares commended sales on March 15, 2002.
F-15
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.81 $ 25.94 $ 30.10 $ 32.69 $ 28.23 $ 25.78
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19(a) 0.49(a) 0.71(a)(b) 0.92(a) 0.82(a) 0.71(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.40 (5.09) (4.14) (2.23) 4.46 2.45
=================================================================================================================================
Total from investment operations 1.59 (4.60) (3.43) (1.31) 5.28 3.16
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.23) (0.53) (0.73) (0.79) (0.82) (0.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- (0.49) -- (0.06)
=================================================================================================================================
Total distributions (0.23) (0.53) (0.73) (1.28) (0.82) (0.71)
=================================================================================================================================
Net asset value, end of period $ 22.17 $ 20.81 $ 25.94 $ 30.10 $ 32.69 $ 28.23
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.66% (17.85)% (11.36)% (4.18)% 19.04% 12.46%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,370,077 $1,434,164 $2,284,776 $2,507,641 $1,800,350 $1,318,230
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.11%(d) 1.06% 1.01% 0.96% 0.94% 0.95%
=================================================================================================================================
Ratio of net investment income to
average net assets 1.78%(d) 2.11% 2.60%(b) 2.80% 2.81% 2.81%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 37% 78% 73% 55% 65% 43%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has 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 would have been $0.73 and the ratio of net investment income to
average net assets would have been 2.67%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, Per share and
ratios for periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$1,382,155,894.
(e) Not annualized for periods less than one year.
F-16
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.77 $ 25.88 $ 30.01 $ 32.61 $ 28.18 $ 25.75
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.11(a) 0.31(a) 0.50(a)(b) 0.66(a) 0.58(a) 0.42(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.39 (5.06) (4.11) (2.23) 4.45 2.51
=================================================================================================================================
Total from investment operations 1.50 (4.75) (3.61) (1.57) 5.03 2.93
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.14) (0.36) (0.52) (0.54) (0.60) (0.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- -- (0.49) -- (0.06)
=================================================================================================================================
Total distributions (0.14) (0.36) (0.52) (1.03) (0.60) (0.50)
=================================================================================================================================
Net asset value, end of period $ 22.13 $ 20.77 $ 25.88 $ 30.01 $ 32.61 $ 28.18
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.27% (18.46)% (12.01)% (4.93)% 18.08% 11.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $740,258 $766,330 $1,176,679 $1,358,823 $1,183,215 $894,165
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.86%(d) 1.81% 1.76% 1.73% 1.75% 1.76%
=================================================================================================================================
Ratio of net investment income to
average net assets 1.03%(d) 1.36% 1.86%(b) 2.03% 2.00% 2.00%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 37% 78% 73% 55% 65% 43%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has 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 would have been $0.52 and the ratio of net investment income to
average net assets would have been 1.93%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$732,276,624.
(e) Not annualized for periods less than one year.
F-17
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.80 $ 25.92 $ 30.05 $ 32.65 $ 28.21 $ 25.76
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.11(a) 0.31(a) 0.50(a)(b) 0.66(a) 0.58(a) 0.42(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.39 (5.07) (4.11) (2.23) 4.46 2.53
=================================================================================================================================
Total from investment operations 1.50 (4.76) (3.61) (1.57) 5.04 2.95
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.14) (0.36) (0.52) (0.54) (0.60) (0.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.49) -- (0.06)
=================================================================================================================================
Total distributions (0.14) (0.36) (0.52) (1.03) (0.60) (0.50)
=================================================================================================================================
Net asset value, end of period $ 22.16 $ 20.80 $ 25.92 $ 30.05 $ 32.65 $ 28.21
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.26% (18.46)% (11.99)% (4.93)% 18.09% 11.60%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $285,141 $302,346 $483,644 $365,510 $200,585 $114,163
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.86%(d) 1.81% 1.76% 1.73% 1.75% 1.73%
=================================================================================================================================
Ratio of net investment income to average
net assets 1.03%(d) 1.36% 1.85%(b) 2.03% 2.00% 2.03%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 37% 78% 73% 55% 65% 43%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has 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 would have been $0.52 and the ratio of net investment income to
average net assets would have been 1.92%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$286,745,003.
(e) Not annualized for periods less than one year.
F-18
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS R
------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2003 2002
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $20.83 $ 23.73
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16(a) 0.22(a)
- --------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.41 (2.78)
============================================================================================
Total from investment operations 1.57 (2.56)
============================================================================================
Less dividends from net investment income (0.20) (0.34)
============================================================================================
Net asset value, end of period $22.20 $ 20.83
____________________________________________________________________________________________
============================================================================================
Total return(b) 7.57% (10.82)%
____________________________________________________________________________________________
============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,824 $ 293
____________________________________________________________________________________________
============================================================================================
Ratio of expenses to average net assets 1.36%(c) 1.33%(d)
============================================================================================
Ratio of net investment income to average net assets 1.53%(c) 1.83%(d)
____________________________________________________________________________________________
============================================================================================
Portfolio turnover rate(e) 37% 78%
____________________________________________________________________________________________
============================================================================================
</Table>
(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
$2,163,017.
(d) Annualized.
(e) Not annualized for periods less than one year.
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------
MARCH 15, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2003 2002
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $20.82 $ 25.81
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.23(a) 0.44(a)
- ---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.41 (4.83)
=============================================================================================
Total from investment operations 1.64 (4.39)
=============================================================================================
Less distributions:
Dividends from net investment income (0.27) (0.60)
=============================================================================================
Net asset value, end of period $22.19 $ 20.82
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 7.93% (17.16)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 9 $ 8
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 0.67%(c) 0.67%(d)
- ---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.25%(c) 0.80%(d)
=============================================================================================
Ratio of net investment income to average net assets 2.22%(c) 2.50%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 37% 78%
_____________________________________________________________________________________________
=============================================================================================
</Table>
(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 $8,420.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-19
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
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(5,6)
AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund SECTOR EQUITY
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Opportunities I Fund(2) AIM Global Science and Technology Fund
AIM Opportunities II Fund(2) AIM Global Utilities Fund
AIM Opportunities III Fund(2) AIM New Technology Fund
AIM Premier Equity Fund AIM Real Estate Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com BAL-SAR-1
[COVER ART]
AIM BASIC BALANCED FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Basic Balanced Fund seeks to achieve long-term growth
of capital and current income.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicmark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY INVESTMENT TYPE
[PIE CHART]
U.S. GOVERNMENT & AGENCY BONDS 16.8%
EQUITIES 64.3%
CORPORATE BONDS & NOTES 14.9%
CASH & OTHER 4.0%
TOTAL NUMBER OF HOLDINGS* 271
TOTAL NET ASSETS $115.9 MILLION
AVERAGE CREDIT QUALITY RATING (BONDS) AA
AVERAGE MATURITY (BONDS) 5.71 YEARS
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (9/28/01) 0.06%
1 Year -2.44
CLASS B SHARES
Inception (9/28/01) -0.05%
1 Year -3.32
CLASS C SHARES
Inception (9/28/01) 2.27%
1 Year 0.78
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 9.39%
CLASS B SHARES 9.04
CLASS C SHARES 9.15
S&P 500 Index (Broad Market Index) 11.75
60% RUSSELL 1000--Registered Trademark-- VALUE INDEX/
40% LEHMAN AGGREGATE BOND INDEX 8.58
(Custom Style-specific Index)
LIPPER BALANCED FUND INDEX 8.87
(Peer Group Index)
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.
================================================================================
<Table>
<Caption>
=================================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 FIXED-INCOME ISSUERS* TOP 10 INDUSTRIES*
- ---------------------------------------------------------------------------------------------------------------------------------
1. Computer Associates 1. U.S. Treasury 6.6% 1. U.S. Government Agency
International, Inc. 2.5% Securities 10.2%
2. Federal National Mortgage
2. Tyco International Association (FNMA) 6.2 2. U.S. Treasury Securities 6.6
Ltd. (Bermuda) 2.4
3. Federal Home Loan Mortgage 3. Other Diversified Financial
3. Waste Management, Inc. 1.9 Corp. (FHLMC) 2.4 Services 6.0
4. Cendant Corp. 1.9 4. Government National 4. Diversified Banks 4.6
Mortgage Association (GNMA) 1.6
5. American Standard Cos. 5. Advertising 3.3
Inc. 1.9 5. General Motors Acceptance
Corp. 0.7 6. Diversified Commercial
6. Citigroup Inc. 1.8 Services 3.3
6. General Electric Capital
7. Omnicom Group Inc. 1.8 Corp. 0.5 7. Data Processing & Outsourced
Services 3.1
8. First Data Corp. 1.7 7. MidAmerican Energy Holdings
Co. 0.4 8. Oil & Gas Drilling 2.6
9. Bank One Corp. 1.7
8. Barclays O/S Investment Co. 9. Systems Software 2.5
10. Target Corp. 1.7 B.V. (Netherlands) 0.4
10. Asset Management & Custody
9. United Mexican States (Mexico) 0.4 Banks 2.4
10. Sprint Capital Corp. 0.4
*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.
=================================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Basic Balanced Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions, and changes in net
asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The fund uses a blended index composed of 60% Russell 1000(R) Value Index
and 40% Lehman Aggregate Bond Index. The unmanaged Russell 1000 Value Index
is a subset of the unmanaged Russell 1000(R) Index, which represents the
performance of the stocks of large-capitalization companies; the Value
subset measures the performance of Russell 1000 companies with lower
price/book ratios and lower forecasted growth values. The unmanaged Lehman
Aggregate Bond Index, which represents the U.S. investment-grade fixed-rate
bond market (including government and corporate securities, mortgage
pass-through securities and asset-backed securities), is compiled by Lehman
Brothers, a global investment bank.
o The unmanaged Lehman U.S. Treasury Index is an index of public obligations
of the U.S. Treasury with a remaining maturity of one year or more. It is
compiled by Lehman Brothers, a global investment bank.
o The unmanaged Lipper Balanced Fund Index represents an average of the 30
largest balanced funds tracked by Lipper, Inc., an independent mutual fund
performance monitor. It is calculated daily, with adjustments for
distributions as of the ex-dividend dates.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMINVESTMENTS.COM.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Basic Balanced Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
will provide an overview of the markets and your fund
during the six months covered by this report.
DESPITE ECONOMIC
SLUGGISHNESS, As always, timely information about your fund and the
DOMESTIC EQUITY markets in general is available at our Web site,
MARKETS PERFORMED aiminvestments.com. From our home page, click on Products
WELL, PARTICULARLY and Performance, then Mutual Funds, then AIM Funds, and
DURING THE SECOND then select the type of information you wish to view.
HALF OF THE
REPORTING PERIOD. MARKET CONDITIONS
ROBERT H. GRAHAM
Economic sluggishness continued during the reporting
period. U.S. gross domestic product (GDP) increased at an
annualized rate of only 1.4% in the first quarter of 2003 and 2.4%, according to
the advance estimate, in the second quarter.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, service sector weakness, and slow
commercial construction and real estate markets. The Fed kept the short-term
federal funds rate at 1.25% for most of the reporting period, then lowered it to
1.00% on June 25, its lowest level since 1958. The Fed said it favored a more
expansive monetary policy because the economy had not yet exhibited sustainable
growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but was up 15.39% for
the second, bringing its total return for the six months to 11.75%.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecommunications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
Yield spreads for corporate bonds--the difference in yield between a
corporate bond and a Treasury issue of equivalent maturity--narrowed over the
period. The Lehman U.S. Treasury Index returned 3.75% for the six-month period,
while the U.S. investment-grade bond market, as represented by the Lehman
Aggregate Bond Index, posted a 3.93% total return.
YOUR FUND
AIM Basic Balanced Fund's Class A shares returned 9.39% at net asset value for
the six months ended June 30, 2003, ahead of the 8.87% return of its peers as
measured by the Lipper Balanced Fund Index. Fund managers Robert G. Alley,
Robert Canon Coleman II, Jan H. Friedli, Scot W. Johnson, Michael J. Simon,
Matthew W. Seinsheimer, and Bret W. Stanley continued investing in a broadly
diversified portfolio, with an asset mix weighted 64% equity and 36%
fixed-income securities at the end of the period.
Performance in the period was largely driven by the fund's equity holdings,
with the largest contributions coming from the information technology, financial
and consumer discretionary sectors.
Over the six months, there were only modest changes to the fund's
positioning. The fund's health care holdings were increased throughout the
period, while holdings in both energy and utility sectors were reduced. At the
close of the reporting period, the equity portfolio's largest sectors were
financial, industrial and consumer discretionary.
In the fixed-income portfolio, U.S. government and agency issues (including
mortgage-backed securities) accounted for approximately 17% of the fund's
assets. All of the fund's fixed-income holdings remained investment grade, with
the overall average credit quality being a strong AA rating.
IN CLOSING
I thank you for your continued participation in AIM Basic Balanced Fund, and
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS-64.37%
ADVERTISING-3.33%
Interpublic Group of Cos., Inc. (The)(a) 134,000 $ 1,792,920
- ------------------------------------------------------------------------
Omnicom Group Inc. 28,900 2,072,130
========================================================================
3,865,050
========================================================================
APPAREL RETAIL-1.62%
Gap, Inc. (The) 99,900 1,874,124
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.34%
Bank of New York Co., Inc. (The) 66,000 1,897,500
- ------------------------------------------------------------------------
Janus Capital Group Inc. 49,700 815,080
========================================================================
2,712,580
========================================================================
BUILDING PRODUCTS-1.87%
American Standard Cos. Inc.(a) 29,400 2,173,542
========================================================================
COMMUNICATIONS EQUIPMENT-0.64%
Motorola, Inc. 79,100 745,913
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.03%
Deere & Co. 26,000 1,188,200
========================================================================
CONSUMER ELECTRONICS-0.90%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 54,700 1,045,317
========================================================================
CONSUMER FINANCE-1.27%
American Express Co. 35,100 1,467,531
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.13%
Ceridian Corp.(a) 94,400 1,601,968
- ------------------------------------------------------------------------
First Data Corp. 48,900 2,026,416
========================================================================
3,628,384
========================================================================
DIVERSIFIED BANKS-2.70%
Bank of America Corp. 14,300 1,130,129
- ------------------------------------------------------------------------
Bank One Corp. 53,900 2,004,002
========================================================================
3,134,131
========================================================================
DIVERSIFIED CAPITAL MARKETS-1.22%
J.P. Morgan Chase & Co. 41,300 1,411,634
========================================================================
DIVERSIFIED CHEMICALS-1.28%
E. I. du Pont de Nemours & Co. 35,500 1,478,220
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-3.26%
Cendant Corp.(a) 121,700 $ 2,229,544
- ------------------------------------------------------------------------
H&R Block, Inc. 35,900 1,552,675
========================================================================
3,782,219
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.17%
Waters Corp.(a) 46,600 1,357,458
========================================================================
ENVIRONMENTAL SERVICES-1.94%
Waste Management, Inc. 93,500 2,252,415
========================================================================
FOOD RETAIL-2.36%
Kroger Co. (The)(a) 101,400 1,691,352
- ------------------------------------------------------------------------
Safeway Inc.(a) 51,300 1,049,598
========================================================================
2,740,950
========================================================================
GENERAL MERCHANDISE STORES-1.69%
Target Corp. 51,700 1,956,328
========================================================================
HEALTH CARE DISTRIBUTORS-1.62%
McKesson Corp. 52,500 1,876,350
========================================================================
HEALTH CARE FACILITIES-1.22%
HCA Inc. 44,000 1,409,760
========================================================================
HEALTH CARE SERVICES-1.07%
IMS Health Inc. 68,800 1,237,712
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.07%
Starwood Hotels & Resorts Worldwide, Inc. 43,200 1,235,088
========================================================================
HOUSEHOLD APPLIANCES-1.58%
Black & Decker Corp. (The) 42,100 1,829,245
========================================================================
INDUSTRIAL CONGLOMERATES-2.36%
Tyco International Ltd. (Bermuda) 144,100 2,735,018
========================================================================
INDUSTRIAL MACHINERY-0.99%
SPX Corp.(a) 26,000 1,145,560
========================================================================
INVESTMENT BANKING & BROKERAGE-1.40%
Morgan Stanley 38,100 1,628,775
========================================================================
LIFE & HEALTH INSURANCE-1.31%
Prudential Financial, Inc. 45,300 1,524,345
========================================================================
MANAGED HEALTH CARE-1.13%
UnitedHealth Group Inc. 26,000 1,306,500
========================================================================
MOVIES & ENTERTAINMENT-1.29%
Walt Disney Co. (The) 76,000 1,501,000
========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
OIL & GAS DRILLING-2.56%
Pride International, Inc.(a) 86,700 $ 1,631,694
- ------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 60,900 1,337,973
========================================================================
2,969,667
========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.82%
Cooper Cameron Corp.(a) 17,400 876,612
- ------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 25,900 1,232,063
========================================================================
2,108,675
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.82%
Citigroup Inc. 49,300 2,110,040
========================================================================
PHARMACEUTICALS-2.28%
Pfizer Inc. 36,600 1,249,890
- ------------------------------------------------------------------------
Wyeth 30,700 1,398,385
========================================================================
2,648,275
========================================================================
PROPERTY & CASUALTY INSURANCE-1.52%
ACE Ltd. (Cayman Islands) 51,400 1,762,506
========================================================================
REINSURANCE-0.52%
PartnerRe Ltd. (Bermuda) 11,900 608,209
========================================================================
SEMICONDUCTOR EQUIPMENT-2.16%
Applied Materials, Inc.(a) 72,300 1,146,678
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 37,100 1,358,639
========================================================================
2,505,317
========================================================================
SPECIALIZED FINANCE-1.16%
CIT Group Inc. 54,700 1,348,355
========================================================================
SYSTEMS SOFTWARE-2.48%
Computer Associates International, Inc. 128,800 2,869,664
========================================================================
THRIFTS & MORTGAGE FINANCE-1.26%
Fannie Mae 21,700 1,463,448
========================================================================
Total Common Stocks (Cost $69,138,334) 74,637,505
========================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-14.57%
AEROSPACE & DEFENSE-0.06%
Lockheed Martin Corp.-Series A, Medium Term
Notes, 8.66%, 11/30/06 $ 35,000 41,310
- ------------------------------------------------------------------------
Raytheon Co., Sr. Unsec. Notes, 6.30%,
03/15/05 30,000 32,170
========================================================================
73,480
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.05%
Bank of New York Co., Inc. (The), Sub. Medium
Term Notes, 7.14%, 03/24/28(b) 300,000 58,092
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
AUTOMOBILE MANUFACTURERS-0.04%
DaimlerChrysler N.A. Holding Corp.-Series D,
Gtd. Medium Term Notes, 3.40%, 12/15/04 $ 50,000 $ 50,802
========================================================================
BROADCASTING & CABLE TV-1.02%
Clear Channel Communications, Inc.,
Sr. Unsec. Gtd. Notes, 8.00%, 11/01/08 100,000 118,125
- ------------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 06/15/05 20,000 22,154
- ------------------------------------------------------------------------
Comcast Cable Communications, Inc., Unsec.
Unsub. Notes, 8.88%, 05/01/17 50,000 66,779
- ------------------------------------------------------------------------
Comcast Corp.,
Sr. Sub. Notes, 10.50%, 06/15/06 50,000 59,500
- ------------------------------------------------------------------------
Sr. Unsec. Notes, 8.88%, 04/01/07 150,000 159,354
- ------------------------------------------------------------------------
Cox Communications, Inc.,
Notes, 4.63%, 06/01/13 40,000 40,240
- ------------------------------------------------------------------------
Sr. Unsec. Putable Deb., 6.53%, 02/01/08 100,000 112,518
- ------------------------------------------------------------------------
TCI Communications Financing III, Gtd. Bonds,
9.65%, 03/31/27 75,000 87,886
- ------------------------------------------------------------------------
TCI Communications, Inc., Sr. Notes, 8.65%,
09/15/04 150,000 161,452
- ------------------------------------------------------------------------
Time Warner Inc.,
Sr. Unsec. Gtd. Deb, 6.88%, 06/15/18 150,000 168,774
- ------------------------------------------------------------------------
Unsec. Notes, 7.75%, 06/15/05 150,000 164,718
- ------------------------------------------------------------------------
Turner Broadcasting System, Inc., Sr. Notes,
7.40%, 02/01/04 20,000 20,647
========================================================================
1,182,147
========================================================================
CONSUMER FINANCE-0.35%
Capital One Bank, Notes, 4.88%, 05/15/08 400,000 405,812
========================================================================
DISTILLERS & VINTNERS-0.11%
Diageo PLC, Sr. Unsec. Gtd. Putable Notes,
7.45%, 04/15/05 100,000 130,554
========================================================================
DIVERSIFIED BANKS-1.90%
American Savings Bank, Notes, 6.63%, 02/15/06
(Acquired 03/05/03; Cost $27,726)(c) 25,000 27,407
- ------------------------------------------------------------------------
Bank of America Corp.,
Series B, Putable Sub. Medium Term Notes,
8.57%, 11/15/04 50,000 68,960
- ------------------------------------------------------------------------
Sub. Notes, 6.90%, 09/01/05 70,000 78,117
- ------------------------------------------------------------------------
BankAmerica Institutional Capital-Series B,
Gtd. Bonds, 7.70%, 12/31/26 (Acquired
06/18/03; Cost $58,940)(c) 50,000 57,155
- ------------------------------------------------------------------------
Barclays O/S Investment Co. B.V.
(Netherlands), Unsec. Gtd. Unsub. Floating
Rate Euro Notes, 1.50%, 11/29/49(d) 600,000 501,646
- ------------------------------------------------------------------------
Barnett Capital I, Gtd. Notes, 8.06%,
12/01/26 60,000 71,566
- ------------------------------------------------------------------------
Barnett Capital II, Gtd. Bonds, 7.95%,
12/01/26 35,000 41,285
- ------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Notes, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $75,926)(c) 60,000 71,203
- ------------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
DIVERSIFIED BANKS-(CONTINUED)
Comerica Inc., Sub. Notes, 4.80%, 05/01/15 $ 150,000 $ 153,903
- ------------------------------------------------------------------------
Corporacion Andina de Fomento (Venezuela),
Global Notes, 5.20%, 05/21/13 55,000 56,035
- ------------------------------------------------------------------------
Unsec. Global Notes, 6.88%, 03/15/12 55,000 62,557
- ------------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom)-Series 1,
Unsec. Sub. Floating Rate Euro Notes,
1.25%, 06/29/49(d) 140,000 111,025
- ------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Putable Sub.
Deb., 8.25%, 11/01/04 100,000 133,446
- ------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (United
Kingdom), Sub. Yankee Notes, 4.70%,
07/03/18 175,000 174,874
- ------------------------------------------------------------------------
Santander Financial Issuances (Cayman
Islands), Unsec. Gtd. Sub. Yankee Notes,
7.00%, 04/01/06 150,000 169,269
- ------------------------------------------------------------------------
Scotland International Finance No. 2 B.V.
(Netherlands), Sub. Notes, 4.25%, 05/23/13
(Acquired 05/20/03; Cost $69,825)(c) 70,000 70,083
- ------------------------------------------------------------------------
U.S. Bancorp-Series N, Sr. Medium Term Notes,
2.75%, 03/30/06 150,000 152,797
- ------------------------------------------------------------------------
U.S. Bank, N.A., Sub. Global Notes, 4.80%,
04/15/15 200,000 206,166
========================================================================
2,207,494
========================================================================
DIVERSIFIED CAPITAL MARKETS-0.07%
UBS Preferred Funding Trust I, Gtd. Global
Bonds, 8.62%, 10/29/49 60,000 77,561
========================================================================
ELECTRIC UTILITIES-1.48%
AmerenEnergy Generating Co.-Series C, Sr.
Unsec. Global Notes, 7.75%, 11/01/05 20,000 22,310
- ------------------------------------------------------------------------
American Electric Power Co., Inc., Sr. Unsec.
Unsub. Notes, 5.25%, 06/01/15 45,000 45,322
- ------------------------------------------------------------------------
CenterPoint Energy, Inc.,
Bonds, 6.85%, 06/01/15 (Acquired 05/21/03;
Cost $76,875)(c) 75,000 76,616
- ------------------------------------------------------------------------
Notes, 5.88%, 06/01/08 (Acquired 05/21/03;
Cost $45,383)(c) 45,000 45,913
- ------------------------------------------------------------------------
Cinergy Corp., Unsec. Sub. Global Deb.,
6.25%, 09/01/04 30,000 31,509
- ------------------------------------------------------------------------
Duke Energy Corp.,
Bonds, 6.45%, 10/15/32 60,000 65,095
- ------------------------------------------------------------------------
First Mortgage Bonds, 3.75%, 03/05/08
(Acquired 02/20/03; Cost $19,942)(c) 20,000 20,700
- ------------------------------------------------------------------------
Hydro-Quebec (Canada),
Gtd. Floating Rate Euro Notes, 1.31%,
09/29/49(d) 180,000 157,433
- ------------------------------------------------------------------------
Gtd. Yankee Bonds, 9.40%, 02/01/21(e) 25,000 37,274
- ------------------------------------------------------------------------
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05 350,000 390,148
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
ELECTRIC UTILITIES-(CONTINUED)
MidAmerican Energy Holdings Co., Sr. Unsec.
Notes, 3.50%, 05/15/08 (Acquired 05/13/03;
Cost $499,205)(c) $ 500,000 $ 503,365
- ------------------------------------------------------------------------
Public Service Co. of Colorado, First
Mortgage Bonds, 4.88%, 03/01/13 (Acquired
03/07/03; Cost $29,956)(c) 30,000 31,113
- ------------------------------------------------------------------------
Public Service Co. of New Mexico-Series A,
Sr. Unsec. Notes, 7.10%, 08/01/05 150,000 162,273
- ------------------------------------------------------------------------
TXU Corp.-Series B, Sr. Unsec. Notes, 6.38%,
10/01/04(e) 60,000 63,506
- ------------------------------------------------------------------------
Xcel Energy, Inc., Sr. Notes, 3.40%, 07/01/08
(Acquired 06/19/03; Cost $59,884)(c) 60,000 59,459
========================================================================
1,712,036
========================================================================
ENVIRONMENTAL SERVICES-0.07%
Waste Management, Inc., Unsec. Putable Notes,
7.10%, 08/01/03 75,000 85,760
========================================================================
GAS UTILITIES-0.10%
CenterPoint Energy Resources Corp., Unsec.
Deb., 6.50%, 02/01/08 60,000 64,919
- ------------------------------------------------------------------------
MCN Corp., First Mortgage Bonds, 5.70%,
03/15/33 45,000 46,985
========================================================================
111,904
========================================================================
HEALTH CARE FACILITIES-0.05%
HCA Inc., Notes, 6.25%, 02/15/13 55,000 56,206
========================================================================
HOMEBUILDING-0.21%
Pulte Homes, Inc., Sr. Unsec. Notes, 6.38%,
05/15/33 240,000 248,033
========================================================================
HYPERMARKETS & SUPER CENTERS-0.08%
Wal-Mart Stores, Inc., Unsec. Deb., 8.50%,
09/15/24 85,000 95,106
========================================================================
INTEGRATED OIL & GAS-0.15%
Occidental Petroleum Corp., Sr. Unsec. Notes,
7.38%, 11/15/08 50,000 59,118
- ------------------------------------------------------------------------
Repsol International Finance B.V.
(Netherlands), Unsec. Gtd. Global Notes,
7.45%, 07/15/05 45,000 49,657
- ------------------------------------------------------------------------
TGT Pipeline LLC, Bonds, 5.20%, 06/01/18
(Acquired 05/22/03; Cost $59,845)(c) 60,000 58,942
========================================================================
167,717
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.23%
AT&T Corp., Sr. Unsec. Global Notes, 7.00%,
11/15/06 35,000 38,796
- ------------------------------------------------------------------------
British Telecommunications PLC (United
Kingdom), Global Notes, 7.88%, 12/15/05 15,000 17,077
- ------------------------------------------------------------------------
Deutsche Telekom International Finance B.V.
(Netherlands), Unsec. Gtd. Unsub. Global
Bonds, 8.25%, 06/15/05 65,000 72,513
- ------------------------------------------------------------------------
</Table>
F-3
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-(CONTINUED)
France Telecom S.A. (France), Sr. Unsec.
Global Notes, 10.00%, 03/01/31 $ 60,000 $ 82,985
- ------------------------------------------------------------------------
GTE Hawaiian Telephone Co., Inc.-Series A,
Unsec. Deb., 7.00%, 02/01/06 75,000 84,447
- ------------------------------------------------------------------------
New England Telephone & Telegraph Co., Sr.
Unsec. Notes, 7.65%, 06/15/07 30,000 34,987
- ------------------------------------------------------------------------
SBC Communications Capital Corp.-Series D,
Medium Term Notes, 7.11%, 08/14/06 10,000 11,476
- ------------------------------------------------------------------------
Sprint Capital Corp.,
Sr. Unsec. Gtd. Global Notes,
6.00%, 01/15/07 170,000 183,430
- ------------------------------------------------------------------------
7.13%, 01/30/06 100,000 108,749
- ------------------------------------------------------------------------
Sr. Unsec. Unsub. Gtd. Global Notes, 6.13%,
11/15/08 50,000 54,450
- ------------------------------------------------------------------------
Unsec. Gtd. Global Notes, 7.90%, 03/15/05 130,000 141,163
- ------------------------------------------------------------------------
Verizon Global Funding Corp., Sr. Unsec.
Unsub. Global Notes, 7.75%, 12/01/30 125,000 157,224
- ------------------------------------------------------------------------
Verizon Pennsylvania Inc.-Series A, Global
Notes, 5.65%, 11/15/11 400,000 441,628
========================================================================
1,428,925
========================================================================
INVESTMENT BANKING & BROKERAGE-0.44%
Bear Stearns Cos. Inc. (The), Sr. Unsec.
Global Notes, 3.00%, 03/30/06 20,000 20,505
- ------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Global
Bonds, 7.63%, 08/17/05 125,000 140,474
- ------------------------------------------------------------------------
Lehman Brothers Inc.,
Sr. Sub. Deb., 11.63%, 05/15/05 75,000 87,556
- ------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 7.63%, 06/01/06 50,000 57,669
- ------------------------------------------------------------------------
Merrill Lynch & Co., Inc.
Series B, Medium Term Notes, 4.54%,
03/08/05 40,000 41,927
- ------------------------------------------------------------------------
Series E, Floating Rate Medium Term Euro
Notes, 1.37%, 06/28/04(f) 50,000 50,088
- ------------------------------------------------------------------------
Morgan Stanley, Sr. Global Notes, 7.75%,
06/15/05 100,000 111,525
========================================================================
509,744
========================================================================
LIFE & HEALTH INSURANCE-0.20%
John Hancock Global Funding II, Notes, 5.00%,
07/27/07 (Acquired 06/12/02; Cost
$49,973)(c) 50,000 53,879
- ------------------------------------------------------------------------
Lincoln National Corp., Unsec. Deb., 9.13%,
10/01/24 135,000 150,750
- ------------------------------------------------------------------------
ReliaStar Financial Corp., Unsec. Notes,
8.00%, 10/30/06 25,000 28,882
========================================================================
233,511
========================================================================
MOVIES & ENTERTAINMENT-0.26%
Viacom Inc., Global Bonds, 5.50%, 05/15/33 300,000 297,870
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
MUNICIPALITIES-0.25%
Illinois (State of); Unlimited Tax Series
2003 GO, 5.10%, 06/01/33 $ 300,000 $ 295,011
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.34%
Anadarko Petroleum Corp. (Canada), Unsec.
Yankee Deb., 7.38%, 05/15/06 75,000 85,660
- ------------------------------------------------------------------------
Burlington Resources Finance Co. (Canada),
Sr. Unsec. Gtd. Bonds, 7.20%, 08/15/31 40,000 49,316
- ------------------------------------------------------------------------
Kern River Funding Corp., Sr. Gtd. Notes,
4.89%, 04/30/18 (Acquired 04/28/03; Cost
$250,000)(c) 250,000 259,090
========================================================================
394,066
========================================================================
OIL & GAS REFINING & MARKETING &
TRANSPORTATION-0.06%
Petroleos Mexicanos (Mexico), Unsec. Unsub.
Gtd. Global Notes, 6.50%, 02/01/05 60,000 63,885
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.88%
American General Finance Corp.-Series H,
Medium Term Notes, 2.75%, 06/15/08 50,000 49,332
- ------------------------------------------------------------------------
ASIF Global Financing XIX, Sec. Notes, 4.90%,
01/17/13 (Acquired 01/08/03; Cost
$299,061)(c) 300,000 315,192
- ------------------------------------------------------------------------
ASIF Global Financing XX, Sec. Notes, 2.65%,
01/17/06 (Acquired 01/08/03; Cost
$59,905)(c) 60,000 61,301
- ------------------------------------------------------------------------
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 250,000 371,847
- ------------------------------------------------------------------------
CIT Group Inc.,
Global Notes, 5.63%, 05/17/04 50,000 51,648
- ------------------------------------------------------------------------
Sr. Floating Rate Medium Term Global Notes,
2.29%, 11/25/03(f) 75,000 75,148
- ------------------------------------------------------------------------
Sr. Global Notes, 7.13%, 10/15/04 50,000 53,204
- ------------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 200,000 236,906
- ------------------------------------------------------------------------
Corestates Capital Trust I, Bonds, 8.00%,
12/15/26 (Acquired 06/18/03; Cost
$47,662)(c) 40,000 47,783
- ------------------------------------------------------------------------
Ford Motor Credit Co.,
Notes, 7.50%, 06/15/04 5,000 5,220
- ------------------------------------------------------------------------
Unsec. Global Notes, 6.88%, 02/01/06 250,000 263,720
- ------------------------------------------------------------------------
Unsec. Global Notes, 6.70%, 07/16/04 135,000 140,401
- ------------------------------------------------------------------------
General Electric Capital Corp.,
Gtd. Sub. Notes, 8.13%, 05/15/12 100,000 126,400
- ------------------------------------------------------------------------
Series A, Medium Term Global Notes,
2.85%, 01/30/06 20,000 20,572
- ------------------------------------------------------------------------
5.00%, 06/15/07 50,000 54,480
- ------------------------------------------------------------------------
6.00%, 06/15/12 40,000 45,317
- ------------------------------------------------------------------------
6.80%, 11/01/05 335,000 374,024
- ------------------------------------------------------------------------
</Table>
F-4
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
General Motors Acceptance Corp.,
Global Bonds, 8.00%, 11/01/31 $ 90,000 $ 88,571
- ------------------------------------------------------------------------
Global Notes,
4.50%, 07/15/06 90,000 90,554
- ------------------------------------------------------------------------
5.13%, 05/09/08 70,000 69,399
- ------------------------------------------------------------------------
Medium Term Notes,
4.15%, 02/07/05 300,000 304,242
- ------------------------------------------------------------------------
6.38%, 01/30/04 65,000 66,559
- ------------------------------------------------------------------------
Unsec. Unsub. Notes, 7.63%, 06/15/04 155,000 162,282
- ------------------------------------------------------------------------
Heller Financial, Inc.-Class A,
Sr. Unsec. Global Notes, 8.00%, 06/15/05 100,000 112,115
- ------------------------------------------------------------------------
Unsec. Global Notes, 7.38%, 11/01/09 100,000 121,075
- ------------------------------------------------------------------------
Household Finance Corp.,
Global Notes, 6.38%, 10/15/11 75,000 85,499
- ------------------------------------------------------------------------
Medium Term Notes, 3.38%, 02/21/06 20,000 20,574
- ------------------------------------------------------------------------
Sr. Unsec. Global Notes,
6.50%, 01/24/06 50,000 55,404
- ------------------------------------------------------------------------
8.00%, 05/09/05 200,000 223,146
- ------------------------------------------------------------------------
International Lease Finance Corp., Notes,
5.13%, 08/01/04 10,000 10,383
- ------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Sr. Notes,
8.75%, 03/15/05 100,000 111,570
- ------------------------------------------------------------------------
Pemex Finance Ltd. (Cayman Islands)- Series
1999-2, Class A1, Global Bonds,
9.69%, 08/15/09 180,000 217,328
- ------------------------------------------------------------------------
Pemex Project Funding Master Trust, Notes,
7.38%, 12/15/14 (Acquired 05/28/03;
Cost $71,590)(c) 65,000 70,909
- ------------------------------------------------------------------------
USL Capital Corp., Sr. Global Notes, 5.95%,
10/15/03 275,000 277,742
- ------------------------------------------------------------------------
Washington Mutual Financial Corp., Sr. Unsec. Notes,
8.25%, 06/15/05 100,000 112,568
========================================================================
4,492,415
========================================================================
PACKAGED FOODS & MEATS-0.07%
Kraft Foods Inc., Global Notes,
5.63%, 11/01/11 30,000 32,640
- ------------------------------------------------------------------------
6.25%, 06/01/12 40,000 45,202
========================================================================
77,842
========================================================================
PHARMACEUTICALS-0.04%
Lilly (Eli) & Co., Unsec. Unsub. Global
Notes, 2.90%, 03/15/08 50,000 50,742
========================================================================
PUBLISHING-0.22%
News America Holdings, Sr. Unsec. Gtd. Deb.,
7.70%, 10/30/25 75,000 89,006
- ------------------------------------------------------------------------
News America Inc., Sr. Putable Deb., 6.75%,
01/09/10 150,000 169,352
========================================================================
258,358
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
REAL ESTATE-0.40%
EOP Operating L.P.,
Sr. Unsec. Notes, 7.25%, 06/15/28 $ 150,000 $ 169,062
- ------------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 60,000 69,283
- ------------------------------------------------------------------------
Unsec. Notes, 8.38%, 03/15/06 100,000 115,310
- ------------------------------------------------------------------------
Simon Property Group, L.P., Notes,
5.45%, 03/15/13 (Acquired 03/13/03;
Cost $99,803)(c) 100,000 105,552
========================================================================
459,207
========================================================================
REGIONAL BANKS-0.35%
Greater Bay Bancorp, Sr. Notes, 5.25%,
03/31/08
(Acquired 03/19/03; Cost $346,206)(c) 350,000 357,665
- ------------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 50,000 52,253
========================================================================
409,918
========================================================================
SOVEREIGN DEBT-0.63%
Japan Bank for International Coop. (Japan),
Unsec. Gtd. Euro Bonds, 6.50%, 10/06/05 100,000 110,214
- ------------------------------------------------------------------------
New Brunswick (Province of) (Canada),
Sec. Yankee Deb., 6.75%, 08/15/13 40,000 49,705
- ------------------------------------------------------------------------
Quebec (Province of) (Canada), Yankee Deb.,
7.50%, 07/15/23 55,000 71,698
- ------------------------------------------------------------------------
United Mexican States (Mexico),
Global Notes,
6.63%, 03/03/15 60,000 63,975
- ------------------------------------------------------------------------
4.63%, 10/08/08 50,000 51,063
- ------------------------------------------------------------------------
7.50%, 04/08/33 120,000 127,650
- ------------------------------------------------------------------------
Series A, Medium Term Global Notes,
6.38%, 01/16/13 240,000 255,000
========================================================================
729,305
========================================================================
THRIFTS & MORTGAGE FINANCE-0.08%
Countrywide Home Loans, Inc.
Series J, Gtd. Medium Term Global Notes,
5.25%, 06/15/04 10,000 10,364
- ------------------------------------------------------------------------
Series K, Medium Term Global Notes, 3.50%,
12/19/05 80,000 82,785
========================================================================
93,149
========================================================================
TRUCKING-0.08%
Roadway Corp., Sr. Unsec. Gtd. Global Notes,
8.25%, 12/01/08 75,000 87,722
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.30%
AT&T Wireless Services Inc., Sr. Unsec.
Unsub. Global Notes, 8.75%, 03/01/31 60,000 75,019
- ------------------------------------------------------------------------
Cingular Wireless LLC, Sr. Unsec. Global
Notes, 5.63%, 12/15/06 10,000 11,037
- ------------------------------------------------------------------------
TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 10.63%, 07/15/10 160,000 195,600
- ------------------------------------------------------------------------
</Table>
F-5
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-(CONTINUED)
Tritel PCS Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 10.38%, 01/15/11 $ 50,000 $ 61,625
========================================================================
343,281
========================================================================
Total Bonds & Notes (Cost $16,300,497) 16,887,655
========================================================================
ASSET-BACKED SECURITIES-0.30%
OTHER DIVERSIFIED FINANCIAL SERVICES-0.30%
Citicorp Lease-Series 1999-1,
Class A1, Pass Through Ctfs., 7.22%,
06/15/05 (Acquired 05/08/02; Cost
$109,720)(c) 104,064 112,953
- ------------------------------------------------------------------------
Class A2, Pass Through Ctfs., 8.04%,
12/15/19 (Acquired 08/20/02; Cost
$166,614)(c) 150,000 181,354
- ------------------------------------------------------------------------
First Industrial Realty Trust, Inc., Putable
PATS, 7.38%, 05/15/04 (Acquired 02/06/03;
Cost $52,425)(c) 50,000 52,095
========================================================================
Total Asset-Backed Securities (Cost
$325,590) 346,402
========================================================================
U.S. GOVERNMENT AGENCY SECURITIES-10.18%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-2.44%
Pass Through Ctfs.,
6.50%, 01/01/16 to 01/01/31 566,917 591,404
- ------------------------------------------------------------------------
6.00%, 05/01/17 to 02/01/33 1,715,413 1,780,035
- ------------------------------------------------------------------------
7.00%, 07/01/29 to 10/01/31 362,999 380,696
- ------------------------------------------------------------------------
7.50%, 11/01/30 to 12/01/30 70,477 74,924
========================================================================
2,827,059
========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-6.17%
Pass Through Ctfs.,
7.50%, 11/01/15 to 05/01/32 248,170 263,843
- ------------------------------------------------------------------------
7.00%, 02/01/16 to 03/01/32 473,482 499,849
- ------------------------------------------------------------------------
6.50%, 10/01/16 to 08/01/32 1,188,732 1,241,679
- ------------------------------------------------------------------------
6.00%, 05/01/17 to 03/01/33 1,944,861 2,027,131
- ------------------------------------------------------------------------
5.00%, 06/01/18 265,000 274,154
- ------------------------------------------------------------------------
5.50%, 06/01/18 259,006 269,134
- ------------------------------------------------------------------------
8.00%, 10/01/30 54,958 59,281
- ------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 07/01/18 400,000 413,125
- ------------------------------------------------------------------------
5.50%, 07/01/33 550,000 569,525
- ------------------------------------------------------------------------
Unsec. Notes,
5.25%, 06/15/06 700,000 769,006
- ------------------------------------------------------------------------
6.20%, 06/13/17 250,000 273,245
- ------------------------------------------------------------------------
Unsec. Sub. Notes,
4.75%, 01/02/07 250,000 272,597
- ------------------------------------------------------------------------
5.25%, 08/01/12 200,000 216,896
========================================================================
7,149,465
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-1.57%
Pass Through Ctfs.,
7.50%, 06/15/23 to 10/15/31 $ 167,604 $ 178,789
- ------------------------------------------------------------------------
8.50%, 02/15/25 63,142 68,753
- ------------------------------------------------------------------------
8.00%, 08/15/25 39,892 43,313
- ------------------------------------------------------------------------
7.00%, 02/15/31 to 05/15/32 607,179 641,482
- ------------------------------------------------------------------------
6.50%, 05/15/31 to 01/15/32 626,436 657,939
- ------------------------------------------------------------------------
6.00%, 12/15/31 to 11/15/32 219,905 230,692
========================================================================
1,820,968
========================================================================
Total U.S. Government Agency Securities
(Cost $11,666,234) 11,797,492
========================================================================
U.S. TREASURY SECURITIES-6.60%
U.S. TREASURY NOTES-5.64%
2.13%, 10/31/04 2,630,000 2,664,111
- ------------------------------------------------------------------------
6.75%, 05/15/05 200,000 220,312
- ------------------------------------------------------------------------
6.88%, 05/15/06 170,000 194,915
- ------------------------------------------------------------------------
6.50%, 10/15/06 500,000 574,610
- ------------------------------------------------------------------------
3.50%, 11/15/06 400,000 421,688
- ------------------------------------------------------------------------
3.25%, 08/15/07 1,660,000 1,732,625
- ------------------------------------------------------------------------
4.75%, 11/15/08 450,000 499,010
- ------------------------------------------------------------------------
3.88%, 02/15/13 225,000 231,644
========================================================================
6,538,915
========================================================================
U.S. TREASURY BONDS-0.96%
7.50%, 11/15/16 700,000 951,342
- ------------------------------------------------------------------------
6.25%, 08/15/23 135,000 165,438
========================================================================
1,116,780
========================================================================
Total U.S. Treasury Securities (Cost $7,546,717) 7,655,695
========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-4.72%
STIC Liquid Assets Portfolio(g) 2,736,712 2,736,712
- ------------------------------------------------------------------------
STIC Prime Portfolio(g) 2,736,712 2,736,712
========================================================================
Total Money Market Funds (Cost
$5,473,424) 5,473,424
========================================================================
TOTAL INVESTMENTS-100.74% (Cost $110,450,796) 116,798,173
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.74%) (856,829)
========================================================================
NET ASSETS-100.00% $115,941,344
________________________________________________________________________
========================================================================
</Table>
F-6
Investment Abbreviations:
<Table>
Ctfs - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
PATS - Pass Through Asset Trust Securities
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 06/30/03 was $2,639,729,
which represented 2.28% of the Fund's net assets. These securities are
considered to be illiquid.
(d) Interest rates are redetermined semi-annually. Rates shown are rates in
effect on 06/30/03.
(e) Principal and interest are secured by bond insurance provided by one of the
following companies: Ambac Assurance Corp. or MBIA Insurance Co.
(f) Interest rates are redetermined monthly. Rates shown are rates in effect on
06/30/03.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-7
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$110,450,796) $116,798,173
- -----------------------------------------------------------
Receivables for:
Investments sold 249,169
- -----------------------------------------------------------
Fund shares sold 285,251
- -----------------------------------------------------------
Dividends and interest 387,954
- -----------------------------------------------------------
Investment for deferred compensation plan 4,777
- -----------------------------------------------------------
Other assets 14,283
===========================================================
Total assets 117,739,607
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,431,645
- -----------------------------------------------------------
Fund shares reacquired 135,635
- -----------------------------------------------------------
Deferred compensation plan 4,777
- -----------------------------------------------------------
Accrued distribution fees 141,111
- -----------------------------------------------------------
Accrued trustees' fees 57
- -----------------------------------------------------------
Accrued transfer agent fees 49,447
- -----------------------------------------------------------
Accrued operating expenses 35,591
===========================================================
Total liabilities 1,798,263
===========================================================
Net assets applicable to shares outstanding $115,941,344
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $113,714,802
- -----------------------------------------------------------
Undistributed net investment income (159,814)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (3,961,021)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities 6,347,377
===========================================================
$115,941,344
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 39,525,429
___________________________________________________________
===========================================================
Class B $ 58,129,619
___________________________________________________________
===========================================================
Class C $ 18,286,296
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 3,837,948
___________________________________________________________
===========================================================
Class B 5,643,426
___________________________________________________________
===========================================================
Class C 1,774,462
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.30
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $10.30 divided by
95.25%) $ 10.81
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 10.30
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 10.31
___________________________________________________________
===========================================================
</Table>
See Notes to Financial Statements.
F-8
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 689,906
- -------------------------------------------------------------------------
Dividends (net of foreign withholding tax of $2,907) 348,374
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 36,059
=========================================================================
Total investment income 1,074,339
=========================================================================
EXPENSES:
Advisory fees 329,998
- -------------------------------------------------------------------------
Administrative services fees 24,795
- -------------------------------------------------------------------------
Custodian fees 18,532
- -------------------------------------------------------------------------
Distribution fees -- Class A 60,491
- -------------------------------------------------------------------------
Distribution fees -- Class B 254,807
- -------------------------------------------------------------------------
Distribution fees -- Class C 80,051
- -------------------------------------------------------------------------
Transfer agent fees 165,945
- -------------------------------------------------------------------------
Trustees' fees 4,816
- -------------------------------------------------------------------------
Other 73,254
=========================================================================
Total expenses 1,012,689
=========================================================================
Less: Fees waived and expenses paid indirectly (34,248)
=========================================================================
Net expenses 978,441
=========================================================================
Net investment income 95,898
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain (loss) from investment securities (615,268)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 10,203,464
=========================================================================
Net gain from investment securities 9,588,196
=========================================================================
Net increase in net assets resulting from operations $ 9,684,094
_________________________________________________________________________
=========================================================================
</Table>
See Notes to Financial Statements.
F-9
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 95,898 $ 480,316
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (615,268) (3,175,000)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 10,203,464 (5,004,736)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 9,684,094 (7,699,420)
==========================================================================================
Distributions to shareholders from net investment income:
Class A (168,757) (294,551)
- ------------------------------------------------------------------------------------------
Class B (76,035) (179,374)
- ------------------------------------------------------------------------------------------
Class C (23,541) (55,465)
==========================================================================================
Decrease in net assets resulting from distributions (268,333) (529,390)
==========================================================================================
Share transactions-net:
Class A 3,941,562 24,754,098
- ------------------------------------------------------------------------------------------
Class B 5,793,039 35,476,082
- ------------------------------------------------------------------------------------------
Class C 1,053,333 11,748,646
==========================================================================================
Net increase in net assets resulting from share
transactions 10,787,934 71,978,826
==========================================================================================
Net increase in net assets 20,203,695 63,750,016
==========================================================================================
NET ASSETS:
Beginning of period 95,737,649 31,987,633
==========================================================================================
End of period $115,941,344 $95,737,649
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-10
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 and 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 at 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. 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 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. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or
broker-dealer, and simultaneously agrees to repurchase a substantially
similar security (same type, coupon and maturity) from the institution at a
later date at an agreed upon price. The mortgage-backed securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any
additional fee income received on the sale, could generate income for the
Fund exceeding the yield on the security sold. The Fund will segregate
assets to cover its
F-11
obligations under dollar roll transactions. The difference between the
selling price and the future repurchase price is recorded as an adjustment
to interest income.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event that the buyer of securities in a dollar roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of
the proceeds from the sale of the securities may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities. The return
earned by the Fund with the proceeds of the dollar roll transaction may not
exceed transaction costs.
D. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly
and are recorded on ex-dividend date. Distributions from net realized
capital gains, 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.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 0.65% of the first $1
billion of the Fund's average daily net assets, plus 0.60% of the Fund's average
daily net assets on the next $4 billion, plus 0.55% of the Fund's average daily
net assets in excess of $5 billion. AIM has voluntarily agreed to waive fees
and/or reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A shares to
1.50%. Voluntary expense limitations may be rescinded, terminated or modified at
any time without further notice to investors. During periods of voluntary
waivers or reimbursements to the extent the annualized expense ratio does not
exceed the voluntary limit for the period committed, AIM will retain its ability
to be reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. Further, AIM has also voluntarily agreed to waive advisory fees of
the Fund in the amount of 25% of the advisory fee AIM receives from the
affiliated money market funds in which the Fund has invested. For the six months
ended June 30, 2003, AIM waived fees of $32,810.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $79,566 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $60,491, $254,807 and $80,051, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended June 30, 2003, AIM
Distributors retained $21,127 in front-end sales commissions from the sale of
Class A shares and $45, $1,613 and $657 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,384 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,359 and reductions in custodian
fees of $79 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $1,438.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an
"interested person" of AIM. Trustees have the option to defer
F-12
compensation payable by the Trust. The Trustees deferring compensation have the
option to select various AIM Funds in which all or part of their deferral
accounts shall be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2009 $ 1,094
- ----------------------------------------------------------
December 31, 2010 3,076,168
==========================================================
Total capital loss carryforward $3,077,262
__________________________________________________________
==========================================================
</Table>
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $41,959,342 and $30,630,464, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 9,328,730
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,052,249)
===========================================================
Net unrealized appreciation of investment
securities $ 6,276,481
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $110,521,692.
</Table>
F-13
NOTE 8--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,042,265 $ 9,836,882 3,446,333 $ 34,648,200
- --------------------------------------------------------------------------------------------------------------------
Class B 1,594,985 15,099,151 5,478,972 54,419,155
- --------------------------------------------------------------------------------------------------------------------
Class C 557,883 5,299,151 1,909,258 19,097,434
====================================================================================================================
Issued as reinvestment of dividends:
Class A 16,176 156,821 28,607 280,388
- --------------------------------------------------------------------------------------------------------------------
Class B 7,173 68,214 15,991 156,480
- --------------------------------------------------------------------------------------------------------------------
Class C 2,102 20,053 5,190 50,976
====================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 67,193 651,702 46,807 451,087
- --------------------------------------------------------------------------------------------------------------------
Class B (67,200) (651,702) (46,781) (451,087)
====================================================================================================================
Reacquired:
Class A (715,844) (6,703,843) (1,094,279) (10,625,577)
- --------------------------------------------------------------------------------------------------------------------
Class B (924,672) (8,722,624) (1,910,198) (18,648,466)
- --------------------------------------------------------------------------------------------------------------------
Class C (447,813) (4,265,871) (732,977) (7,399,764)
====================================================================================================================
1,132,248 $10,787,934 7,146,923 $ 71,978,826
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
F-14
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------------
SEPTEMBER 28, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.46 $ 10.75 $ 10.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03(a) 0.11(a) 0.03(a)
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.86 (1.28) 0.76
====================================================================================================================
Total from investment operations 0.89 (1.17) 0.79
====================================================================================================================
Less dividends from net investment income (0.05) (0.12) (0.04)
====================================================================================================================
Net asset value, end of period $ 10.30 $ 9.46 $ 10.75
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 9.39% (10.97)% 7.94%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,525 $32,414 $10,753
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.50%(c) 1.48% 1.43%(d)
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.57%(c) 1.67% 2.89%(d)
====================================================================================================================
Ratio of net investment income to average net assets 0.62%(c) 1.15% 1.16%(d)
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e) 32% 42% 7%
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(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 annualized and based on average net assets of $34,852,676.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-15
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
------------------------------------------------------
SEPTEMBER 28, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.46 $ 10.75 $ 10.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) 0.05(a) 0.01(a)
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.85 (1.29) 0.77
====================================================================================================================
Total from investment operations 0.85 (1.24) 0.78
====================================================================================================================
Less dividends from net investment income (0.01) (0.05) (0.03)
====================================================================================================================
Net asset value, end of period $ 10.30 $ 9.46 $ 10.75
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 9.04% (11.56)% 7.76%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,130 $47,597 $16,067
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.15%(c) 2.13% 2.08%(d)
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.32% 3.54%(d)
====================================================================================================================
Ratio of net investment income (loss) to average net assets (0.03)%(c) 0.50% 0.52%(d)
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e) 32% 42% 7%
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(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 annualized and based on average net assets of $51,383,731.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-16
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------
SEPTEMBER 28, 2001
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.46 $ 10.75 $10.00
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) 0.05(a) 0.01(a)
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.86 (1.29) 0.77
=================================================================================================================
Total from investment operations 0.86 (1.24) 0.78
=================================================================================================================
Less dividends from net investment income (0.01) (0.05) (0.03)
=================================================================================================================
Net asset value, end of period $ 10.31 $ 9.46 $10.75
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 9.15% (11.57)% 7.76%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,286 $15,727 $5,168
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.15%(c) 2.13% 2.08%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.32% 3.54%(d)
=================================================================================================================
Ratio of net investment income (loss) to average net assets (0.03)%(c) 0.50% 0.52%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 32% 42% 7%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(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 annualized and based on average net assets of $16,142,930.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-17
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class
A shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
Your goals. Our solutions.
--Servicemark--
AIMinvestments.com BBA-SAR-1
[COVER ART]
AIM EUROPEAN SMALL COMPANY FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM European Small Company Fund seeks to
provide long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY COUNTRY
[PIE CHART]
UNITED KINGDOM 32.0%
OTHER 17.0%
GERMANY 10.2%
IRELAND 10.5%
FRANCE 8.5%
SPAIN 5.4%
ITALY 4.9%
BELGIUM 3.4%
NORWAY 2.9%
NETHERLANDS 2.9%
FINLAND 2.3%
TOTAL NUMBER OF HOLDINGS* 106
TOTAL NET ASSETS $38.0 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (8/31/00) -6.17%
1 Year -0.11
CLASS B SHARES
Inception (8/31/00) -5.90%
1 Year -0.02
CLASS C SHARES
Inception (8/31/00) -4.92%
1 Year 3.85
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 19.27%
CLASS B SHARES 18.98
CLASS C SHARES 18.84
MSCI EAFE--Registered Trademark-- Index 9.47
(Broad Market Index)
MSCI EUROPE SMALL-CAP INDEX 18.10
(Style-Specific Index)
LIPPER EUROPEAN FUND INDEX 10.70
(Peer Group Index)
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.
<Table>
<Caption>
==========================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
- --------------------------------------------------------------------------------------------------------------------------
1. Merloni Elettrodomestici S.p.A. (Italy) 3.1% 1. Diversified Banks 5.0%
2. Puma A.G. Rudolf Dassler Sport (Germany) 2.5 2. Household Appliances 4.3
3. Anglo Irish Bank Corp. PLC (Ireland) 2.4 3. Pharmaceuticals 3.8
4. Mobistar S.A. (Belgium) 2.2 4. Leisure Products 3.8
5. Benfield Group PLC (Bermuda) 1.7 5. Apparel, Accessories & Luxury Goods 3.3
6. Bricolage (Mr.) S.A. (France) 1.7 6. Apparel Retail 2.9
7. Enterprise Inns PLC (United Kingdom) 1.6 7. Restaurants 2.6
8. Cattles PLC (United Kingdom) 1.6 8. Food Distributors 2.5
9. Bijou Brigitte Modische Accessoires A.G. (Germany) 1.6 9. Footwear 2.5
10. Camaieu (France) 1.5 10. Insurance Brokers 2.5
* 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.
==========================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM European Small Company Fund's performance figures are historical, and
they reflect fund expenses, the reinvestment of distributions, and changes
in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o Had the advisor not waived fees and/or reimbursed expenses, returns would
have been lower.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o Investing in a single-sector or single-region mutual fund may involve
greater risk and potential reward than investing in a more diversified fund.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged MSCI Europe, Australasia and the Far East Index (the
EAFE--Registered Trademark-- is a group of foreign securities tracked by
Morgan Stanley Capital International.
o The unmanaged Lipper European Fund Index represents an average of the 30
largest European funds tracked by Lipper, Inc., an independent mutual fund
performance monitor.
o The unmanaged MSCI Europe Small-Cap Index is a price-only index that
comprises a group of small-cap European securities tracked by Morgan Stanley
Capital International.
o The unmanaged MSCI Europe Index is a group of European securities tracked by
Morgan Stanley Capital International.
o The MSCI All Country (AC) Asia Pacific Free ex-Japan Index is a group of
developed and emerging Asian and Asia-Pacific markets (except Japan) covered
by Morgan Stanley Capital International. A "free" index represents
investable opportunities for global investors, taking into account the local
market restrictions on share ownership by foreign investors.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM European Small Company Fund for
ROBERT H. the six months ended June 30, 2003. Important information
GRAHAM] such as top holdings and fund performance as of the close of
the reporting period appears on the opposite page. This
ON THE CURRENCY letter will provide an overview of the markets and your
FRONT, THE U.S. fund during the six months covered by this report.
DOLLAR REMAINED
WEAK COMPARED TO As always, timely information about your fund and the
MANY FOREIGN markets in general is available at our Web site,
CURRENCIES, aiminvestments.com. From our home page, click on Products &
PARTICULARLY Performance, then Mutual Funds, then AIM Funds, and then
THE EURO. select the type of information you wish to view.
ROBERT H. GRAHAM
MARKET CONDITIONS
At the start of 2003, the global economy remained sluggish
as uncertainties over the war in Iraq mounted. However, as
noted in many financial publications, a relatively quick resolution of the
conflict during April removed that risk factor from the global economy.
International markets, as measured by the MSCI Europe, Australasia and the
Far East Index (the EAFE--Registered Trademark--), produced negative returns for
the first quarter of 2003. Many foreign markets rallied, however, in April and
continued to produce positive returns each month throughout the second quarter.
European markets in particular rallied in April with the MSCI Europe Index
posting a return of 13.49% for the month. The European Central Bank (ECB)
reduced its benchmark interest twice in 2003: 0.25% in March and 0.50% in June.
This left the euro zone benchmark rate at 2.0% at the end of the reporting
period. According to the ECB's June 2003 monthly bulletin, the June rate cut was
based on the outlook for price stability over the medium term, which has
improved significantly since interest rates were lowered in March. The decision
was in line with the ECB's monetary policy strategy, including the aim of
maintaining inflation rates below but close to 2% over the medium term.
As widely reported, in Asia, the epidemic of severe acute respiratory
syndrome (SARS) dealt a blow to local economies early in the year. However, the
MSCI All Country (AC) Asia Pacific Free ex-Japan Index, rallied in April and
produced positive results for the six-month reporting period.
On the currency front, the U.S. dollar remained weak compared to many
foreign currencies, particularly the euro. Other currencies that gained ground
on the U.S. dollar during the reporting period included the Australian dollar,
Swiss franc, British pound and Canadian dollar.
YOUR FUND
European small-cap stocks, as represented by the MSCI Europe Small-Cap Index,
outperformed their large-cap peers, measured by the MSCI Europe Index, during
the reporting period. This proved a positive trend for AIM European Small
Company Fund, as it is comprised primarily of European small- and micro-cap
equities. Throughout the reporting period, fund managers Borge Endresen and
Jason T. Holzer sought to identify companies that, in their view, are
experiencing strong growth and have prospects for future long-term growth.
As of June 30, 2003, the fund had significant exposure to the following
sectors: consumer discretionary, financials and health care. Over the course of
the reporting period, the fund's exposure to the financials and health care
sectors increased, while its weightings in consumer staples and industrials
decreased. The number of fund holdings increased over the reporting period from
85 on December 31, 2002 to 106 on June 30, 2003.
IN CLOSING
I thank you for your continued participation in AIM European Small Company Fund,
and I look forward to reporting to you again in six months. If you have any
questions, please consult your financial advisor to help you with your
investment choices. And as always, members of our award-winning Client Services
department are ready to help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-93.57%
BELGIUM-3.35%
Colruyt N.V. (Food Retail) 6,200 $ 429,786
- ---------------------------------------------------------------------
Mobistar S.A. (Wireless Telecommunication
Services)(a) 20,500 844,850
=====================================================================
1,274,636
=====================================================================
BERMUDA-1.73%
Benfield Group PLC (Insurance Brokers)
(Acquired 06/13/03; Cost $586,443)(a)(b) 140,600 656,333
=====================================================================
CROATIA-0.57%
Pliva d.d.-GDR (Pharmaceuticals) (Acquired
11/14/02-05/19/03; Cost $214,204)(b)(c)(d) 15,700 216,660
=====================================================================
CZECH REPUBLIC-0.61%
Komercni Banka A.S. (Diversified Banks) 3,200 231,352
=====================================================================
DENMARK-1.90%
Jyske Bank A.S. (Diversified Banks)(a) 5,100 206,334
- ---------------------------------------------------------------------
Novozymes A.S.-Class B (Specialty
Chemicals)(a) 6,700 186,942
- ---------------------------------------------------------------------
Topdanmark A.S. (Multi-Line Insurance)(a) 8,950 328,106
=====================================================================
721,382
=====================================================================
FINLAND-2.31%
Marimekko Oyj (Apparel, Accessories & Luxury
Goods) 24,200 183,360
- ---------------------------------------------------------------------
Nokian Renkaat Oyj (Tires & Rubber) 8,200 423,015
- ---------------------------------------------------------------------
Vacon Oyj (Electrical Components & Equipment) 28,100 270,182
=====================================================================
876,557
=====================================================================
FRANCE-8.47%
Bonduelle S.C.A. (Packaged Foods & Meats) 2,550 204,075
- ---------------------------------------------------------------------
Bricolage (Mr.) S.A. (Home Improvement
Retail) 22,869 649,915
- ---------------------------------------------------------------------
Camaieu (Apparel Retail) 10,100 574,529
- ---------------------------------------------------------------------
Gifi (General Merchandise Stores) 7,100 338,472
- ---------------------------------------------------------------------
Ipsos (Advertising) 3,000 186,716
- ---------------------------------------------------------------------
SEB S.A. (Household Appliances) 2,600 229,632
- ---------------------------------------------------------------------
SMOBY S.A. (Leisure Products) 2,500 109,392
- ---------------------------------------------------------------------
Stallergenes (Biotechnology) 8,800 388,811
- ---------------------------------------------------------------------
Trigano (Leisure Products)(a) 8,600 282,926
- ---------------------------------------------------------------------
UBI Soft Entertainment S.A. (Home
Entertainment Software)(a) 9,700 187,090
- ---------------------------------------------------------------------
Vet' Affaires (Apparel Retail) 1,000 67,248
=====================================================================
3,218,806
=====================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
<Caption>
GERMANY-10.16%
Bijou Brigitte Modische Accessoires A.G.
(Apparel, Accessories & Luxury Goods) 6,700 $ 593,905
- ---------------------------------------------------------------------
Boewe Systec A.G. (Office Electronics)(a) 7,800 262,266
- ---------------------------------------------------------------------
Draegerwerk A.G.-Pfd. (Health Care Equipment) 2,600 107,032
- ---------------------------------------------------------------------
Freenet.de A.G. (Internet Software &
Services)(a) 4,850 191,558
- ---------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)
(Acquired 07/26/01-05/19/03; Cost
$305,922)(b) 9,460 942,261
- ---------------------------------------------------------------------
Schwarz Pharma A.G. (Pharmaceuticals)(a) 7,400 284,605
- ---------------------------------------------------------------------
Singulus Technologies A.G. (Industrial
Machinery)(a) 9,200 159,754
- ---------------------------------------------------------------------
Stada Arzneimittel A.G. (Pharmaceuticals) 4,300 274,310
- ---------------------------------------------------------------------
Vossloh A.G. (Construction & Farm Machinery &
Heavy Trucks) 8,800 316,662
- ---------------------------------------------------------------------
W.E.T. Automotive Systems A.G. (Auto Parts &
Equipment)(a) 4,960 307,618
- ---------------------------------------------------------------------
Zapf Creation A.G. (Leisure Products) 11,300 421,587
=====================================================================
3,861,558
=====================================================================
GREECE-0.72%
Hyatt Regency Hotels & Tourism S.A. (Hotels,
Resorts & Cruise Lines) 30,700 272,910
=====================================================================
HUNGARY-0.79%
Gedeon Richter Rt. (Pharmaceuticals)(a) 4,250 300,617
=====================================================================
IRELAND-10.45%
Anglo Irish Bank Corp. PLC (Diversified
Banks) 103,400 916,801
- ---------------------------------------------------------------------
DCC PLC (Industrial Conglomerates) 27,100 365,106
- ---------------------------------------------------------------------
Depfa Bank PLC (Diversified Banks) 3,800 296,454
- ---------------------------------------------------------------------
First Active PLC (Diversified Banks) 47,500 237,929
- ---------------------------------------------------------------------
Fyffes PLC (Food Distributors) 267,700 422,311
- ---------------------------------------------------------------------
Grafton Group PLC-Units (Trading Companies &
Distributors)(e) 119,880 531,461
- ---------------------------------------------------------------------
IAWS Group PLC (Agricultural Products) 47,500 407,487
- ---------------------------------------------------------------------
ICON PLC-ADR (Health Care Services)(a) 5,500 175,010
- ---------------------------------------------------------------------
Jurys Doyle Hotel Group PLC (Hotels, Resorts
& Cruise Lines) 12,400 120,369
- ---------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
IRELAND-(CONTINUED)
Paddy Power PLC (Casinos & Gaming) 28,200 $ 174,052
- ---------------------------------------------------------------------
United Drug PLC (Health Care Distributors) 20,300 324,919
=====================================================================
3,971,899
=====================================================================
ITALY-4.91%
Davide Campari-Milano S.p.A. (Distillers &
Vintners) 6,800 261,137
- ---------------------------------------------------------------------
Merloni Elettrodomestici S.p.A. (Household
Appliances) 78,897 1,170,147
- ---------------------------------------------------------------------
Mondo TV S.p.A. (Movies & Entertainment)(a) 5,700 196,906
- ---------------------------------------------------------------------
Saeco International Group S.p.A. (Household
Appliances) 66,000 235,597
=====================================================================
1,863,787
=====================================================================
NETHERLANDS-2.90%
Sligro Food Group N.V. (Food Distributors) 11,300 531,798
- ---------------------------------------------------------------------
Trader Classified Media N.V.-Class A
(Advertising)(a) 21,300 188,857
- ---------------------------------------------------------------------
Versatel Telecom International N.V.
(Integrated Telecommunication Services)(a) 292,800 380,990
=====================================================================
1,101,645
=====================================================================
NORWAY-2.94%
Aktiv Kapital A.S.A. (Specialized Finance) 60,875 401,283
- ---------------------------------------------------------------------
Ekornes A.S.A. (Home Furnishings) 24,200 324,086
- ---------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas
Equipment & Services)(a) 35,000 393,433
=====================================================================
1,118,802
=====================================================================
SPAIN-5.44%
Baron de Ley, S.A. (Distillers & Vintners)(a) 15,100 537,104
- ---------------------------------------------------------------------
Compania de Distribucion Integral Logista,
S.A. (Distributors) 16,100 385,614
- ---------------------------------------------------------------------
Corporacion Mapfre S.A. (Multi-Line
Insurance) 37,000 396,231
- ---------------------------------------------------------------------
Gamesa Corporacion Tecnologica, S.A.
(Electric Utilities) 10,100 226,206
- ---------------------------------------------------------------------
Miquel y Costas & Miquel, S.A. (Paper
Products) 16,500 522,493
=====================================================================
2,067,648
=====================================================================
SWEDEN-2.07%
Axfood A.B. (Food Retail) 14,800 269,731
- ---------------------------------------------------------------------
Elekta A.B.-Class B (Health Care
Equipment)(a) 24,550 304,434
- ---------------------------------------------------------------------
Swedish Match A.B. (Tobacco) 28,100 212,945
=====================================================================
787,110
=====================================================================
SWITZERLAND-2.26%
Actelion Ltd. (Biotechnology)(a) 2,650 176,902
- ---------------------------------------------------------------------
Centerpulse A.G. (Health Care Equipment)
(Acquired 12/11/02-05/19/03; Cost
$348,826)(a)(b) 1,850 499,056
- ---------------------------------------------------------------------
Geberit A.G. (Building Products) 595 183,626
=====================================================================
859,584
=====================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
UNITED KINGDOM-31.99%
Acambis PLC (Biotechnology)(a) 49,000 $ 299,304
- ---------------------------------------------------------------------
Alba PLC (Consumer Electronics) 36,100 301,779
- ---------------------------------------------------------------------
Albemarle & Bond Holdings PLC (Consumer
Finance) 213,200 258,938
- ---------------------------------------------------------------------
Alexon Group PLC (Apparel, Accessories &
Luxury Goods) 110,100 472,038
- ---------------------------------------------------------------------
Barratt Developments PLC (Homebuilding) 36,300 259,585
- ---------------------------------------------------------------------
Belhaven Group PLC (The) (Brewers) 33,000 199,523
- ---------------------------------------------------------------------
Bell Group PLC (Electronic Equipment
Manufacturers)(a) 100,000 206,919
- ---------------------------------------------------------------------
Blacks Leisure Group PLC (Specialty
Stores)(a) 52,500 230,970
- ---------------------------------------------------------------------
Brown & Jackson PLC (General Merchandise
Stores)(a) 143,300 215,863
- ---------------------------------------------------------------------
Cattles PLC (Consumer Finance) 111,200 597,323
- ---------------------------------------------------------------------
Character Group PLC (Leisure Products) 148,000 219,268
- ---------------------------------------------------------------------
Cranswick PLC (Packaged Foods & Meats) 54,700 377,131
- ---------------------------------------------------------------------
Domino Printing Sciences PLC (Industrial
Machinery) 113,000 317,993
- ---------------------------------------------------------------------
Domino's Pizza UK & IRL PLC (Restaurants) 193,100 370,792
- ---------------------------------------------------------------------
Enterprise Inns PLC (Restaurants) 45,400 610,241
- ---------------------------------------------------------------------
French Connection Group PLC (Apparel Retail) 12,700 260,684
- ---------------------------------------------------------------------
Galen Holdings PLC (Pharmaceuticals) 44,700 385,139
- ---------------------------------------------------------------------
GAME GROUP PLC (Computer & Electronics
Retail) 281,000 266,300
- ---------------------------------------------------------------------
Hornby PLC (Leisure Products) 32,500 410,270
- ---------------------------------------------------------------------
ICAP PLC (Investment Banking & Brokerage) 26,100 491,885
- ---------------------------------------------------------------------
iSOFT Group PLC (Application Software) 53,800 258,268
- ---------------------------------------------------------------------
Jardine Lloyd Thompson Group PLC (Insurance
Brokers) 28,100 280,255
- ---------------------------------------------------------------------
Johnston Press PLC (Publishing) 45,800 328,379
- ---------------------------------------------------------------------
Kensington Group PLC (Thrifts & Mortgage
Finance) 82,600 371,911
- ---------------------------------------------------------------------
Kier Group PLC (Construction & Engineering) 33,281 277,872
- ---------------------------------------------------------------------
Majestic Wine PLC (Specialty Stores) 17,900 188,155
- ---------------------------------------------------------------------
McBride PLC (Household Products) 325,200 516,787
- ---------------------------------------------------------------------
Paragon Group Cos. PLC (Thrifts & Mortgage
Finance) 52,900 246,066
- ---------------------------------------------------------------------
Peacock Group PLC (Apparel Retail) 82,500 182,453
- ---------------------------------------------------------------------
PHS Group PLC (Diversified Commercial
Services)(a) 156,000 196,258
- ---------------------------------------------------------------------
RPS Group PLC (Environmental Services) 237,700 537,096
- ---------------------------------------------------------------------
Taylor & Francis Group PLC (Publishing) 45,100 350,885
- ---------------------------------------------------------------------
Telecom plus PLC (Integrated
Telecommunication Services) 79,300 277,254
- ---------------------------------------------------------------------
Topps Tiles PLC (Home Improvement Retail) 45,400 281,072
- ---------------------------------------------------------------------
Ultra Electronics Holdings PLC (Aerospace &
Defense) 49,200 418,211
- ---------------------------------------------------------------------
Victrex PLC (Specialty Chemicals) 56,950 299,786
- ---------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Wellington Underwriting PLC (Property &
Casualty Insurance)(a) 89,000 $ 151,236
- ---------------------------------------------------------------------
Wimpey (George) PLC (Homebuilding) 49,000 239,281
=====================================================================
12,153,170
=====================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $28,251,104) 35,554,456
=====================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-1.32%
0.90%, 09/18/03 (Cost $499,013)(f) $500,000 499,013
======================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-3.08%
STIC Liquid Assets Portfolio(g) 585,758 585,758
- ----------------------------------------------------------------------
STIC Prime Portfolio(g) 585,758 585,758
======================================================================
Total Money Market Funds (Cost
$1,171,516) 1,171,516
======================================================================
TOTAL INVESTMENTS-97.97% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $29,921,633) 37,224,985
======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.22%
STIC Liquid Assets Portfolio(g)(h) 464,080 $ 464,080
=====================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $464,080) 464,080
=====================================================================
TOTAL INVESTMENTS-99.19% (Cost $30,385,713) 37,689,065
=====================================================================
OTHER ASSETS LESS LIABILITIES-0.81% 307,314
=====================================================================
NET ASSETS-100.00% $37,996,379
_____________________________________________________________________
=====================================================================
</Table>
Investment Abbreviations:
<Table>
<Caption>
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Pfd. - Preferred
</Table>
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 06/30/03 was $2,314,310,
which represented 6.09% of the Fund's net assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) Security considered to be illiquid. The market value of this security at
06/30/03 represented 0.57% of the Fund's net assets.
(e) Consists of more than one class of securities traded together as a unit.
(f) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
(h) 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
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost $30,385,713)* $37,689,065
- --------------------------------------------------------------
Foreign currencies, at value (cost $284,278) 282,323
- --------------------------------------------------------------
Receivables for:
Investments sold 454,636
- --------------------------------------------------------------
Fund shares sold 476,573
- --------------------------------------------------------------
Dividends 78,565
- --------------------------------------------------------------
Due from advisor 57,000
- --------------------------------------------------------------
Investment for deferred compensation plan 11,378
- --------------------------------------------------------------
Other assets 21,606
==============================================================
Total assets 39,071,146
______________________________________________________________
==============================================================
LIABILITIES:
Payables for:
Investments purchased 365,839
- --------------------------------------------------------------
Fund shares reacquired 141,561
- --------------------------------------------------------------
Deferred compensation plan 11,378
- --------------------------------------------------------------
Collateral upon return of securities loaned 464,080
- --------------------------------------------------------------
Accrued distribution fees 29,575
- --------------------------------------------------------------
Accrued transfer agent fees 15,593
- --------------------------------------------------------------
Accrued operating expenses 46,741
==============================================================
Total liabilities 1,074,767
==============================================================
Net assets applicable to shares outstanding $37,996,379
______________________________________________________________
==============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $38,654,417
- --------------------------------------------------------------
Undistributed net investment income 43,059
- --------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies and
futures contracts (8,004,983)
- --------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 7,303,886
==============================================================
$37,996,379
______________________________________________________________
==============================================================
NET ASSETS:
Class A $29,676,357
______________________________________________________________
==============================================================
Class B $ 5,550,882
______________________________________________________________
==============================================================
Class C $ 2,769,140
______________________________________________________________
==============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 3,374,939
______________________________________________________________
==============================================================
Class B 642,048
______________________________________________________________
==============================================================
Class C 320,451
______________________________________________________________
==============================================================
Class A:
Net asset value per share $ 8.79
- --------------------------------------------------------------
Offering price per share:
(Net asset value of $8.79 divided by 94.50%) $ 9.30
______________________________________________________________
==============================================================
Class B:
Net asset value and offering price per share $ 8.65
______________________________________________________________
==============================================================
Class C:
Net asset value and offering price per share $ 8.64
______________________________________________________________
==============================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $441,049 were
on loan to brokers.
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $37,355) $ 314,638
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 10,264
- ------------------------------------------------------------------------
Interest 482
- ------------------------------------------------------------------------
Security lending income 1,608
========================================================================
Total investment income 326,992
========================================================================
EXPENSES:
Advisory fees 117,964
- ------------------------------------------------------------------------
Administrative services fees 24,795
- ------------------------------------------------------------------------
Custodian fees 125,420
- ------------------------------------------------------------------------
Distribution fees -- Class A 31,063
- ------------------------------------------------------------------------
Distribution fees -- Class B 24,387
- ------------------------------------------------------------------------
Distribution fees -- Class C 11,034
- ------------------------------------------------------------------------
Interest 661
- ------------------------------------------------------------------------
Transfer agent fees 44,302
- ------------------------------------------------------------------------
Trustees' fees 4,506
- ------------------------------------------------------------------------
Professional fees 22,487
- ------------------------------------------------------------------------
Other 31,230
========================================================================
Total expenses 437,849
========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (166,744)
========================================================================
Net expenses 271,105
========================================================================
Net investment income 55,887
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 156,691
- ------------------------------------------------------------------------
Foreign currencies (66,093)
- ------------------------------------------------------------------------
Futures contracts 34,782
========================================================================
125,380
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 4,363,586
- ------------------------------------------------------------------------
Foreign currencies (555)
========================================================================
4,363,031
========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 4,488,411
========================================================================
Net increase in net assets resulting from operations $4,544,298
________________________________________________________________________
========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 55,887 $ (159,922)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and futures contracts 125,380 (3,641,173)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 4,363,031 2,004,221
=========================================================================================
Net increase (decrease) in net assets resulting from
operations 4,544,298 (1,796,874)
=========================================================================================
Share transactions-net:
Class A 12,796,999 7,577,888
- -----------------------------------------------------------------------------------------
Class B (959,526) 4,168,394
- -----------------------------------------------------------------------------------------
Class C 272,209 1,002,947
=========================================================================================
Net increase in net assets resulting from share
transactions 12,109,682 12,749,229
=========================================================================================
Net increase in net assets 16,653,980 10,952,355
=========================================================================================
NET ASSETS:
Beginning of period 21,342,399 10,390,044
=========================================================================================
End of period $37,996,379 $21,342,399
_________________________________________________________________________________________
=========================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM European Small Company Fund (the "Fund") is a series portfolio of AIM Funds
Group (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 twelve 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.
Companies are listed in the Schedule of Investments based on the country in
which they are organized.
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 at 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. 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
F-6
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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the Statement
of Operations.
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
disclosed in the Statement of Assets and Liabilities.
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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 0.95% of the Fund's
average daily net assets. AIM has contractually agreed to waive fees and/or
reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A shares to
2.00%. To the extent that the annualized expense ratio does not exceed the
contractual expense limitation AIM will retain its ability to be reimbursed for
such fee waivers or reimbursements prior to the end of the committed period.
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 of which the Fund has invested (excluding investments made in affiliated
money market funds with cash collateral from securities loaned by the Fund). For
the six months ended June 30, 2003, AIM waived fees of $117,964 and reimbursed
expenses of $48,442.
F-7
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $22,583 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $31,063, $24,387 and $11,034, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended June 30, 2003, AIM
Distributors retained $2,281 in front-end sales commissions from the sale of
Class A shares and $740, $0 and $316 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,368 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $330 and reductions in custodian
fees of $8 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $338.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $441,049 were on
loan to brokers. The loans were secured by cash collateral of $464,080 received
by the Fund and subsequently invested in an affiliated money market fund. For
the six months ended June 30, 2003, the Fund received fees of $1,608 for
securities lending.
F-8
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2008 $ 220,935
- ----------------------------------------------------------
December 31, 2009 3,926,995
- ----------------------------------------------------------
December 31, 2010 3,518,112
==========================================================
Total capital loss carryforward $7,666,042
__________________________________________________________
==========================================================
</Table>
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 six months
ended June 30, 2003 was $24,575,203 and $14,113,564, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment
securities $7,377,895
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (111,684)
===========================================================
Net unrealized appreciation of investment
securities $7,266,211
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $30,422,854.
</Table>
NOTE 9--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,893,497 $ 30,861,838 3,539,416 $ 27,415,985
- ----------------------------------------------------------------------------------------------------------------------
Class B 93,058 755,358 1,525,491 11,870,378
- ----------------------------------------------------------------------------------------------------------------------
Class C 1,271,604 9,705,954 742,433 5,614,529
======================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 5,561 42,936 27,392 208,822
- ----------------------------------------------------------------------------------------------------------------------
Class B (5,647) (42,936) (27,627) (208,822)
======================================================================================================================
Reacquired:
Class A (2,368,950) (18,107,775) (2,690,785) (20,046,919)
- ----------------------------------------------------------------------------------------------------------------------
Class B (227,463) (1,671,948) (1,041,846) (7,493,162)
- ----------------------------------------------------------------------------------------------------------------------
Class C (1,234,055) (9,433,745) (612,283) (4,611,582)
======================================================================================================================
1,427,605 $ 12,109,682 1,462,191 $ 12,749,229
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
F-9
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------------- DECEMBER 31,
2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.37 $ 7.19 $ 9.17 $10.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02 (0.04)(a) (0.05)(a) (0.04)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.40 0.22 (1.93) (0.74)
==========================================================================================================================
Total from investment operations 1.42 0.18 (1.98) (0.78)
==========================================================================================================================
Less dividends from net investment income -- -- -- (0.05)
==========================================================================================================================
Net asset value, end of period $ 8.79 $ 7.37 $ 7.19 $ 9.17
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 19.27% 2.50% (21.59)% (7.84)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,676 $13,597 $ 6,969 $8,606
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.00%(c) 2.01% 2.01% 2.07%(d)
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.34%(c) 3.05% 4.65% 6.28%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.63%(c) (0.51)% (0.61)% (1.28)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(e) 61% 119% 152% 25%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$17,897,427.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-10
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.27 $ 7.15 $ 9.17 $10.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.09)(a) (0.10)(a) (0.06)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.38 0.21 (1.92) (0.74)
=======================================================================================================================
Total from investment operations 1.38 0.12 (2.02) (0.80)
=======================================================================================================================
Less dividends from net investment income -- -- -- (0.03)
=======================================================================================================================
Net asset value, end of period $ 8.65 $ 7.27 $ 7.15 $ 9.17
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 18.98% 1.68% (22.03)% (7.99)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,551 $5,689 $ 2,330 $2,851
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.66% 2.71% 2.77%(d)
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.99%(c) 3.70% 5.36% 6.98%(d)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.02)%(c) (1.16)% (1.31)% (1.98)%(d)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(e) 61% 119% 152% 25%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$4,917,813.
(d) Annualized.
(e) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS C
-----------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.27 $ 7.14 $ 9.17 $10.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00) (0.09)(a) (0.10)(a) (0.06)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.37 0.22 (1.93) (0.74)
=========================================================================================================================
Total from investment operations 1.37 0.13 (2.03) (0.80)
=========================================================================================================================
Less dividends from net investment income -- -- -- (0.03)
=========================================================================================================================
Net asset value, end of period $ 8.64 $ 7.27 $ 7.14 $ 9.17
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 18.84% 1.82% (22.14)% (7.99)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,769 $2,057 $ 1,091 $1,073
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.66% 2.71% 2.77%(d)
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.99%(c) 3.70% 5.36% 6.98%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.02)%(c) (1.16)% (1.31)% (1.98)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 61% 119% 152% 25%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$2,225,149.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
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(5,6)
AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund SECTOR EQUITY
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Opportunities I Fund(2) AIM Global Science and Technology Fund
AIM Opportunities II Fund(2) AIM Global Utilities Fund
AIM Opportunities III Fund(2) AIM New Technology Fund
AIM Premier Equity Fund AIM Real Estate Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com ESC-SAR-1
[COVER ART]
AIM GLOBAL UTILITIES FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Global Utilities Fund seeks to achieve a high total return.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY INVESTMENT TYPE
[PIE CHART]
CASH & OTHER 4%
BONDS & NOTES 7%
EQUITY, INTERNATIONAL 19%
EQUITY, DOMESTIC 70%
TOTAL NUMBER OF HOLDINGS* 61
Equity holdings 52
Fixed income holdings 9
TOTAL NET ASSETS $153.8 million
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (1/19/88) 7.52%
10 Years 2.90
5 Years -5.29
1 Year -9.30
CLASS B SHARES
Inception (9/1/93) 2.31%
5 Years -5.22
1 Year -9.33
CLASS C SHARES
Inception (8/4/97) -1.29%
5 Years -4.94
1 Year -5.62
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 9.34%
CLASS B SHARES 9.03
CLASS C SHARES 8.94
S&P 500 INDEX 11.75
(Broad Market Index)
LIPPER UTILITY FUND INDEX 12.31
(Peer Group Index)
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.
<Table>
<Caption>
===================================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP INDUSTRIES* TOP COUNTRIES
- -----------------------------------------------------------------------------------------------------------------------------------
1. FPL Group, Inc. 5.7% 1. Electric Utilities 53.5% 1. United States 76.5%
2. Pinnacle West Capital Corp. 4.3 2. Multi-Utilities & Unregulated Power 13.3 2. United Kingdom 9.9
3. Southern Co. (The) 4.3 3. Integrated Telecommunication 12.2 3. Spain 4.8
Services
4. Energy East Corp. 4.1 4. Italy 3.8
4. Gas Utilities 10.5
5. DTE Energy Co. 3.6 5. Germany 2.0
5. Water Utilities 3.1
6. NiSource Inc. 3.6 6. France 1.4
6. Wireless Telecommunication 1.7
7. Verizon Communications Inc. 3.3 Services 7. Greece 1.1
8. BellSouth Corp. 2.7 7. Diversified Metals & Mining 1.5 8. Canada 0.5
9. Endesa, S.A. (Spain) 2.5 8. Integrated Oil & Gas 0.7
10. Kelda Group PLC 2.5
(United Kingdom)
* 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.
===================================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o Effective July 1, 2003, after the close of the reporting period, Jeffrey G.
Morris became the manager of the fund.
o AIM Global Utilities Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions, and changes in
net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class
C share performance reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. The performance of the fund's share classes will differ due to
different sales charge structures and class expenses.
o International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values of
other currencies, the custody arrangements made for the fund's foreign
holdings, differences in accounting, political risks and the lesser degree
of public information required to be provided by non-U.S. companies.
o The fund may participate in the initial public offering (IPO) market in
some market cycles. A significant portion of the fund's returns during
certain periods was attributable to its investments in IPOs. These
investments have a magnified impact when the fund's asset base is
relatively small. As the fund's assets grow, the impact of IPO investments
will decline, which may reduce the effect of IPO investments on the fund's
total return. For additional information regarding the impact of IPO
investments on the fund's performance, please see the fund's prospectus.
o Investing in a single-sector or single-region mutual fund may involve
greater risk and potential reward than investing in a more diversified
fund.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
o The unmanaged Lipper Utility Fund Index represents an average of the 10
largest utility funds tracked by Lipper, Inc., an independent mutual fund
performance monitor.
o The unmanaged MSCI Europe, Australasia and the Far East Index (the EAFE(R))
is a group of foreign securities tracked by Morgan Stanley Capital
International.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
DEAR SHAREHOLDER:
[PHOTO OF This is your report on AIM Global Utilities Fund for the six
ROBERT H months ended June .30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
will provide an overview of the markets and your fund during
DESPITE ECONOMIC the six months covered by this report.
SLUGGISHNESS,
DOMESTIC EQUITY As always, timely information about your fund and the
MARKETS PERFORMED markets in general is available at our Web site,
WELL, PARTICULARLY aiminvestments.com. From our home page, click on Products
DURING THE SECOND and Performance, then Mutual Funds, then AIM funds, and then
HALF OF THE select the type of information you wish to view.
REPORTING PERIOD.
ROBERT H. GRAHAM MARKET CONDITIONS
Economic sluggishness continued in the United States during the reporting
period, particularly in manufacturing. The manufacturing sector contracted
during four of the six months in the reporting period. The overall economy grew
only 1.4%, annualized, during the first quarter of the year. In the second
quarter, the advance estimate indicated that economic growth improved, with the
gross domestic product expanding at a 2.4% annualized rate.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%.
The pattern was similar overseas. For example, both the European Central
Bank and the Bank of Japan noted slow growth in a number of overseas economies.
International markets, as measured by the MSCI Europe, Australasia and the Far
East Index (the EAFE(R)), produced negative returns for the first quarter of
2003. Many foreign markets rallied, however, in April and continued to produce
positive returns each month throughout the second quarter.
On the currency front, the U.S. dollar remained weak compared to many
foreign currencies, particularly the euro. Other currencies that gained ground
on the U.S. dollar during the reporting period included the Australian dollar,
Swiss franc, British pound and Canadian dollar.
YOUR FUND
AIM Global Utilities Fund's Class A shares returned 9.34% at net asset value for
the six months ended June 30, 2003. The fund's portfolio management team during
the reporting period, consisting of Robert G. Alley, Claude C. Cody IV, Jan H.
Friedli, Craig A. Smith and Meggan M. Walsh, continued investing in securities
of domestic and foreign utility companies, emphasizing firms they judged to have
dependable dividends and relatively secure income streams.
Reversing 2002's trend, utilities that derived most of their revenues from
regulated markets underperformed those with more deregulated business during
this period, undermining fund results. Rising natural gas prices hampered the
profitability of many electric utilities. After passage of the Jobs and Growth
Tax Relief Reconciliation Act, which reduced the tax rate on corporate
dividends, investors rushed to purchase utility stocks. Those with the highest
yields or the highest dividend growth potential performed best.
As the reporting period ended, utility holdings made up approximately 80%
of the fund's assets and telecommunications holdings about 14%.
IN CLOSING
I thank you for your continued participation in AIM Global Utilities Fund, and
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-70.26%
DIVERSIFIED METALS & MINING-1.46%
Peabody Energy Corp. 66,700 $ 2,240,453
========================================================================
ELECTRIC UTILITIES-45.16%
American Electric Power Co., Inc. 63,600 1,897,188
- ------------------------------------------------------------------------
CenterPoint Energy, Inc. 105,000 855,750
- ------------------------------------------------------------------------
Cinergy Corp. 47,000 1,729,130
- ------------------------------------------------------------------------
CMS Energy Corp.(a) 92,000 745,200
- ------------------------------------------------------------------------
Consolidated Edison, Inc. 65,000 2,813,200
- ------------------------------------------------------------------------
Constellation Energy Group, Inc. 86,500 2,966,950
- ------------------------------------------------------------------------
Dominion Resources, Inc. 28,000 1,799,560
- ------------------------------------------------------------------------
DTE Energy Co. 143,000 5,525,520
- ------------------------------------------------------------------------
Edison International(a) 55,500 911,865
- ------------------------------------------------------------------------
Entergy Corp. 62,000 3,272,360
- ------------------------------------------------------------------------
Exelon Corp. 59,000 3,528,790
- ------------------------------------------------------------------------
FirstEnergy Corp. 90,000 3,460,500
- ------------------------------------------------------------------------
FPL Group, Inc. 132,000 8,824,200
- ------------------------------------------------------------------------
Northeast Utilities 134,000 2,243,160
- ------------------------------------------------------------------------
OGE Energy Corp. 106,000 2,265,220
- ------------------------------------------------------------------------
PG &E Corp.(a) 77,000 1,628,550
- ------------------------------------------------------------------------
Pinnacle West Capital Corp. 175,000 6,553,750
- ------------------------------------------------------------------------
PPL Corp. 75,000 3,225,000
- ------------------------------------------------------------------------
Progress Energy, Inc. 36,500 1,602,350
- ------------------------------------------------------------------------
Public Service Enterprise Group Inc. 63,600 2,687,100
- ------------------------------------------------------------------------
Southern Co. (The) 209,700 6,534,252
- ------------------------------------------------------------------------
TXU Corp. 86,500 1,941,925
- ------------------------------------------------------------------------
Wisconsin Energy Corp. 84,000 2,436,000
========================================================================
69,447,520
========================================================================
GAS UTILITIES-9.50%
KeySpan Corp. 80,000 2,836,000
- ------------------------------------------------------------------------
Kinder Morgan, Inc. 37,200 2,032,980
- ------------------------------------------------------------------------
NiSource Inc. 290,000 5,510,000
- ------------------------------------------------------------------------
Peoples Energy Corp. 44,000 1,887,160
- ------------------------------------------------------------------------
Sempra Energy 82,000 2,339,460
========================================================================
14,605,600
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-7.43%
BellSouth Corp. 154,100 4,103,683
- ------------------------------------------------------------------------
SBC Communications Inc. 88,000 2,248,400
- ------------------------------------------------------------------------
Verizon Communications Inc. 128,662 5,075,716
========================================================================
11,427,799
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER-6.14%
Energy East Corp. 306,200 $ 6,356,712
- ------------------------------------------------------------------------
Equitable Resources, Inc. 22,100 900,354
- ------------------------------------------------------------------------
ONEOK, Inc. 61,000 1,197,430
- ------------------------------------------------------------------------
Reliant Resources, Inc.(a) 161,663 990,994
========================================================================
9,445,490
========================================================================
WATER UTILITIES-0.57%
Philadelphia Suburban Corp. 36,000 877,680
========================================================================
Total Domestic Common Stocks (Cost
$96,975,929) 108,044,542
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-19.09%
FRANCE-1.37%
Suez S.A. (Multi-Utilities & Unregulated
Power) 67,750 1,081,276
- ------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas) 6,800 1,030,454
========================================================================
2,111,730
========================================================================
GERMANY-1.97%
E.ON A.G. (Electric Utilities) 58,880 3,035,420
========================================================================
GREECE-1.05%
Public Power Corp.-GDR (Electric Utilities)
(Acquired 12/10/01; Cost
$1,008,054)(b)(c)(d) 89,300 1,616,471
========================================================================
ITALY-3.83%
ACEA S.p.A. (Multi-Utilities & Unregulated
Power) (Acquired 07/12/99; Cost
$3,909,910)(b) 428,800 2,024,429
- ------------------------------------------------------------------------
Snam Rete Gas S.p.A. (Gas Utilities)
(Acquired 12/03/01; Cost $621,491)(b) 247,600 975,081
- ------------------------------------------------------------------------
Telecom Italia S.p.A. (Integrated
Telecommunication Services) 526,700 2,892,981
========================================================================
5,892,491
========================================================================
SPAIN-4.84%
Endesa, S.A. (Electric Utilities) 227,000 3,811,073
- ------------------------------------------------------------------------
Endesa, S.A.-ADR (Electric Utilities) 39,600 645,480
- ------------------------------------------------------------------------
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 255,743 2,977,274
========================================================================
7,433,827
========================================================================
UNITED KINGDOM-6.03%
Kelda Group PLC (Water Utilities) 538,407 3,810,103
- ------------------------------------------------------------------------
National Grid Transco PLC (Multi-Utilities &
Unregulated Power) 202,526 1,377,883
- ------------------------------------------------------------------------
United Utilities PLC (Multi-Utilities &
Unregulated Power) 151,936 1,481,378
- ------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services) 1,034,218 2,028,712
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Vodafone Group PLC-ADR (Wireless
Telecommunication Services) 29,200 $ 573,780
========================================================================
9,271,856
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $29,865,328) 29,361,795
========================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-7.03%
ELECTRIC UTILITIES-2.44%
AmerenEnergy Generating Co.-Series C, Sr.
Unsec. Global Notes, 7.75%, 11/01/05 $ 750,000 $ 836,617
- ------------------------------------------------------------------------
Hydro-Quebec (Canada)-Series B, Gtd. Medium
Term Yankee Notes, 6.52%, 02/23/06(e) 750,000 833,393
- ------------------------------------------------------------------------
Kansas City Power & Light Co., Sr. Unsec.
Notes, 7.13%, 12/15/05 500,000 557,355
- ------------------------------------------------------------------------
Public Service Co. of New Mexico-Series A,
Sr. Unsec. Notes, 7.10%, 08/01/05 750,000 811,365
- ------------------------------------------------------------------------
Wisconsin Energy Corp., Sr. Unsec. Unsub.
Notes, 5.50%, 12/01/08 650,000 720,063
========================================================================
3,758,793
========================================================================
GAS UTILITIES-0.32%
Consolidated Natural Gas Co., Unsec. Deb.,
6.63%, 12/01/08 420,000 490,762
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.97%
British Telecommunications PLC (United
Kingdom), Global Notes, 7.88%, 12/15/05 750,000 853,853
- ------------------------------------------------------------------------
SBC Communications Capital Corp.-Series D,
Medium Term Notes, 7.11%, 08/14/06 550,000 631,158
========================================================================
1,485,011
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER-3.30%
National Grid Co. PLC (United Kingdom), Conv.
Bonds, 4.25%, 02/17/08 (Acquired 02/05/98;
Cost $4,574,700)(b)(d)(f) GBP 2,760,000 $ 5,080,116
========================================================================
Total Bonds & Notes (Cost $10,227,446) 10,814,682
========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-3.32%
STIC Liquid Assets Portfolio(g) 2,549,104 2,549,104
- ------------------------------------------------------------------------
STIC Prime Portfolio(g) 2,549,104 2,549,104
========================================================================
Total Money Market Funds (Cost
$5,098,208) 5,098,208
========================================================================
TOTAL INVESTMENTS-99.70% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $142,166,911) 153,319,227
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-12.52%
STIC Liquid Assets Portfolio(g)(h) 9,625,472 9,625,472
- ------------------------------------------------------------------------
STIC Prime Portfolio(g)(h) 9,625,472 9,625,472
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $19,250,944) 19,250,944
========================================================================
TOTAL INVESTMENTS-112.22% (Cost $161,417,855) 172,570,171
========================================================================
OTHER ASSETS LESS LIABILITIES-(12.22%) (18,791,308)
========================================================================
NET ASSETS-100.00% $153,778,863
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Sr. - Senior
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
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 06/30/03 was $9,696,097,
which represented 6.31% of the Fund's net assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at 06/30/03 was $6,696,587, which represented
4.35% of the Fund's net assets.
(e) Principal and interest are secured by bond insurance provided by MBIA
Insurance Co.
(f) Foreign denominated security. Par value is denominated in currency
indicated.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
(h) 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
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$161,417,855)* $172,570,171
- -----------------------------------------------------------
Foreign currencies, at value (cost $4,148) 4,184
- -----------------------------------------------------------
Receivables for:
Fund shares sold 206,555
- -----------------------------------------------------------
Investments matured (Note 9) 257,898
- -----------------------------------------------------------
Dividends and interest 641,389
- -----------------------------------------------------------
Investment for deferred compensation plan 44,697
- -----------------------------------------------------------
Other assets 21,182
===========================================================
Total assets 173,746,076
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 313,689
- -----------------------------------------------------------
Deferred compensation plan 44,697
- -----------------------------------------------------------
Collateral upon return of securities loaned 19,250,944
- -----------------------------------------------------------
Accrued distribution fees 127,947
- -----------------------------------------------------------
Accrued transfer agent fees 145,136
- -----------------------------------------------------------
Accrued operating expenses 84,800
===========================================================
Total liabilities 19,967,213
===========================================================
Net assets applicable to shares outstanding $153,778,863
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $238,201,756
- -----------------------------------------------------------
Undistributed net investment income 8,675
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (95,586,486)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 11,154,918
===========================================================
$153,778,863
___________________________________________________________
===========================================================
NET ASSETS:
Class A $106,098,651
___________________________________________________________
===========================================================
Class B $ 41,562,511
___________________________________________________________
===========================================================
Class C $ 6,117,701
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 8,781,294
___________________________________________________________
===========================================================
Class B 3,447,017
___________________________________________________________
===========================================================
Class C 507,565
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 12.08
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $12.08 divided by
94.50%) $ 12.78
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.06
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.05
___________________________________________________________
===========================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $18,714,181
were on loan to brokers.
See Notes to Financial Statements.
F-3
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $76,083) $ 3,024,900
- --------------------------------------------------------------------------
Dividends from affiliated money market funds 31,129
- --------------------------------------------------------------------------
Interest 185,854
- --------------------------------------------------------------------------
Security lending income 72,108
==========================================================================
Total investment income 3,313,991
==========================================================================
EXPENSES:
Advisory fees 438,892
- --------------------------------------------------------------------------
Administrative services fees 24,795
- --------------------------------------------------------------------------
Custodian fees 33,416
- --------------------------------------------------------------------------
Distribution fees -- Class A 125,515
- --------------------------------------------------------------------------
Distribution fees -- Class B 200,022
- --------------------------------------------------------------------------
Distribution fees -- Class C 29,404
- --------------------------------------------------------------------------
Transfer agent fees 380,999
- --------------------------------------------------------------------------
Trustees' fees 4,920
- --------------------------------------------------------------------------
Other 81,132
==========================================================================
Total expenses 1,319,095
==========================================================================
Less: Fees waived and expenses paid indirectly (17,858)
==========================================================================
Net expenses 1,301,237
==========================================================================
Net investment income 2,012,754
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (27,154,526)
- --------------------------------------------------------------------------
Foreign currencies (839)
- --------------------------------------------------------------------------
Option contracts written 218,559
==========================================================================
(26,936,806)
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 37,407,504
- --------------------------------------------------------------------------
Foreign currencies (20,967)
==========================================================================
37,386,537
==========================================================================
Net gain from investment securities, foreign currencies and
option contracts 10,449,731
==========================================================================
Net increase in net assets resulting from operations $ 12,462,485
__________________________________________________________________________
==========================================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,012,754 $ 5,305,007
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (26,936,806) (40,212,110)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 37,386,537 (29,845,808)
===========================================================================================
Net increase (decrease) in net assets resulting from
operations 12,462,485 (64,752,911)
===========================================================================================
Distributions to shareholders from net investment income:
Class A (1,549,549) (3,815,987)
- -------------------------------------------------------------------------------------------
Class B (459,868) (1,247,649)
- -------------------------------------------------------------------------------------------
Class C (68,605) (170,081)
===========================================================================================
Decrease in net assets resulting from distributions (2,078,022) (5,233,717)
===========================================================================================
Share transactions-net:
Class A (8,146,240) (18,909,941)
- -------------------------------------------------------------------------------------------
Class B (5,192,029) (29,029,595)
- -------------------------------------------------------------------------------------------
Class C (350,950) (2,715,781)
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (13,689,219) (50,655,317)
===========================================================================================
Net increase (decrease) in net assets (3,304,756) (120,641,945)
===========================================================================================
NET ASSETS:
Beginning of period 157,083,619 277,725,564
===========================================================================================
End of period $153,778,863 $ 157,083,619
___________________________________________________________________________________________
===========================================================================================
</Table>
See Notes to Financial Statements.
F-5
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Utilities Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 a high total return. 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 at 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. 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 be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly
and are recorded on ex-dividend date. Distributions from net realized
capital gains, 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in
F-6
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.
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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 an annual rate of 0.60% on the first
$200 million of the Fund's average daily net assets, plus 0.50% on the next $300
million of the Fund's average daily net assets, plus 0.40% on the next $500
million of the Fund's average daily net assets, plus 0.30% on the Fund's average
daily net assets in excess of $1 billion. Effective September 23, 2002, AIM has
voluntarily agreed to waive advisory fees in the amount of 0.02% of average net
assets for one year. Further, AIM has voluntarily agreed to waive advisory fees
of the Fund in the amount of 25% of the advisory fee AIM receives from the
affiliated money market funds in which the Fund has invested (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the Fund). For the six months ended June 30, 2003, AIM
waived fees of $15,517.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $159,663 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
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.25% 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, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
A, Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. NASD
Rules also impose a cap on the total sales charges, including asset-based sales
charges, that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $125,515, $200,022 and $29,404, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $7,005 in front-end sales commissions from the sale of
Class A shares and $1,498, $0 and $262 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
F-7
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,463 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $2,341 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$2,341.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $18,714,181 were on
loan to brokers. The loans were secured by cash collateral of $19,250,944
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2003, the Fund received fees of $72,108 for
securities lending.
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ----------------------------------------------------------
Beginning of period -- $ --
- ----------------------------------------------------------
Written 4,658 254,312
- ----------------------------------------------------------
Exercised (708) (35,753)
- ----------------------------------------------------------
Expired (3,950) (218,559)
==========================================================
End of period -- $ --
__________________________________________________________
==========================================================
</Table>
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2009 $18,490,169
- ----------------------------------------------------------
December 31, 2010 49,721,870
==========================================================
Total capital loss carryforward $68,212,039
__________________________________________________________
==========================================================
</Table>
F-8
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $10,029,109 and $19,579,078, 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 $4,866,000 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.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 23,302,282
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (17,010,246)
===========================================================
Net unrealized appreciation of investment
securities $ 6,292,036
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $166,536,033.
</Table>
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 957,610 $ 10,971,753 949,587 $ 12,605,008
- ----------------------------------------------------------------------------------------------------------------------
Class B 393,964 4,534,669 398,925 5,334,927
- ----------------------------------------------------------------------------------------------------------------------
Class C 87,631 979,343 613,148 9,024,735
======================================================================================================================
Issued as reinvestment of dividends:
Class A 123,436 1,395,321 280,719 3,433,259
- ----------------------------------------------------------------------------------------------------------------------
Class B 35,828 403,253 91,166 1,110,123
- ----------------------------------------------------------------------------------------------------------------------
Class C 5,313 59,823 12,269 149,446
======================================================================================================================
Issued in connection with acquisitions:*
Class A -- -- 609,422 6,380,412
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 448,140 4,682,205
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 15,466 161,591
======================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 218,430 2,423,265 950,791 12,830,006
- ----------------------------------------------------------------------------------------------------------------------
Class B (219,041) (2,423,265) (953,214) (12,830,006)
======================================================================================================================
Reacquired:
Class A (2,052,652) (22,936,579) (4,216,515) (54,158,626)
- ----------------------------------------------------------------------------------------------------------------------
Class B (700,633) (7,706,686) (2,113,600) (27,326,844)
- ----------------------------------------------------------------------------------------------------------------------
Class C (126,041) (1,390,116) (849,183) (12,051,553)
======================================================================================================================
(1,276,155) $(13,689,219) (3,762,879) $(50,655,317)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* As of the open of business on September 23, 2002, the Fund acquired all the
net assets of AIM Global Infrastructure Fund pursuant to a plan of
reorganization approved by AIM Global Infrastructure Fund shareholders on
September 4, 2002. The acquisition was accomplished by a tax-free exchange of
1,073,028 shares of the Fund for 2,195,890 shares of AIM Global Infrastructure
Fund outstanding as of the close of business on September 20, 2002. AIM Global
Infrastructure Fund's net assets at that date of $11,224,208 including
$(5,084,726) of unrealized appreciation (depreciation), were combined with
those of the Fund. The aggregate net assets of the Fund immediately before the
acquisition were $144,339,163.
F-9
NOTE 11--SIGNIFICANT EVENT
The Board of Trustees of AIM Funds Group ("Seller") unanimously approved, on
June 11, 2003, an Agreement and Plan of Reorganization (the "Plan") pursuant to
which AIM Global Utilities Fund ("Selling Fund"), a series of Seller, would
transfer all of its assets to INVESCO Utilities Fund ("Buying Fund"), a series
of INVESCO Sector Funds, Inc. (the "Reorganization"). As a result of the
Reorganization, shareholders of Selling Fund would receive shares of Buying Fund
in exchange for their shares of Selling Fund, and Selling Fund would cease
operations.
The Plan requires approval of Selling Fund shareholders and will be submitted
to the shareholders for their consideration at a meeting to be held on October
21, 2003. If the Plan is approved by shareholders of Selling Fund and certain
conditions required by the Plan are satisfied, the transaction is expected to
become effective shortly thereafter.
Effective on or about October 1, 2003, it is anticipated that Selling Fund
will be closed to new investors.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.22 $ 15.64 $ 22.45 $ 26.08 $ 21.01 $ 19.26
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17 0.37(a) 0.29(a)(b) 0.33(a) 0.38(a) 0.48
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.87 (4.40) (6.63) (1.00) 6.60 2.53
=================================================================================================================================
Total from investment operations 1.04 (4.03) (6.34) (0.67) 6.98 3.01
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.18) (0.39) (0.29) (0.28) (0.35) (0.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.18) (2.68) (1.56) (0.80)
=================================================================================================================================
Total distributions (0.18) (0.39) (0.47) (2.96) (1.91) (1.26)
=================================================================================================================================
Net asset value, end of period $ 12.08 $ 11.22 $ 15.64 $ 22.45 $ 26.08 $ 21.01
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.34% (25.96)% (28.33)% (2.54)% 34.15% 16.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $106,099 $106,962 $171,432 $267,200 $238,432 $196,665
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.55%(d) 1.33% 1.12% 1.03% 1.10% 1.06%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.57%(d) 1.33% 1.12% 1.03% 1.10% 1.06%
=================================================================================================================================
Ratio of net investment income to average net
assets 2.99%(d) 2.88% 1.53%(b) 1.23% 1.69% 2.39%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 7% 54% 19% 52% 37% 38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 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 would
have been $0.30 and the ratio of net investment income to average net
assets would have been 1.57%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$101,244,380.
(e) Not annualized for periods less than one year.
F-10
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.19 $ 15.60 $ 22.38 $ 26.03 $ 20.98 $ 19.24
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13 0.28(a) 0.15(a)(b) 0.13(a) 0.21(a) 0.33
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.87 (4.41) (6.60) (1.01) 6.59 2.53
=================================================================================================================================
Total from investment operations 1.00 (4.13) (6.45) (0.88) 6.80 2.86
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.13) (0.28) (0.15) (0.09) (0.19) (0.32)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.18) (2.68) (1.56) (0.80)
=================================================================================================================================
Total distributions (0.13) (0.28) (0.33) (2.77) (1.75) (1.12)
=================================================================================================================================
Net asset value, end of period $ 12.06 $ 11.19 $ 15.60 $ 22.38 $ 26.03 $ 20.98
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.03% (26.56)% (28.87)% (3.28)% 33.16% 15.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $41,563 $44,071 $94,615 $160,820 $142,632 $111,866
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.30%(d) 2.08% 1.88% 1.80% 1.84% 1.81%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.32%(d) 2.08% 1.88% 1.80% 1.84% 1.81%
=================================================================================================================================
Ratio of net investment income to average net assets 2.24%(d) 2.13% 0.78%(b) 0.46% 0.95% 1.64%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 7% 54% 19% 52% 37% 38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 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 would
have been the same and the ratio of net investment income to average net
assets would have been 0.81%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$40,335,958.
(e) Not annualized for periods less than one year.
F-11
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.19 $ 15.59 $ 22.37 $ 26.02 $20.97 $19.24
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13 0.28(a) 0.15(a)(b) 0.13(a) 0.21(a) 0.33
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.86 (4.40) (6.60) (1.01) 6.59 2.52
=================================================================================================================================
Total from investment operations 0.99 (4.12) (6.45) (0.88) 6.80 2.85
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.13) (0.28) (0.15) (0.09) (0.19) (0.32)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.18) (2.68) (1.56) (0.80)
=================================================================================================================================
Total distributions (0.13) (0.28) (0.33) (2.77) (1.75) (1.12)
=================================================================================================================================
Net asset value, end of period $12.05 $ 11.19 $ 15.59 $ 22.37 $26.02 $20.97
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.94% (26.52)% (28.88)% (3.28)% 33.18% 15.09%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,118 $ 6,050 $11,679 $17,727 $6,702 $2,994
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.30%(d) 2.08% 1.88% 1.80% 1.84% 1.81%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.32%(d) 2.08% 1.88% 1.80% 1.84% 1.81%
=================================================================================================================================
Ratio of net investment income to average net assets 2.24%(d) 2.13% 0.78%(b) 0.46% 0.95% 1.64%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 7% 54% 19% 52% 37% 38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 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 would
have been the same and the ratio of net investment income to average net
assets would have been 0.81%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to January 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, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$5,929,494.
(e) Not annualized for periods less than one year.
F-12
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
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(5,6)
AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Opportunities I Fund(2)
AIM Opportunities II Fund(2) SECTOR EQUITY
AIM Opportunities III Fund(2)
AIM Premier Equity Fund AIM Global Energy Fund
AIM Premier Equity II Fund AIM Global Financial Services Fund
AIM Select Equity Fund AIM Global Health Care Fund
AIM Small Cap Equity Fund AIM Global Science and Technology Fund
AIM Small Cap Growth Fund(3) AIM Global Utilities Fund
AIM Weingarten Fund AIM New Technology Fund
AIM Real Estate Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com GLU-SAR-1
[COVER ART]
AIM GLOBAL VALUE FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Global Value Fund seeks to provide long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHART]
CASH & OTHER 3.2%
UTILITIES 4.6%
CONSUMER STAPLES 5.4%
HEALTH CARE 6.6%
INDUSTRIALS 7.2%
SOVEREIGN DEBT 8.2%
INFORMATION TECHNOLOGY 8.7%
CONSUMER DISCRETIONARY 9.9%
ENERGY 13.8%
MATERIALS 13.9%
FINANCIALS 18.5%
TOTAL NUMBER OF HOLDINGS* 80
TOTAL NET ASSETS $14.1 million
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
Class A Shares
Inception (12/29/00) -2.64%
1 Year -2.23
Class B Shares
Inception (12/29/00) -2.20%
1 Year -2.04
Class C Shares
Inception (12/29/00) -1.00%
1 Year 1.96
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 9.28%
CLASS B SHARES 9.06
CLASS C SHARES 9.06
MSCI WORLD INDEX 11.12
(Broad Market Index)
MSCI WORLD VALUE FREE INDEX 13.38
(Style-Specific Index)
LIPPER GLOBAL FUND INDEX 9.69
(Peer Group Index)
Sources: Lipper, Inc., Factset
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.
================================================================================
<Table>
<Caption>
====================================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES* TOP 10 COUNTRIES
- ------------------------------------------------------------------------------------------------------------------------------------
1. E-L Financial Corp. Ltd. (Canada) 3.0% 1. Sovereign Debt 8.2% 1. United States 37.1%
2. Pfizer Inc. 2.5 2. Diversified Banks 8.2 2. Canada 26.4
3. Bank of America Corp. 2.2 3. Pharmaceuticals 6.6 3. Switzerland 10.3
4. National Australia Bank Ltd. 2.2 4. Oil & Gas Exploration & 6.0 4. Bermuda 5.5
(Australia) Production
5. Australia 4.9
5. Clean Power Income Fund (Canada) 2.2 5. Integrated Oil & Gas 6.0
6. United Kingdom 3.4
6. Pan-Ocean Energy Corp. Ltd. 2.2 6. Gold 5.7
(Bermuda) 7. Japan 2.8
7. Other Diversified Financial 3.8
7. Citigroup Inc. 2.2 Services 8. Finland 2.1
8. UPM-Kymmene Oyj (Finland) 2.1 8. Multi-Utilities & Unregulated 3.7 9. Hong Kong 1.6
Power
9. Honda Motor Co., Ltd. (Japan) 1.9 10. Cayman Islands 1.5
9. Semiconductor Equipment 3.3
10. Microsoft Corp. 1.9
10. Multi-Line Insurance 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.
====================================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o Effective 4/30/03, AIM Worldwide Spectrum Fund was renamed AIM Global Value
Fund. Some of the fund's investment policies were changed as of 5/14/03.
For more information, please consult the fund's prospectus dated 5/01/03
that was mailed to you, or read it online at aiminvestments.com.
o AIM Global Value Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions, and changes in
net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class
C share performance reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. The performance of the fund's share classes will differ due to
different sales charge structures and class expenses.
o Had the advisor not waived fees and/or reimbursed expenses, returns would
have been lower.
o The fund may participate in the initial public offering (IPO) market in
some market cycles. Because of the fund's small asset base, any investment
the fund may make in IPOs may significantly affect the fund's total return.
As the fund's assets grow, the impact of IPO investments will decline,
which may reduce the effect of IPO investments on the fund's total return.
o Investing in emerging markets may involve greater risk and potential reward
than investing in more established markets.
o International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the value of other
currencies, the custody arrangements made for the fund's foreign holdings,
differences in accounting, political risks and the lesser degree of public
information required to be provided by non-U.S. companies.
o Investing in small and mid-sized companies may involve risks not associated
with investing in more established companies. Also, small companies may
have business risk, significant stock price fluctuations, and illiquidity.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged MSCI World Index is a group of global securities tracked by
Morgan Stanley Capital International.
o The unmanaged MSCI World Value Free Index is a subset of the MSCI World
Index, a group of global securities tracked by Morgan Stanley Capital
International; the Value subset measures performance of companies with
lower price-to-earnings ratios and lower forecasted growth values.
o The unmanaged Lipper Global Fund Index represents an average of the
performance of the 30 largest global funds tracked by Lipper, Inc., an
independent mutual fund performance monitor.
o The unmanaged Standard & Poor's Index of 500 Stocks (the S&P 500) is an
index of common stocks frequently used as a general measure of U.S. stock
market performance.
o The unmanaged MSCI Europe, Australasia and the Far East (the EAFE
--Registerd Trademark--) is a group of foreign securities tracked by
Morgan Stanley Capital International.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Global Value Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
will provide an overview of the markets and your fund during
the six months covered by this report.
ON THE CURRENCY As always, timely information about your fund and
FRONT, THE U.S. the markets in general is available at our Web site,
DOLLAR REMAINED aiminvestments.com. From our home page, click on Products
WEAK COMPARED TO and Performance, then Mutual Funds, then AIM Funds, and then
MANY FOREIGN select the type of information you wish to view.
CURRENCIES,
PARTICULARLY THE MARKET CONDITIONS
EURO.
ROBERT H. GRAHAM Economic sluggishness continued in the United States during
the reporting period, particularly in manufacturing. The
manufacturing sector contracted during four of the six months in the reporting
period. The overall economy grew only 1.4%, annualized, during the first quarter
of the year. In the second quarter, the advance estimate indicated that economic
growth improved, with the gross domestic product expanding at a 2.4% annualized
rate.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%.
The pattern was similar overseas. For example, both the European Central
Bank and the Bank of Japan noted slow growth in a number of overseas economies.
International markets, as measured by the MSCI Europe, Australasia and the Far
East Index (the EAFE--Registerd Trademark--), produced negative returns for the
first quarter of 2003. Many foreign markets rallied, however, in April and
continued to produce positive returns each month throughout the second quarter.
On the currency front, the U.S. dollar remained weak compared to many
foreign currencies, particularly the euro. Other currencies that gained ground
on the U.S. dollar during the reporting period included the Australian dollar,
Swiss franc, British pound and Canadian dollar.
YOUR FUND
Effective April 30, 2003, your fund's name was changed from AIM Worldwide
Spectrum Fund to AIM Global Value Fund. As stated in the fund's prospectus,
"portfolio managers focus on companies that they believe trade below their
intrinsic value." Portfolio managers Glen Hilton and Roger J. Mortimer also look
for stocks that may increase in value as a result of a catalyst such as a new
product launch, a corporate restructuring, a management change, or a divestiture
of part of the company.
The fund continues to invest in companies of every market capitalization. As
of June 30, 2003, the fund's portfolio was characterized by Lipper, Inc., an
independent mutual fund performance monitor, as containing 40.7% large-cap
stocks, 20.8% mid-cap stocks and 38.5% small-cap stocks. The three sectors in
which the fund was most heavily invested were financials, materials and energy.
As of June 30, 2003, U.S.-company stocks represented 33.9% of fund holdings,
down from 52.9% when the reporting period opened.
IN CLOSING
I thank you for your continued participation in AIM Global Value Fund, and I
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-54.61%
AUSTRALIA-4.92%
Australia & New Zealand Banking Group Ltd.
(Diversified Banks) 18,100 $ 226,947
- -----------------------------------------------------------------------
Commonwealth Bank of Australia (Diversified
Banks)(a) 7,800 155,293
- -----------------------------------------------------------------------
National Australia Bank Ltd. (Diversified
Banks)(a) 13,800 311,475
=======================================================================
693,715
=======================================================================
BERMUDA-5.46%
Johnson Electric Holdings Ltd. (Electrical
Components & Equipment) 158,000 195,517
- -----------------------------------------------------------------------
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 1,500 59,325
- -----------------------------------------------------------------------
Pan-Ocean Energy Corp. Ltd. (Oil & Gas
Exploration & Production)(a) 75,000 308,928
- -----------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance
Brokers) 6,700 206,025
=======================================================================
769,795
=======================================================================
CANADA-26.38%
AGF Management Ltd.-Class B (Other
Diversified Financial Services) 20,000 225,620
- -----------------------------------------------------------------------
Barrick Gold Corp. (Gold) 11,800 210,095
- -----------------------------------------------------------------------
Canadian Oil Sands Trust (Oil & Gas
Exploration & Production) (Acquired
02/21/03; Cost $62,778)(b)(c) 2,700 69,995
- -----------------------------------------------------------------------
Central Fund of Canada Ltd.-Class A (Gold)
(Acquired 02/12/03; Cost $189,029)(a)(b)(c) 42,100 182,622
- -----------------------------------------------------------------------
Clean Power Income Fund (Multi-Utilities &
Unregulated Power) 42,100 310,891
- -----------------------------------------------------------------------
Corus Entertainment Inc.-Class B
(Broadcasting & Cable TV)(a) 9,000 151,959
- -----------------------------------------------------------------------
Denison Energy Inc. (Diversified Metals &
Mining)(a) 39,000 66,573
- -----------------------------------------------------------------------
Dofasco Inc. (Steel) 3,600 69,494
- -----------------------------------------------------------------------
E-L Financial Corp. Ltd. (Multi-Line
Insurance) 2,200 421,256
- -----------------------------------------------------------------------
Hollinger Canadian Newspapers, L.P.
(Publishing)(a) 81,200 30,735
- -----------------------------------------------------------------------
Home Equity Income Trust (Homebuilding) 23,900 223,674
- -----------------------------------------------------------------------
Nevsun Resources Ltd. (Diversified Metals &
Mining)(a) 24,800 66,997
- -----------------------------------------------------------------------
Nortel Networks Corp. (Communications
Equipment) 23,400 63,215
- -----------------------------------------------------------------------
Northbridge Financial Corp. (Property &
Casualty Insurance)(a) 7,900 111,693
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
CANADA-(CONTINUED)
Penn West Petroleum Ltd. (Oil & Gas
Exploration & Production)(a) 5,100 $ 164,650
- -----------------------------------------------------------------------
Placer Dome Inc. (Gold) 20,000 244,916
- -----------------------------------------------------------------------
Research In Motion Ltd. (Communications
Equipment) 6,400 138,602
- -----------------------------------------------------------------------
Saskatchewan Wheat Pool-Class B (Agricultural
Products) 185,100 51,516
- -----------------------------------------------------------------------
Talisman Energy Inc. (Oil & Gas Exploration &
Production) 1,700 77,594
- -----------------------------------------------------------------------
TimberWest Forest Corp.-Units (Forest
Products)(d) 15,300 128,314
- -----------------------------------------------------------------------
Torstar Corp.-Class B (Publishing) 8,000 163,574
- -----------------------------------------------------------------------
TransCanada Power, L.P. (Multi-Utilities &
Unregulated Power) 5,800 146,356
- -----------------------------------------------------------------------
Triquest Energy Corp. (Oil & Gas Exploration
& Production)(a) 27,100 70,395
- -----------------------------------------------------------------------
Westaim Corp. (The) (Industrial
Conglomerates)(a) 97,400 162,647
- -----------------------------------------------------------------------
Wolfden Resources Inc. (Gold)(a) 98,700 166,282
=======================================================================
3,719,665
=======================================================================
CAYMAN ISLANDS-1.53%
ASM Pacific Technology Ltd. (Semiconductor
Equipment) 74,000 216,355
=======================================================================
DENMARK-1.15%
Kobenhavns Lufthavne A.S. (Airport
Services)(a) 2,000 162,760
=======================================================================
FINLAND-2.08%
UPM-Kymmene Oyj (Paper Products) 20,000 292,711
=======================================================================
FRANCE-1.02%
Aventis S.A. (Pharmaceuticals) 2,600 143,438
=======================================================================
HONG KONG-1.62%
Cathay Pacific Airways Ltd. (Airlines) 170,000 228,896
=======================================================================
ITALY-0.98%
Merloni Elettrodomestici S.p.A. (Household
Appliances) 9,300 137,931
=======================================================================
JAPAN-2.76%
Honda Motor Co., Ltd. (Automobile
Manufacturers) 7,000 266,037
- -----------------------------------------------------------------------
Tokyo Electric Power Co., Inc. (The)
(Electric Utilities) 6,400 122,686
=======================================================================
388,723
=======================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
MEXICO-0.78%
Grupo Aeroportuario del Sureste S.A. de
C.V.-ADR (Airport Services) 7,500 $ 109,725
=======================================================================
PERU-0.51%
Compania de Minas Buenaventura S.A.-ADR
(Precious Metals & Minerals) 2,400 72,216
=======================================================================
SWITZERLAND-2.07%
Nestle S.A. (Packaged Foods & Meats) 650 134,454
- -----------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals) 2,000 157,268
=======================================================================
291,722
=======================================================================
UNITED KINGDOM-3.35%
HSBC Holdings PLC (Diversified Banks)(a) 12,000 142,339
- -----------------------------------------------------------------------
Randgold Resources Ltd.-ADR (Precious Metals
& Minerals)(a) 2,100 35,700
- -----------------------------------------------------------------------
Rio Tinto PLC (Diversified Metals & Mining) 9,100 171,726
- -----------------------------------------------------------------------
Severn Trent PLC (Water Utilities) 210 2,378
- -----------------------------------------------------------------------
Unilever PLC (Packaged Foods & Meats) 15,000 119,806
=======================================================================
471,949
=======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $7,053,131) 7,699,601
=======================================================================
DOMESTIC COMMON STOCKS-33.89%
AUTOMOBILE MANUFACTURERS-0.97%
General Motors Corp. 3,800 136,800
=======================================================================
COMMUNICATIONS EQUIPMENT-0.53%
Cisco Systems, Inc.(a) 4,500 75,105
=======================================================================
DIVERSIFIED BANKS-2.24%
Bank of America Corp. 4,000 316,120
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.31%
Coinstar, Inc.(a) 2,300 43,378
=======================================================================
DIVERSIFIED METALS & MINING-0.78%
Freeport-McMoRan Copper & Gold, Inc.-Class B 4,500 110,250
=======================================================================
EMPLOYMENT SERVICES-0.79%
Heidrick & Struggles International, Inc.(a) 8,800 111,056
=======================================================================
FOOD RETAIL-2.22%
Great Atlantic & Pacific Tea Co., Inc.
(The)(a) 12,300 108,240
- -----------------------------------------------------------------------
Safeway Inc.(a) 10,000 204,600
=======================================================================
312,840
=======================================================================
FOREST PRODUCTS-1.03%
Weyerhaeuser Co. 2,700 145,800
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
HOME ENTERTAINMENT SOFTWARE-1.51%
Take-Two Interactive Software, Inc.(a) 7,500 $ 212,550
=======================================================================
INTEGRATED OIL & GAS-5.97%
Amerada Hess Corp. 3,000 147,540
- -----------------------------------------------------------------------
ChevronTexaco Corp. 3,000 216,600
- -----------------------------------------------------------------------
ConocoPhillips 3,400 186,320
- -----------------------------------------------------------------------
Exxon Mobil Corp. 5,900 211,869
- -----------------------------------------------------------------------
Murphy Oil Corp. 1,500 78,900
=======================================================================
841,229
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.09%
Merrill Lynch & Co., Inc. 3,300 154,044
=======================================================================
LIFE & HEALTH INSURANCE-0.22%
AFLAC Inc. 1,000 30,750
=======================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.44%
El Paso Corp. 7,700 62,216
=======================================================================
OIL & GAS DRILLING-1.33%
Patterson-UTI Energy, Inc.(a) 5,800 187,920
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.13%
Cimarex Energy Co.(a) 6,700 159,125
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.15%
Citigroup Inc. 7,100 303,880
=======================================================================
PERSONAL PRODUCTS-0.97%
Gillette Co. (The) 4,300 136,998
=======================================================================
PHARMACEUTICALS-4.51%
Bristol-Myers Squibb Co. 5,500 149,325
- -----------------------------------------------------------------------
Johnson & Johnson 1,200 62,040
- -----------------------------------------------------------------------
Merck & Co. Inc. 1,200 72,660
- -----------------------------------------------------------------------
Pfizer Inc. 10,300 351,745
=======================================================================
635,770
=======================================================================
PHOTOGRAPHIC PRODUCTS-0.39%
Eastman Kodak Co. 2,000 54,700
=======================================================================
RESTAURANTS-1.66%
Yum! Brands, Inc.(a) 7,900 233,524
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.78%
Applied Materials, Inc.(a) 15,800 250,588
=======================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
SYSTEMS SOFTWARE-1.87%
Microsoft Corp. 10,300 $ 263,783
=======================================================================
Total Domestic Common Stocks (Cost
$4,421,722) 4,778,426
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
NON-U.S. DOLLAR DENOMINATED BONDS-8.25%(E)
SWITZERLAND-8.25%
Switzerland (Treasury of) (Sovereign Debt),
Bonds, 6.50%, 04/10/04 (Cost $1,157,744)CHF 1,500,000 1,162,390
=======================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
MARKET
SHARES VALUE
=======================================================================
MONEY MARKET FUNDS-2.84%
STIC Liquid Assets Portfolio(f) 199,911 $ 199,911
- -----------------------------------------------------------------------
STIC Prime Portfolio(f) 199,911 199,911
=======================================================================
Total Money Market Funds (Cost $399,822) 399,822
=======================================================================
TOTAL INVESTMENTS-99.59% (Cost $13,032,419) 14,040,239
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.41% 58,467
=======================================================================
NET ASSETS-100.00% $14,098,706
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
CHF - Swiss Franc
</Table>
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 06/30/03 was $252,617,
which represented 1.79% 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) Each unit represents one common share, one hundred preferred shares and one
subordinate note receipt.
(e) Foreign denominated security. Par value is denominated in currency
indicated.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$13,032,419) $14,040,239
- -----------------------------------------------------------
Foreign currencies, at value (cost $11,313) 11,297
- -----------------------------------------------------------
Receivables for:
Investments sold 143,467
- -----------------------------------------------------------
Fund shares sold 99,698
- -----------------------------------------------------------
Dividends and interest 61,969
- -----------------------------------------------------------
Amount due from advisor 14,794
- -----------------------------------------------------------
Investment for deferred compensation plan 8,728
- -----------------------------------------------------------
Other assets 13,880
===========================================================
Total assets 14,394,072
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 151,764
- -----------------------------------------------------------
Fund shares reacquired 79,245
- -----------------------------------------------------------
Deferred compensation plan 8,728
- -----------------------------------------------------------
Accrued distribution fees 16,133
- -----------------------------------------------------------
Accrued transfer agent fees 8,380
- -----------------------------------------------------------
Accrued operating expenses 31,116
===========================================================
Total liabilities 295,366
===========================================================
Net assets applicable to shares outstanding $14,098,706
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $13,903,716
- -----------------------------------------------------------
Undistributed net investment income (9,261)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
foreign currency contracts and option
contracts (804,082)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 1,008,333
===========================================================
$14,098,706
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 7,189,723
___________________________________________________________
===========================================================
Class B $ 5,126,126
___________________________________________________________
===========================================================
Class C $ 1,782,857
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 726,652
___________________________________________________________
===========================================================
Class B 526,059
___________________________________________________________
===========================================================
Class C 182,870
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 9.89
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $9.89 divided
by 94.50%) $ 10.47
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 9.74
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 9.75
___________________________________________________________
===========================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $16,229) $ 141,417
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 9,940
- ------------------------------------------------------------------------
Interest 804
========================================================================
Total investment income 152,161
========================================================================
EXPENSES:
Advisory fees 55,529
- ------------------------------------------------------------------------
Administrative services fees 24,795
- ------------------------------------------------------------------------
Custodian fees 15,774
- ------------------------------------------------------------------------
Distribution fees -- Class A 11,460
- ------------------------------------------------------------------------
Distribution fees -- Class B 24,080
- ------------------------------------------------------------------------
Distribution fees -- Class C 8,505
- ------------------------------------------------------------------------
Transfer agent fees 27,177
- ------------------------------------------------------------------------
Trustees' fees 4,470
- ------------------------------------------------------------------------
Registration and filing fees 18,262
- ------------------------------------------------------------------------
Printing fees 15,975
- ------------------------------------------------------------------------
Professional fees 23,399
- ------------------------------------------------------------------------
Other 3,174
========================================================================
Total expenses 232,600
========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (80,842)
========================================================================
Net expenses 151,758
========================================================================
Net investment income 403
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 2,082,789
- ------------------------------------------------------------------------
Foreign currencies 30,923
- ------------------------------------------------------------------------
Foreign currency contracts (238,687)
- ------------------------------------------------------------------------
Option contracts written 3,150
========================================================================
1,878,175
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (808,237)
- ------------------------------------------------------------------------
Foreign currencies 157
- ------------------------------------------------------------------------
Foreign currency contracts 125,355
========================================================================
(682,725)
========================================================================
Net gain from investment securities, foreign currencies,
foreign currency contracts and option contracts 1,195,450
========================================================================
Net increase in net assets resulting from operations $1,195,853
________________________________________________________________________
========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 403 $ (190,623)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts, futures
contracts and option contracts 1,878,175 (1,519,961)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, foreign
currency contracts and option contracts (682,725) 482,952
=========================================================================================
Net increase (decrease) in net assets resulting from
operations 1,195,853 (1,227,632)
=========================================================================================
Distributions to shareholders from net investment income:
Class A -- (2,912)
=========================================================================================
Decrease in net assets resulting from distributions -- (2,912)
=========================================================================================
Share transactions-net:
Class A 247,962 (1,707,264)
- -----------------------------------------------------------------------------------------
Class B 72,484 1,387,954
- -----------------------------------------------------------------------------------------
Class C (212,379) 693,806
=========================================================================================
Net increase in net assets resulting from share
transactions 108,067 374,496
=========================================================================================
Net increase (decrease) in net assets 1,303,920 (856,048)
=========================================================================================
NET ASSETS:
Beginning of period 12,794,786 13,650,834
=========================================================================================
End of period $14,098,706 $12,794,786
_________________________________________________________________________________________
=========================================================================================
</Table>
See Notes to Financial Statements.
F-6
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Value Fund, formerly AIM Worldwide Spectrum Fund, (the "Fund") is a
series portfolio of AIM Funds Group (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 twelve 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from
F-7
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.
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
disclosed in the Statement of Assets and Liabilities.
H. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
I. 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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 in excess of $1 billion. AIM has contractually agreed to waive
fees and/or reimburse expenses (excluding interest, taxes, dividends on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B, and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A shares to
2.00%. To the extent that the annualized expense ratio does not exceed the
contractual expense limitation AIM will retain the ability to be reimbursed for
such fee waivers or reimbursements prior to the end of the committed period.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the
amount of 25% of the advisory fee AIM receives from the affiliated money market
funds in which the Fund has invested. For the six months ended June 30, 2003,
AIM waived fees of $55,529 and reimbursed expenses of $25,106.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $13,584 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
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and Class C shares. Of these amounts, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
A, Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. NASD
Rules also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $11,460, $24,080 and $8,505, respectively.
Front-end sales commissions and contingent deferred sales charges
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the
F-8
sales of Fund shares prior to investment in Class A shares of the Fund.
Contingent deferred sales charges ("CDSCs") are deducted from redemption
proceeds prior to remittance to the shareholder. During six months ended June
30, 2003, AIM Distributors retained $3,453 in front-end sales commissions from
the sale of Class A shares and $0, $0 and $92 for Class A, Class B and Class C
shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,367 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $206 and reductions in custodian
fees of $1 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $207.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
NOTE 6--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ---------------------------------------------------------
Beginning of period -- $ --
- ---------------------------------------------------------
Written 150 13,200
- ---------------------------------------------------------
Closed (150) (13,200)
=========================================================
End of period -- $ --
_________________________________________________________
=========================================================
</Table>
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2009 $1,171,360
- ----------------------------------------------------------
December 31, 2010 1,488,748
==========================================================
Total capital loss carryforward $2,660,108
__________________________________________________________
==========================================================
</Table>
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 six months
ended June 30, 2003 was $24,098,404 and $23,631,069, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $1,230,610
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (222,790)
===========================================================
Net unrealized appreciation of investment
securities $1,007,820
___________________________________________________________
===========================================================
Investments have the same cost for tax and financial
statement purposes.
</Table>
F-9
NOTE 9--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
Sold:
Class A 212,330 $ 2,001,975 838,881 $ 7,844,956
- ------------------------------------------------------------------------------------------------------------------
Class B 146,749 1,322,108 410,973 3,812,711
- ------------------------------------------------------------------------------------------------------------------
Class C 43,559 414,530 122,164 1,145,729
==================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 310 2,861
==================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 1,413 12,959 11,498 102,735
- ------------------------------------------------------------------------------------------------------------------
Class B (1,433) (12,959) (11,486) (102,735)
==================================================================================================================
Reacquired:
Class A (185,732) (1,766,972) (1,038,150) (9,657,816)
- ------------------------------------------------------------------------------------------------------------------
Class B (136,483) (1,236,665) (251,272) (2,322,022)
- ------------------------------------------------------------------------------------------------------------------
Class C (67,551) (626,909) (49,330) (451,923)
==================================================================================================================
12,852 $ 108,067 33,588 $ 374,496
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
F-10
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------
DECEMBER 29, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.05 $ 9.85 $10.00 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.11)(a) (0.05)(a) --
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.82 (0.69) (0.10) --
============================================================================================================================
Total from investment operations 0.84 (0.80) (0.15) --
============================================================================================================================
Less dividends from net investment income -- (0.00) (0.00) --
============================================================================================================================
Net asset value, end of period $ 9.89 $ 9.05 $ 9.85 $10.00
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 9.28% (8.08)% (1.49)% --
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,190 $6,321 $8,725 $1,110
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.00%(c) 2.00% 1.91% 1.80%(d)
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.24%(c) 2.75% 4.44% 76.90%(d)
============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.33%(c) (1.16)% (0.52)% 3.91%(d)
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 207% 101% 168% --
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$6,603,114.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-11
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
------------------------------------------------
JANUARY 2, 2001
SIX MONTHS YEAR (DATE SALES
ENDED ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.94 $ 9.79 $10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.17)(a) (0.11)(a)
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.81 (0.68) (0.10)
==============================================================================================================
Total from investment operations 0.80 (0.85) (0.21)
==============================================================================================================
Less dividends from net investment income -- -- (0.00)
==============================================================================================================
Net asset value, end of period $ 9.74 $ 8.94 $ 9.79
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 8.95% (8.68)% (2.09)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,126 $4,624 $3,613
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.65% 2.57%(d)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.89%(c) 3.40% 5.10%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (1.81)% (1.18)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 207% 101% 168%
______________________________________________________________________________________________________________
==============================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$4,855,812.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-12
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------------------
JANUARY 11, 2001
SIX MONTHS YEAR (DATE SALES
ENDED ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.94 $ 9.79 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.17)(a) (0.11)(a)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.82 (0.68) (0.10)
===============================================================================================================
Total from investment operations 0.81 (0.85) (0.21)
===============================================================================================================
Less dividends from net investment income -- -- (0.00)
===============================================================================================================
Net asset value, end of period $ 9.75 $ 8.94 $ 9.79
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 9.06% (8.68)% (2.09)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,783 $1,850 $1,312
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.65% 2.57%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.89%(c) 3.40% 5.10%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (1.81)% (1.18)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 207% 101% 168%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$1,715,113.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-13
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
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(5,6)
AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Opportunities I Fund(2)
AIM Opportunities II Fund(2) SECTOR EQUITY
AIM Opportunities III Fund(2)
AIM Premier Equity Fund AIM Global Energy Fund
AIM Premier Equity II Fund AIM Global Financial Services Fund
AIM Select Equity Fund AIM Global Health Care Fund
AIM Small Cap Equity Fund AIM Global Science and Technology Fund
AIM Small Cap Growth Fund(3) AIM Global Utilities Fund
AIM Weingarten Fund AIM New Technology Fund
AIM Real Estate Fund
*Domestic equity and income fund
</Table>
(1)Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2)Effective October 1, 2002, the fund was reopened
to new investors. (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)Class A shares
closed to new investors on October 30, 2002. (6)Class A3 shares were first
offered on October 31, 2002.
For more complete information about any AIM fund, including sales
charges and expenses, ask your financial advisor for a prospectus. Please read
it carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com GLV-SAR-1
[COVER ART]
AIM INTERNATIONAL EMERGING GROWTH FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM International Emerging Growth Fund seeks to
provide long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY COUNTRY
[PIE CHART]
OTHER 26.8%
SOUTH KOREA 2.2%
NORWAY 2.4%
AUSTRALIA 2.5%
NETHERLANDS 3.1%
ITALY 3.8%
GERMANY 6.4%
IRELAND 6.8%
UNITED STATES 7.3%
UNITED KINGDOM 15.9%
CANADA 22.8%
TOTAL NUMBER OF HOLDINGS 138
TOTAL NET ASSETS $40.2 million
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (8/31/00) -6.94%
1 Year 1.06
CLASS B SHARES
Inception (8/31/00) -6.67%
1 Year 1.27
CLASS C SHARES
Inception (8/31/00) -5.66%
1 Year 5.40
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 24.31%
CLASS B SHARES 23.98
CLASS C SHARES 23.98
MSCI EAFE--Registered Trademark-- INDEX 9.47
(Broad Market Index)
MSCI (AC) WORLD FREE EX-USA GROWTH INDEX 8.64
(Style-Specific Index)
LIPPER INTERNATIONAL SMALL-CAP FUND INDEX 18.39
(Peer Group Index)
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.
================================================================================
<Table>
<Caption>
=============================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- ---------------------------------------------------------------------------------------------
1. Merloni Elettrodomestici S.p.A. (Italy) 2.5% 1. Pharmaceuticals 6.1%
2. Puma A.G. Rudolf Dassler Sport (Germany) 2.2 2. Diversified Banks 4.8
3. Anglo Irish Bank Corp. PLC (Ireland) 2.0 3. Household Appliances 3.5
4. Enterprise Inns PLC (United Kingdom) 1.5 4. Packaged Foods & Meats 3.5
5. Mobistar S.A. (Belgium) 1.4 5. Health Care Equipment 2.9
6. Benfield Group PLC (Bermuda) 1.4 6. Home Furnishings 2.7
7. Stake Technology Ltd. (Canada) 1.3 7. Insurance Brokers 2.6
8. Cattles PLC (United Kingdom) 1.3 8. U.S. Government 2.5
9. Galen Holdings PLC (United Kingdom) 1.2 9. Broadcasting & Cable TV 2.4
10. Taro Pharmaceuticals Industries Ltd. (Israel) 1.1 10. Application Software 2.3
The fund's holdings are subject to change, and there is no assurance that the
fund will continue to hold any particular security..
=============================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM International Emerging Growth Fund's performance figures are historical,
and they reflect fund expenses, the reinvestment of distributions, and
changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o Had the advisor not waived fees and/or reimbursed expenses, returns would
have been lower.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o The fund is nondiversified, which may increase risks as well as potential
rewards. This means that with respect to 50% of its assets, the fund may
invest more than 5% of its assets in securities of any one issuer.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
o The unmanaged MSCI Europe, Australasia and the Far East Index (the
EAFE--Registered Trademark--) is a group of foreign securities tracked by
Morgan Stanley Capital International.
o The unmanaged Lipper International Small-Cap Fund Index represents an
average of the performance of 10 international small-cap mutual funds
tracked by Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged MSCI All Country (AC) World Free Ex-USA Growth Index is a
subset of the unmanaged MSCI All Country (AC) World Free Ex-USA Index, which
represents the performance of securities in approximately 50 developed and
emerging countries, excluding the United States, covered by Morgan Stanley
Capital International. The Growth portion measures performance of companies
with higher price/earnings ratios and higher forecasted growth values. A
"free" index represents investable opportunities for global investors,
taking into account the local market restrictions on share ownership by
foreign investors.
o The MSCI All Country (AC) Asia Pacific Free ex-Japan Index is a group of
developed and emerging Asian and Asia-Pacific markets (except Japan) covered
by Morgan Stanley Capital International. A "free" represents investable
opportunities for global investors, taking into account the local market
restrictions on share ownership by foreign investors.
o The unmanaged MSCI Europe Index is a group of European securities tracked by
Morgan Stanley Capital International.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
This is your report on AIM International Emerging Growth
Fund for the six months ended June 30, 2003. Important
information such as top holdings and fund performance as of
[PHOTO OF the close of the reporting period appears on the opposite
ROBERT H. page. This letter will provide an overview of the markets
GRAHAM] and your fund during the six months covered by this report.
ON THE CURRENCY As always, timely information about your fund and the
FRONT, THE U.S. markets in general is available at our Web site,
DOLLAR REMAINED aiminvestments.com. From our home page, click on Products &
WEAK COMPARED TO Performance, then Mutual Funds, then AIM Funds, and then
MANY FOREIGN select the type of information you wish to view.
CURRENCIES,
PARTICULARLY THE MARKET CONDITIONS
EURO.
ROBERT H. GRAHAM At the start of 2003, the global economy remained sluggish
as uncertainties over the war in Iraq mounted. However, as
noted in many financial publications, a relatively quick resolution of the
conflict during April removed that risk factor from the global economy.
International markets, as measured by the MSCI Europe, Australasia and the
Far East Index (the EAFE--Registered Trademark--), produced negative returns for
the first quarter of 2003. Many foreign markets rallied, however, in April and
continued to produce positive returns each month throughout the second quarter.
European markets in particular rallied in April with the MSCI Europe Index
posting a return of 13.49% for the month. The European Central Bank (ECB)
reduced its benchmark interest twice in 2003: 0.25% in March and 0.50% in June.
This left the euro zone benchmark rate at 2.0% at the end of the reporting
period. According to the ECB's June 2003 monthly bulletin, the June rate cut was
based on the outlook for price stability over the medium term, which has
improved significantly since interest rates were lowered in March. The decision
was in line with the ECB's monetary policy strategy, including the aim of
maintaining inflation rates below but close to 2% over the medium term.
As widely discussed, in Asia, the epidemic of severe acute respiratory
syndrome (SARS) dealt a blow to local economies early in the year. However, the
MSCI All Country (AC) Asia Pacific Free ex-Japan Index, rallied in April and
produced positive results for the six-month reporting period.
On the currency front, the U.S. dollar remained weak compared to many
foreign currencies, particularly the euro. Other currencies that gained ground
on the U.S. dollar during the reporting period included the Australian dollar,
Swiss franc, British pound and Canadian dollar.
YOUR FUND
For the six-month reporting period, AIM International Emerging Growth Fund Class
A shares at NAV significantly outperformed the fund's broad market index, the
MSCI EAFE--Registered Trademark--, as shown on the opposite page. Throughout the
reporting period, fund managers Shuxin Cao, Borge Endresen, Jason T. Holzer and
Barrett K. Sides sought to identify companies that, in their view, are
experiencing strong growth and have prospects for future long-term growth.
As of June 30, 2003, the fund had significant exposure to the following
sectors: consumer discretionary, financials and health care. Over the course of
the reporting period, the fund's exposure to the financials and health care
sectors increased, while its weightings in consumer staples and industrials
decreased. The fund increased its number of holdings during the reporting period
from 98 holdings on December 31, 2002 to 138 on June 30, 2003.
IN CLOSING
I thank you for your continued participation in AIM International Emerging
Growth Fund, and I look forward to reporting to you again in six months. If you
have any questions, please consult your financial advisor, who is the person
best qualified to help you with your investment choices. And as always, members
of our award-winning Client Services department are ready to help. They can be
reached at 800-959-4246.
Sincerely,
/s/ Robert H. Graham
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-92.71%
AUSTRALIA-2.51%
Cochlear Ltd. (Health Care Equipment) 12,800 $ 278,555
- -----------------------------------------------------------------------
Foodland Associated Ltd. (Food Retail) 18,749 248,853
- -----------------------------------------------------------------------
Ramsay Health Care Ltd. (Health Care
Facilities) 104,800 259,841
- -----------------------------------------------------------------------
Toll Holdings Ltd. (Trucking) 46,200 220,381
=======================================================================
1,007,630
=======================================================================
BELGIUM-1.38%
Mobistar S.A. (Wireless Telecommunication
Services)(a) 13,500 556,365
=======================================================================
BERMUDA-1.54%
Benfield Group PLC (Insurance Brokers)
(Acquired 06/13/03; Cost $485,504)(a)(b) 116,400 543,365
- -----------------------------------------------------------------------
Texwinca Holdings Ltd. (Textiles) 94,000 74,734
=======================================================================
618,099
=======================================================================
CANADA-22.77%
AD OPT Technologies Inc. (Application
Software)(a) 25,500 63,400
- -----------------------------------------------------------------------
Agricore United (Agricultural Products) 38,000 207,288
- -----------------------------------------------------------------------
AKITA Drilling Ltd.-Class A (Oil & Gas
Drilling) 22,300 342,593
- -----------------------------------------------------------------------
Allstream Inc.-Class A (Integrated
Telecommunications Services)(a) 4,800 160,309
- -----------------------------------------------------------------------
BMTC Group, Inc.-Class A (Specialty Stores) 15,662 209,230
- -----------------------------------------------------------------------
Calian Technology Ltd. (Data Processing &
Outsourced Services) 29,900 185,294
- -----------------------------------------------------------------------
Canadian Western Bank (Regional Banks) 14,000 359,195
- -----------------------------------------------------------------------
Cangene Corp. (Biotechnology)(a) 24,000 209,292
- -----------------------------------------------------------------------
CanWest Global Communications Corp.
(Broadcasting & Cable TV)(a) 46,000 295,309
- -----------------------------------------------------------------------
CHUM Ltd.-Class B (Broadcasting & Cable TV) 6,500 255,678
- -----------------------------------------------------------------------
CML Healthcare Inc. (Health Care Services)(a) 5,100 130,585
- -----------------------------------------------------------------------
Cogeco Cable Inc. (Broadcasting & Cable TV) 12,100 163,890
- -----------------------------------------------------------------------
Corby Distilleries Ltd.-Class A (Distillers &
Vintners) 3,800 164,984
- -----------------------------------------------------------------------
DataMirror Corp. (Application Software)(a) 12,700 96,141
- -----------------------------------------------------------------------
Dorel Industries Inc.-Class B (Home
Furnishings)(a) 7,000 203,911
- -----------------------------------------------------------------------
Enghouse Systems Ltd. (Application
Software)(a) 14,000 130,295
- -----------------------------------------------------------------------
Ensign Resource Service Group, Inc. (Oil &
Gas Drilling) 8,500 127,431
- -----------------------------------------------------------------------
Fortis, Inc. (Electric Utilities) 7,300 319,653
- -----------------------------------------------------------------------
Hip Interactive Corp. (Distributors)(a) 200,000 240,463
- -----------------------------------------------------------------------
Home Capital Group Inc.-Class B (Asset
Management & Custody Banks) 28,000 426,006
- -----------------------------------------------------------------------
Hub International Ltd. (Insurance Brokers) 16,600 283,860
- -----------------------------------------------------------------------
Imax Corp. (Movies & Entertainment)(a) 33,700 305,386
- -----------------------------------------------------------------------
Kingsway Financial Services Inc. (Property &
Casualty Insurance)(a) 30,100 365,248
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
CANADA-(CONTINUED)
MAAX Inc. (Building Products) 11,100 $ 156,771
- -----------------------------------------------------------------------
Magnifoam Technology International Inc.
(Specialty Chemicals)(a) 64,900 121,862
- -----------------------------------------------------------------------
Mega Bloks Inc. (Leisure Products)(a) 15,700 244,693
- -----------------------------------------------------------------------
Reitmans (Canada) Ltd.-Class A (Apparel
Retail)(a) 16,000 217,307
- -----------------------------------------------------------------------
Richelieu Hardware Ltd. (Trading Companies &
Distributors) 33,300 394,440
- -----------------------------------------------------------------------
RONA Inc. (Home Improvement Retail) (Acquired
10/28/02-05/15/03; Cost $271,819)(a)(b) 28,000 387,561
- -----------------------------------------------------------------------
Shermag Inc. (Home Furnishings)(a) 41,000 410,791
- -----------------------------------------------------------------------
Stake Technology Ltd. (Packaged Foods &
Meats)(a) 76,000 536,560
- -----------------------------------------------------------------------
Stantec Inc. (Construction & Engineering)(a) 22,000 291,450
- -----------------------------------------------------------------------
Systems Xcellence Inc. (Application
Software)(a) 180,000 176,340
- -----------------------------------------------------------------------
Total Energy Services Ltd. (Oil & Gas
Equipment & Services)(a) 127,300 255,091
- -----------------------------------------------------------------------
Trican Well Service Ltd. (Oil & Gas Equipment
& Services)(a) 8,100 116,023
- -----------------------------------------------------------------------
TSX Group Inc. (Specialized Finance) 11,500 234,711
- -----------------------------------------------------------------------
TVA Group Inc.-Class B (Broadcasting & Cable
TV) 16,800 236,901
- -----------------------------------------------------------------------
Wajax Ltd. (Industrial Machinery)(a) 34,200 125,642
=======================================================================
9,151,584
=======================================================================
CAYMAN ISLANDS-1.08%
ASM Pacific Technology Ltd. (Semiconductor
Equipment) 69,000 201,736
- -----------------------------------------------------------------------
Global Bio-chem Technology Group Co. Ltd.
(Biotechnology) 346,000 112,033
- -----------------------------------------------------------------------
Xinao Gas Holdings Ltd. (Gas Utilities)(a) 382,000 120,013
=======================================================================
433,782
=======================================================================
CHILE-0.45%
Lan Chile S.A. (Airlines)(a) 113,800 182,275
=======================================================================
CHINA-1.58%
Anhui Conch Cement Co. Ltd.-Class H
(Construction Materials) 390,000 221,298
- -----------------------------------------------------------------------
Lianhua Supermarket Holdings Ltd.-Class H
(Food Retail)(a) 536,000 283,523
- -----------------------------------------------------------------------
Maanshan Iron & Steel Co. Ltd.-Class H
(Steel) 778,000 131,693
=======================================================================
636,514
=======================================================================
CZECH REPUBLIC-0.47%
Komercni Banka A.S. (Diversified Banks) 2,640 190,865
=======================================================================
DENMARK-1.42%
Jyske Bank A.S. (Diversified Banks)(a) 5,900 238,700
- -----------------------------------------------------------------------
Topdanmark A.S. (Multi-Line Insurance)(a) 9,050 331,772
=======================================================================
570,472
=======================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
FINLAND-1.45%
Nokian Renkaat Oyj (Tires & Rubber) 7,700 $ 397,221
- -----------------------------------------------------------------------
Vacon Oyj (Electrical Components & Equipment) 19,200 184,608
=======================================================================
581,829
=======================================================================
FRANCE-2.09%
Camaieu (Apparel Retail) 6,300 358,370
- -----------------------------------------------------------------------
Trigano (Leisure Products)(a) 8,600 282,926
- -----------------------------------------------------------------------
UBI Soft Entertainment S.A. (Home
Entertainment Software)(a) 10,300 198,663
=======================================================================
839,959
=======================================================================
GERMANY-6.38%
Freenet.de A.G. (Internet Software &
Services)(a) 6,400 252,777
- -----------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)
(Acquired 01/30/02-05/19/03; Cost
$432,182)(b) 8,870 883,494
- -----------------------------------------------------------------------
Schwarz Pharma A.G. (Pharmaceuticals)(a) 7,800 299,989
- -----------------------------------------------------------------------
Singulus Technologies A.G. (Industrial
Machinery)(a) 10,200 177,119
- -----------------------------------------------------------------------
Stada Arzneimittel A.G. (Pharmaceuticals) 4,800 306,207
- -----------------------------------------------------------------------
Vossloh A.G. (Construction & Farm Machinery &
Heavy Trucks) 7,600 273,481
- -----------------------------------------------------------------------
Zapf Creation A.G. (Leisure Products) 9,900 369,355
=======================================================================
2,562,422
=======================================================================
GREECE-0.48%
Hyatt Regency Hotels & Tourism S.A. (Hotels,
Resorts & Cruise Lines) 21,900 194,682
=======================================================================
HONG KONG-1.78%
China Pharmaceutical Group Ltd.
(Pharmaceuticals) 762,000 256,498
- -----------------------------------------------------------------------
Fountain Set (Holdings) Ltd. (Textiles) 294,000 262,019
- -----------------------------------------------------------------------
Techtronic Industries Co. Ltd. (Household
Appliances) (Acquired 04/24/02-07/29/02;
Cost $94,166)(b) 116,000 194,863
=======================================================================
713,380
=======================================================================
HUNGARY-0.77%
Gedeon Richter Rt. (Pharmaceuticals)(a) 4,400 311,228
=======================================================================
INDIA-1.73%
Bajaj Auto Ltd. (Motorcycle Manufacturers)(a) 14,000 173,122
- -----------------------------------------------------------------------
Dr. Reddy's Laboratories Ltd.-ADR
(Pharmaceuticals) 5,400 125,874
- -----------------------------------------------------------------------
HDFC Bank Ltd.-ADR (Diversified Banks) 10,400 195,000
- -----------------------------------------------------------------------
Ranbaxy Laboratories Ltd. (Pharmaceuticals) 12,000 202,935
=======================================================================
696,931
=======================================================================
IRELAND-6.81%
Anglo Irish Bank Corp. PLC (Diversified
Banks) 90,100 798,876
- -----------------------------------------------------------------------
Depfa Bank PLC (Diversified Banks) 4,400 343,262
- -----------------------------------------------------------------------
First Active PLC (Diversified Banks) 32,800 164,296
- -----------------------------------------------------------------------
Fyffes PLC (Food Distributors) 238,200 375,774
- -----------------------------------------------------------------------
Grafton Group PLC-Units (Trading Companies &
Distributors)(c) 86,040 381,439
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
IRELAND-(CONTINUED)
IAWS Group PLC (Agricultural Products) 31,500 $ 270,228
- -----------------------------------------------------------------------
ICON PLC-ADR (Health Care Services)(a) 6,500 206,830
- -----------------------------------------------------------------------
Paddy Power PLC (Casinos & Gaming) 31,700 195,654
=======================================================================
2,736,359
=======================================================================
ISRAEL-1.10%
Taro Pharmaceutical Industries Ltd.
(Pharmaceuticals)(a) 8,020 440,138
=======================================================================
ITALY-3.82%
Davide Campari-Milano S.p.A. (Distillers &
Vintners) 8,000 307,220
- -----------------------------------------------------------------------
Merloni Elettrodomestici S.p.A. (Household
Appliances) 68,200 1,011,496
- -----------------------------------------------------------------------
Saeco International Group S.p.A. (Household
Appliances) 60,300 215,250
=======================================================================
1,533,966
=======================================================================
JAPAN-0.95%
Alps Electric Co., Ltd. (Electronic Equipment
Manufacturers) 12,000 154,160
- -----------------------------------------------------------------------
Stanley Electric Co., Ltd. (Auto Parts &
Equipment) 16,000 228,667
=======================================================================
382,827
=======================================================================
MEXICO-0.48%
Consorcio ARA, S.A. de C.V. (Homebuilding)(a) 98,000 194,454
=======================================================================
NETHERLANDS-3.14%
James Hardie Industries N.V. (Construction
Materials) 50,900 241,429
- -----------------------------------------------------------------------
Orthofix International N.V. (Health Care
Equipment)(a) 8,800 288,112
- -----------------------------------------------------------------------
Sligro Food Group N.V. (Food Distributors) 8,100 381,201
- -----------------------------------------------------------------------
Versatel Telecom International N.V.
(Integrated Telecommunication Services)(a) 269,100 350,152
=======================================================================
1,260,894
=======================================================================
NORWAY-2.35%
Aktiv Kapital A.S.A. (Specialized Finance) 48,475 319,543
- -----------------------------------------------------------------------
Ekornes A.S.A. (Home Furnishings) 24,900 333,461
- -----------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas
Equipment & Services)(a) 25,900 291,140
=======================================================================
944,144
=======================================================================
PHILIPPINES-0.79%
Philippine Long Distance Telephone Co.
(Integrated Telecommunications Services)(a) 30,000 316,971
=======================================================================
SINGAPORE-1.65%
Keppel Corp. Ltd. (Industrial Conglomerates) 61,000 169,777
- -----------------------------------------------------------------------
SembCorp Logistics Ltd. (Marine Ports &
Services) 265,000 282,980
- -----------------------------------------------------------------------
Venture Corp. Ltd. (Electronic Manufacturing
Services) 23,000 210,332
=======================================================================
663,089
=======================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
SOUTH KOREA-2.18%
Cheil Communications Inc. (Advertising)(a) 2,600 $ 255,649
- -----------------------------------------------------------------------
CJ Corp. (Packaged Foods & Meats) 6,910 300,686
- -----------------------------------------------------------------------
Kook Soon Dang Brewery Co., Ltd. (Packaged
Foods & Meats) 7,300 193,649
- -----------------------------------------------------------------------
Shinsegae Co., Ltd. (Department Stores)(a) 800 124,854
=======================================================================
874,838
=======================================================================
SPAIN-1.68%
Compania de Distribucion Integral Logista,
S.A. (Distributors) 15,800 378,429
- -----------------------------------------------------------------------
Corporacion Mapfre S.A. (Multi-Line
Insurance) 27,600 295,567
=======================================================================
673,996
=======================================================================
SWEDEN-0.48%
Elekta A.B.-Class B (Health Care
Equipment)(a) 15,600 193,449
=======================================================================
SWITZERLAND-1.54%
Actelion Ltd. (Biotechnology)(a) 3,200 213,618
- -----------------------------------------------------------------------
Centerpulse A.G. (Health Care Equipment)
(Acquired 12/11/02-05/19/03; Cost
$279,034)(a)(b) 1,500 404,640
=======================================================================
618,258
=======================================================================
TAIWAN-1.65%
Ambit Microsystems Corp. (Computer Storage &
Peripherals)(a) 81,000 250,781
- -----------------------------------------------------------------------
Largan Precision Co., Ltd. (Photographic
Products) 45,000 270,833
- -----------------------------------------------------------------------
Nien Made Enterprise Co., Ltd. (Home
Furnishings) 78,349 142,824
=======================================================================
664,438
=======================================================================
THAILAND-0.35%
Land & Houses PCL (Homebuilding) 621,000 140,147
=======================================================================
UNITED KINGDOM-15.86%
Acambis PLC (Biotechnology)(a) 37,000 226,005
- -----------------------------------------------------------------------
Cattles PLC (Consumer Finance) 96,010 515,728
- -----------------------------------------------------------------------
Cranswick PLC (Packaged Foods & Meats) 55,300 381,268
- -----------------------------------------------------------------------
Enterprise Inns PLC (Restaurants) 43,300 582,014
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
French Connection Group PLC (Apparel Retail) 14,800 $ 303,790
- -----------------------------------------------------------------------
Galen Holdings PLC (Pharmaceuticals) 57,550 495,856
- -----------------------------------------------------------------------
ICAP PLC (Investment Banking & Brokerage) 18,500 348,654
- -----------------------------------------------------------------------
iSOFT Group PLC (Application Software) 55,100 264,508
- -----------------------------------------------------------------------
Jardine Lloyd Thompson Group PLC (Insurance
Brokers) 20,600 205,454
- -----------------------------------------------------------------------
Johnston Press PLC (Publishing) 36,700 263,134
- -----------------------------------------------------------------------
Kensington Group PLC (Thrifts & Mortgage
Finance) 76,500 344,445
- -----------------------------------------------------------------------
Majestic Wine PLC (Specialty Stores) 16,100 169,235
- -----------------------------------------------------------------------
McBride PLC (Household Products) 254,400 404,276
- -----------------------------------------------------------------------
NDS Group PLC-ADR (Application Software)(a) 11,500 178,135
- -----------------------------------------------------------------------
Paragon Group Cos. PLC (Thrifts & Mortgage
Finance) 49,100 228,390
- -----------------------------------------------------------------------
RPS Group PLC (Environmental Services) 84,900 191,836
- -----------------------------------------------------------------------
Taylor & Francis Group PLC (Publishing) 37,100 288,643
- -----------------------------------------------------------------------
Topps Tiles PLC (Home Improvement Retail) 32,900 203,684
- -----------------------------------------------------------------------
Ultra Electronics Holdings PLC (Aerospace &
Defense) 42,100 357,859
- -----------------------------------------------------------------------
Victrex PLC (Specialty Chemicals) 52,800 277,940
- -----------------------------------------------------------------------
Wellington Underwriting PLC (Property &
Casualty Insurance)(a) 85,100 144,609
=======================================================================
6,375,463
=======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $30,161,043) 37,261,448
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-2.49%
0.80%, 09/18/03(d) $ 500,000 499,065
- -----------------------------------------------------------------------
0.90%, 09/18/03(d) 500,000 499,064
=======================================================================
Total U.S. Treasury Bills (Cost $998,129) 998,129
=======================================================================
TOTAL INVESTMENTS--95.20% (Cost $31,159,172) 38,259,577
=======================================================================
OTHER ASSETS LESS LIABILITIES--4.80% 1,930,868
=======================================================================
NET ASSETS-100.00% $40,190,445
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
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 06/30/03 was $2,413,923,
which represented 6.01% of the Fund's net assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) Each unit represents one ordinary share and eight redeemable shares.
(d) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
See Notes to Financial Statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$31,159,172) $38,259,577
- -----------------------------------------------------------
Foreign currencies, at value (cost $827,754) 826,823
- -----------------------------------------------------------
Cash 180,847
- -----------------------------------------------------------
Receivables for:
Investments sold 987,517
- -----------------------------------------------------------
Fund shares sold 810,075
- -----------------------------------------------------------
Dividends 35,351
- -----------------------------------------------------------
Amount due from advisor 37,000
- -----------------------------------------------------------
Investment for deferred compensation plan 11,364
- -----------------------------------------------------------
Other assets 22,423
===========================================================
Total assets 41,170,977
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 564,699
- -----------------------------------------------------------
Fund shares reacquired 285,532
- -----------------------------------------------------------
Deferred compensation plan 11,364
- -----------------------------------------------------------
Accrued distribution fees 33,823
- -----------------------------------------------------------
Accrued transfer agent fees 26,520
- -----------------------------------------------------------
Accrued operating expenses 58,594
===========================================================
Total liabilities 980,532
===========================================================
Net assets applicable to shares outstanding $40,190,445
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $38,157,080
- -----------------------------------------------------------
Undistributed net investment income (loss) (20,441)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and futures contracts (5,044,461)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 7,098,267
===========================================================
$40,190,445
___________________________________________________________
===========================================================
NET ASSETS:
Class A $30,031,269
___________________________________________________________
===========================================================
Class B $ 6,339,948
___________________________________________________________
===========================================================
Class C $ 3,819,228
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 3,494,498
___________________________________________________________
===========================================================
Class B 747,811
___________________________________________________________
===========================================================
Class C 450,709
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 8.59
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $8.59 divided by
94.50%) $ 9.09
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 8.48
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 8.47
___________________________________________________________
===========================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $33,346) $ 253,155
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 11,211
- ------------------------------------------------------------------------
Interest 365
========================================================================
Total investment income 264,731
========================================================================
EXPENSES:
Advisory fees 117,235
- ------------------------------------------------------------------------
Administrative services fees 24,795
- ------------------------------------------------------------------------
Custodian fees 86,434
- ------------------------------------------------------------------------
Distribution fees -- Class A 30,214
- ------------------------------------------------------------------------
Distribution fees -- Class B 21,881
- ------------------------------------------------------------------------
Distribution fees -- Class C 15,200
- ------------------------------------------------------------------------
Transfer agent fees 45,488
- ------------------------------------------------------------------------
Trustees' fees 4,503
- ------------------------------------------------------------------------
Printing fees 25,621
- ------------------------------------------------------------------------
Professional fees 30,126
- ------------------------------------------------------------------------
Other 22,934
========================================================================
Total expenses 424,431
========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (153,520)
========================================================================
Net expenses 270,911
========================================================================
Net investment income (loss) (6,180)
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 279,893
- ------------------------------------------------------------------------
Foreign currencies 13,074
- ------------------------------------------------------------------------
Futures contracts 36,411
========================================================================
329,378
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 5,949,361
- ------------------------------------------------------------------------
Foreign currencies (2,499)
========================================================================
5,946,862
========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 6,276,240
========================================================================
Net increase in net assets resulting from operations $6,270,060
________________________________________________________________________
========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (6,180) $ (182,360)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and futures contracts 329,378 (1,435,848)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 5,946,862 (216,476)
=========================================================================================
Net increase (decrease) in net assets resulting from
operations 6,270,060 (1,834,684)
=========================================================================================
Share transactions-net:
Class A 15,790,303 5,678,996
- -----------------------------------------------------------------------------------------
Class B 1,432,005 2,421,609
- -----------------------------------------------------------------------------------------
Class C 227,902 398,520
=========================================================================================
Net increase in net assets resulting from share
transactions 17,450,210 8,499,125
=========================================================================================
Net increase in net assets 23,720,270 6,664,441
=========================================================================================
NET ASSETS:
Beginning of period 16,470,175 9,805,734
=========================================================================================
End of period $40,190,445 $16,470,175
_________________________________________________________________________________________
=========================================================================================
</Table>
See Notes to Financial Statements.
F-6
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Emerging Growth Fund (the "Fund") is a series portfolio of AIM
Funds Group (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 twelve 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.
Companies are listed in the Schedule of Investments based on the country in
which they are organized.
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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from
F-7
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.
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
disclosed in the Statement of Assets and Liabilities.
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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 0.95% of the Fund's
average daily net assets. AIM has contractually agreed to waive fees and/or
reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B, and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A shares to
2.00%. To the extent that the annualized expense ratio does not exceed the
contractual expense limitation AIM will retain the ability to be reimbursed for
such fee waivers or reimbursements prior to the end of the committed period.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the
amount of 25% of the advisory fee AIM receives from the affiliated money market
funds in which the Fund has invested. For the six months ended June 30, 2003,
AIM waived fees of $117,235 and reimbursed expenses of $35,979.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $18,378 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
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and Class C shares. Of these amounts, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
A, Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. NASD
Rules also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $30,214, $21,881 and $15,200, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $4,027 in front-end sales commissions from the sale of
Class A shares and $7, $0 and $134 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,369 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $294 and reductions in custodian
fees of $12 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $306.
F-8
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2008 $ 161,713
- ----------------------------------------------------------
December 31, 2009 3,598,747
- ----------------------------------------------------------
December 31, 2010 1,583,364
==========================================================
Total capital loss carryforward $5,343,824
__________________________________________________________
==========================================================
</Table>
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $24,482,105 and $8,623,594, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $7,233,344
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (160,125)
===========================================================
Net unrealized appreciation of investment
securities $7,073,219
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $31,186,358.
</Table>
F-9
NOTE 8--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,444,775 $ 34,524,731 3,320,793 $ 24,876,290
- ----------------------------------------------------------------------------------------------------------------------
Class B 270,207 2,117,954 639,639 4,859,028
- ----------------------------------------------------------------------------------------------------------------------
Class C 1,329,300 9,882,813 505,667 3,617,347
======================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 2,741 20,618 3,706 26,644
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,774) (20,618) (3,719) (26,644)
======================================================================================================================
Reacquired:
Class A (2,357,075) (18,755,046) (2,653,242) (19,223,938)
- ----------------------------------------------------------------------------------------------------------------------
Class B (92,481) (665,331) (348,193) (2,410,775)
- ----------------------------------------------------------------------------------------------------------------------
Class C (1,295,450) (9,654,911) (454,970) (3,218,827)
======================================================================================================================
2,299,243 $ 17,450,210 1,009,681 $ 8,499,125
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
F-10
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.91 $ 7.10 $ 7.97 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.06)(a) (0.08)(a) (0.03)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.67 (0.13) (0.76) (2.00)
=========================================================================================================================
Total from investment operations 1.68 (0.19) (0.84) (2.03)
=========================================================================================================================
Less dividends from net investment income -- -- (0.03) --
=========================================================================================================================
Net asset value, end of period $ 8.59 $ 6.91 $ 7.10 $ 7.97
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 24.31% (2.68)% (10.48)% (20.30)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,031 $9,703 $ 5,202 $ 5,625
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.00%(c) 2.01% 2.02% 2.11%(d)
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.24%(c) 3.03% 4.55% 6.83%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.15%(c) (0.85)% (1.12)% (1.09)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 38% 118% 145% 30%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$17,408,052.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-11
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
-----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.84 $ 7.07 $ 7.95 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.11)(a) (0.13)(a) (0.05)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.66 (0.12) (0.75) (2.00)
=========================================================================================================================
Total from investment operations 1.64 (0.23) (0.88) (2.05)
=========================================================================================================================
Net asset value, end of period $ 8.48 $ 6.84 $ 7.07 $ 7.95
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 23.98% (3.25)% (11.07)% (20.50)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,340 $3,918 $ 2,016 $ 1,992
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.66% 2.72% 2.81%(d)
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.89%(c) 3.68% 5.25% 7.53%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.50)%(c) (1.50)% (1.83)% (1.79)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 38% 118% 145% 30%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$4,412,560.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-12
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED)
JUNE 30, -------------------- TO DECEMBER 31,
2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.83 $ 7.07 $ 7.95 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.11)(a) (0.13)(a) (0.05)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.66 (0.13) (0.75) (2.00)
==========================================================================================================================
Total from investment operations 1.64 (0.24) (0.88) (2.05)
==========================================================================================================================
Net asset value, end of period $ 8.47 $ 6.83 $ 7.07 $ 7.95
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 24.01% (3.39)% (11.07)% (20.50)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,819 $2,849 $ 2,588 $ 2,649
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.66% 2.72% 2.81%(d)
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.89%(c) 3.68% 5.25% 7.53%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.50)%(c) (1.50)% (1.83)% (1.79)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(e) 38% 118% 145% 30%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$3,065,089.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-13
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley
Bruce L. Crockett Robert H. Graham 11 Greenway Plaza
Albert R. Dowden Chairman and President Suite 100
Edward K. Dunn Jr. Houston, TX 77046
Jack M. Fields Mark H. Williamson
Carl Frischling Executive Vice President INVESTMENT ADVISOR
Robert H. Graham A I M Advisors, Inc.
Prema Mathai-Davis Kevin M. Carome 11 Greenway Plaza
Lewis F. Pennock Senior Vice President Suite 100
Ruth H. Quigley Houston, TX 77046
Louis S. Sklar Gary T. Crum
Mark H. Williamson Senior Vice President TRANSFER AGENT
A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges and
expenses, ask your financial advisor for a prospectus. Please read it carefully
before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com IEG-SAR-1
[COVER ART]
AIM MID CAP BASIC VALUE FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Mid Cap Basic Value Fund seeks long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHART]
CONSUMER STAPLES 2.3%
CASH & OTHER 3.8%
ENERGY 5.1%
HEALTH CARE 9.7%
INDUSTRIALS 11.7%
CONSUMER DISCRETIONARY 21.8%
INFORMATION TECHNOLOGY 22.6%
FINANCIALS 23.0%
TOTAL NUMBER OF HOLDINGS* 47
TOTAL NET ASSETS $64.3 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (12/31/01) -7.27%
1 Year -7.26
CLASS B SHARES
Inception (12/31/01) -6.90%
1 Year -7.37
CLASS C SHARES
Inception (12/31/01) -4.32%
1 Year -3.47
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 14.82%
CLASS B SHARES 14.43
CLASS C SHARES 14.43
S&P 500 Index 11.75
(Broad Market Index)
RUSSELL MID-CAP VALUE INDEX 13.11
(Style Specific Index)
LIPPER MULTI-CAP VALUE FUND INDEX 19.22
(Lipper Peer Group)
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.
================================================================================
<Table>
<Caption>
==================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
- ------------------------------------------------------------------------------------------------------------------
1. Computer Associates International, Inc. 4.0% 1. Data Processing & Outsourced Services 9.1%
2. Aetna Inc. 3.4 2. Thrifts & Mortgage Finance 5.9
3. Interpublic Group of Cos., Inc. (The) 3.3 3. Apparel Retail 5.3
4. Waters Corp. 3.2 4. Advertising 5.0
5. Brunswick Corp. 2.8 5. Electronic Equipment Manufacturers 5.0
6. Ceridian Corp. 2.7 6. Managed Health Care 5.0
7. IMS Health Inc. 2.7 7. Regional Banks 4.9
8. Zions Bancorp. 2.6 8. Asset Management & Custody Banks 4.2
9. American Standard Cos. Inc. 2.6 9. Restaurants 4.1
10. ACE Ltd. (Cayman Islands) 2.5 10. Systems Software 4.0
*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.
==================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Mid Cap Basic Value Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales-charge structure and class expenses.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International, Inc. and Standard & Poor's.
o Investing in small- and mid-sized companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations, and illiquidity.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the affect of IPO investments on the fund's total return.
o The unmanaged Russell Mid-Cap Value Index is a subset of the Russell Midcap
Index, which represents the performance of the stocks of domestic
mid-capitalization companies; the Value subset measures the performance of
Russell Midcap companies with lower price/book ratios and lower forecasted
growth values.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Lipper Multi-Cap Value Fund Index represents an average of the
performance of the 30 largest multi-capitalization value funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Mid Cap Basic Value Fund for the
ROBERT H. six months ended June 30, 2003. Important information such
GRAHAM] as top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
will provide an overview of the markets and your fund
DESPITE ECONOMIC during the six months covered by this report.
SLUGGISHNESS,
DOMESTIC EQUITY As always, timely information about your fund and the
MARKETS PERFORMED markets in general is available at our Web site,
WELL, PARTICULARLY aiminvestments.com. From our home page, click on Products
DURING THE SECOND and Performance, then Mutual Funds, then AIM Funds, and
HALF OF THE then select the type of information you wish to view.
REPORTING PERIOD.
ROBERT H. GRAHAM MARKET CONDITIONS
Economic sluggishness continued during the reporting period,
particularly in manufacturing. The manufacturing sector
contracted during four of the six months in the reporting period. The overall
economy grew only 1.4%, annualized, during the first quarter of the year. In the
second quarter, the advance estimate indicated that economic growth improved,
with the gross domestic product expanding at a 2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period,
then lowered it to 1.00% on June 25, its lowest level since 1958. The Fed said
it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecommunications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
YOUR FUND
AIM Mid Cap Basic Value Fund produced double-digit increases for the six-month
reporting period ended June 30, 2002. Class A shares, for example, produced
total return of 14.82% at net asset value during the reporting period.
The fund management team--Timothy Beyer, R. Canon Coleman, Matthew W.
Seinsheimer, Michael J. Simon and Bret W. Stanley--has stated that the fund's
gains during the reporting period were based upon its ability to acquire strong
valuation opportunities in more economically sensitive areas.
IN CLOSING
I thank you for your continued participation in AIM Mid Cap Basic Value Fund,
and look forward to reporting to you again in six months. If you have any
questions, please consult your financial advisor for help with your investment
choices. And as always, members of our award-winning Client Services department
are ready to help. They can be reached at 800-959-4246.
Sincerely.
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.12%
ADVERTISING-5.03%
Interpublic Group of Cos., Inc. (The)(a) 158,970 $ 2,127,019
- --------------------------------------------------------------------
R.H. Donnelley Corp.(a) 30,400 1,108,688
====================================================================
3,235,707
====================================================================
APPAREL RETAIL-5.25%
Abercrombie & Fitch Co.-Class A(a) 37,310 1,059,977
- --------------------------------------------------------------------
Gap, Inc. (The) 72,600 1,361,976
- --------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 43,800 957,030
====================================================================
3,378,983
====================================================================
ASSET MANAGEMENT & CUSTODY BANKS-4.18%
Janus Capital Group Inc. 71,540 1,173,256
- --------------------------------------------------------------------
Waddell & Reed Financial, Inc.-Class A 59,090 1,516,840
====================================================================
2,690,096
====================================================================
BUILDING PRODUCTS-2.64%
American Standard Cos. Inc.(a) 22,950 1,696,693
====================================================================
DATA PROCESSING & OUTSOURCED SERVICES-9.11%
BISYS Group, Inc. (The)(a) 73,100 1,342,847
- --------------------------------------------------------------------
Ceridian Corp.(a) 101,480 1,722,116
- --------------------------------------------------------------------
Certegy Inc.(a) 50,650 1,405,537
- --------------------------------------------------------------------
DST Systems, Inc.(a) 36,570 1,389,660
====================================================================
5,860,160
====================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.27%
Viad Corp. 65,100 1,457,589
====================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.91%
Rockwell Automation, Inc. 51,650 1,231,336
====================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-5.03%
Cognex Corp.(a) 53,190 1,188,797
- --------------------------------------------------------------------
Waters Corp.(a) 70,200 2,044,926
====================================================================
3,233,723
====================================================================
EMPLOYMENT SERVICES-1.89%
Robert Half International Inc.(a) 64,330 1,218,410
====================================================================
FOOD RETAIL-2.27%
Kroger Co. (The)(a) 87,400 1,457,832
====================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------
HEALTH CARE FACILITIES-1.99%
Universal Health Services, Inc.-Class B(a) 32,250 $ 1,277,745
====================================================================
HEALTH CARE SERVICES-2.67%
IMS Health Inc. 95,340 1,715,167
====================================================================
HOME FURNISHINGS-1.59%
Natuzzi S.p.A.-ADR (Italy) 127,200 1,020,144
====================================================================
HOTELS, RESORTS & CRUISE LINES-3.03%
Orient Express Hotels Ltd.-Class A
(Bermuda)(a) 32,800 483,800
- --------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 51,180 1,463,236
====================================================================
1,947,036
====================================================================
INDUSTRIAL MACHINERY-2.50%
Kennametal Inc. 26,430 894,391
- --------------------------------------------------------------------
SPX Corp.(a) 16,140 711,128
====================================================================
1,605,519
====================================================================
IT CONSULTING & OTHER SERVICES-1.79%
Acxiom Corp.(a) 76,350 1,152,122
====================================================================
LEISURE PRODUCTS-2.81%
Brunswick Corp. 72,170 1,805,693
====================================================================
LIFE & HEALTH INSURANCE-3.65%
Nationwide Financial Services, Inc.-Class A 42,190 1,371,175
- --------------------------------------------------------------------
Protective Life Corp. 36,600 979,050
====================================================================
2,350,225
====================================================================
MANAGED HEALTH CARE-5.01%
Aetna Inc. 35,890 2,160,578
- --------------------------------------------------------------------
Anthem, Inc.(a) 13,780 1,063,127
====================================================================
3,223,705
====================================================================
MULTI-LINE INSURANCE-1.82%
American Financial Group, Inc. 51,430 1,172,604
====================================================================
OFFICE SERVICES & SUPPLIES-0.51%
Danka Business Systems PLC-ADR (United
Kingdom)(a) 84,650 326,664
====================================================================
OIL & GAS DRILLING-3.61%
Nabors Industries, Ltd. (Bermuda)(a) 22,390 885,525
- --------------------------------------------------------------------
Pride International, Inc.(a) 76,310 1,436,154
====================================================================
2,321,679
====================================================================
OIL & GAS EQUIPMENT & SERVICES-1.47%
Smith International, Inc.(a) 25,760 946,422
====================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-2.49%
ACE Ltd. (Cayman Islands) 46,720 $ 1,602,029
====================================================================
REGIONAL BANKS-4.91%
Cullen/Frost Bankers, Inc. 45,400 1,457,340
- --------------------------------------------------------------------
Zions Bancorp. 33,670 1,704,039
====================================================================
3,161,379
====================================================================
RESTAURANTS-4.08%
CEC Entertainment Inc.(a) 30,400 1,122,672
- --------------------------------------------------------------------
Outback Steakhouse, Inc. 38,530 1,502,670
====================================================================
2,625,342
====================================================================
SEMICONDUCTOR EQUIPMENT-2.65%
Brooks Automation, Inc.(a) 61,450 696,843
- --------------------------------------------------------------------
Novellus Systems, Inc.(a) 27,550 1,008,909
====================================================================
1,705,752
====================================================================
SYSTEMS SOFTWARE-4.04%
Computer Associates International, Inc. 116,600 2,597,848
====================================================================
THRIFTS & MORTGAGE FINANCE-5.92%
Federal Agricultural Mortgage Corp.-Class C 45,300 1,012,455
- --------------------------------------------------------------------
MGIC Investment Corp. 27,600 1,287,264
- --------------------------------------------------------------------
Radian Group Inc. 41,180 1,509,247
====================================================================
3,808,966
====================================================================
Total Common Stocks & Other Equity
Interests (Cost $58,301,654) 61,826,570
====================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------
MONEY MARKET FUNDS-6.29%
STIC Liquid Assets Portfolio(b) 2,022,132 $ 2,022,132
- --------------------------------------------------------------------
STIC Prime Portfolio(b) 2,022,132 2,022,132
====================================================================
Total Money Market Funds (Cost
$4,044,264) 4,044,264
====================================================================
TOTAL INVESTMENTS-102.41% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $62,345,918) 65,870,834
====================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.82%
STIC Liquid Assets Portfolio(b)(c) 524,400 524,400
====================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $524,400) 524,400
====================================================================
TOTAL INVESTMENTS-103.23% (Cost $62,870,318) 66,395,234
====================================================================
OTHER ASSETS LESS LIABILITIES-(3.23%) (2,076,461)
====================================================================
NET ASSETS-100.00% $64,318,773
____________________________________________________________________
====================================================================
</Table>
Investment Abbreviations:
<Table>
ADR -- American Depositary Receipt
</Table>
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
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$62,870,318)* $66,395,234
- -----------------------------------------------------------
Receivables for:
Investments sold 301,305
- -----------------------------------------------------------
Fund shares sold 234,418
- -----------------------------------------------------------
Dividends 52,742
- -----------------------------------------------------------
Investment for deferred compensation plan 3,816
- -----------------------------------------------------------
Other assets 33,685
===========================================================
Total assets 67,021,200
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,746,172
- -----------------------------------------------------------
Fund shares reacquired 256,097
- -----------------------------------------------------------
Deferred compensation plan 3,816
- -----------------------------------------------------------
Collateral upon return of securities loaned 524,400
- -----------------------------------------------------------
Accrued distribution fees 69,361
- -----------------------------------------------------------
Accrued transfer agent fees 51,928
- -----------------------------------------------------------
Accrued operating expenses 50,653
===========================================================
Total liabilities 2,702,427
===========================================================
Net assets applicable to shares outstanding $64,318,773
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $74,698,030
- -----------------------------------------------------------
Undistributed net investment income (loss) (406,660)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (13,497,513)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities 3,524,916
===========================================================
$64,318,773
___________________________________________________________
===========================================================
NET ASSETS:
Class A $31,140,544
___________________________________________________________
===========================================================
Class B $25,443,181
___________________________________________________________
===========================================================
Class C $ 7,735,048
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 3,294,994
___________________________________________________________
===========================================================
Class B 2,717,341
___________________________________________________________
===========================================================
Class C 826,735
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 9.45
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $9.45 divided by
94.50%) $ 10.00
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 9.36
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 9.36
___________________________________________________________
===========================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $509,580 were
on loan to brokers.
See Notes to Financial Statements.
F-3
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $9,539) $ 190,073
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 12,017
- -------------------------------------------------------------------------
Security lending income 8,305
=========================================================================
Total investment income 210,395
=========================================================================
EXPENSES:
Advisory fees 230,006
- -------------------------------------------------------------------------
Administrative services fees 24,795
- -------------------------------------------------------------------------
Custodian fees 12,790
- -------------------------------------------------------------------------
Distribution fees -- Class A 49,943
- -------------------------------------------------------------------------
Distribution fees -- Class B 106,813
- -------------------------------------------------------------------------
Distribution fees -- Class C 38,001
- -------------------------------------------------------------------------
Transfer agent fees 146,562
- -------------------------------------------------------------------------
Registration and filing fees 45,785
- -------------------------------------------------------------------------
Trustees' fees 4,621
- -------------------------------------------------------------------------
Other 50,556
=========================================================================
Total expenses 709,872
=========================================================================
Less: Fees waived and expenses paid indirectly (96,587)
=========================================================================
Net expenses 613,285
=========================================================================
Net investment income (loss) (402,890)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain (loss) from investment securities (6,175,644)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 14,019,520
=========================================================================
Net gain from investment securities 7,843,876
=========================================================================
Net increase in net assets resulting from operations $ 7,440,986
_________________________________________________________________________
=========================================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (402,890) $ (476,400)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (6,175,644) (7,321,869)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 14,019,520 (10,493,590)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 7,440,986 (18,291,859)
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (478)
- ------------------------------------------------------------------------------------------
Class B -- (253)
- ------------------------------------------------------------------------------------------
Class C -- (97)
==========================================================================================
Decrease in net assets resulting from distributions -- (828)
==========================================================================================
Share transactions-net:
Class A (11,346,387) 50,139,628
- ------------------------------------------------------------------------------------------
Class B 1,300,281 25,993,450
- ------------------------------------------------------------------------------------------
Class C (1,469,186) 9,553,721
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (11,515,292) 85,686,799
==========================================================================================
Net increase (decrease) in net assets (4,074,306) 67,394,112
==========================================================================================
NET ASSETS:
Beginning of period 68,393,079 998,967
==========================================================================================
End of period $ 64,318,773 $ 68,393,079
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-5
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Basic Value Fund (the "Fund") is a series portfolio of AIM Funds
Group (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 twelve 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer
F-6
agency and service agreement adopted by the Fund with respect to such
class. All other expenses are allocated among the classes based on relative
net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $1
billion of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets on the next $4 billion, plus 0.70% of the Fund's average daily
net assets in excess of $5 billion. AIM has voluntarily agreed to waive fees
and/or reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the total fund operating expenses of Class A to 1.80%.
Voluntary fee waivers may be rescinded, terminated or modified at any time
without further notice to investors. During periods of voluntary waivers or
reimbursements to the extent the annualized expense ratio does not exceed the
voluntary limit for the period committed, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. Further, AIM has voluntarily agreed to waive advisory fees of the
Fund in the amount of 25% of the advisory fee AIM receives from the affiliated
money market funds in which the Fund has invested (excluding investments made in
affiliated money market funds with cash collateral from securities loaned by the
Fund). For the six months ended June 30, 2003, AIM waived fees of $95,544.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $65,759 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $49,943, $106,813 and $38,001, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $12,557 in front-end sales commissions from the sale of
Class A shares and $168, $92, $1,594 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,375 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agent fees from AFS (an affiliate of AIM) of $959 and reductions in custodian
fees of $84 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $1,043.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 were parties to the line of credit could 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
F-7
assets for the period. The committed line of credit facility expired May 20,
2003.
During the six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $509,580 were on
loan to brokers. The loans were secured by cash collateral of $524,400, received
by the Fund and subsequently invested in affiliated money market funds. For the
six months ended June 30, 2003, the Fund received fees of $8,305 for securities
lending.
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -------------------------------------------------------------------------
December 31, 2010 $3,285,438
_________________________________________________________________________
=========================================================================
</Table>
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 six months ended
June 30, 2003 was $13,269,971 and $25,360,993, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $ 5,609,155
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,891,663)
===============================================================================
Net unrealized appreciation of investment securities $ 2,717,492
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $63,677,742.
</Table>
NOTE 9--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Sold:
Class A 981,310 $ 8,608,248 6,822,286 $ 67,387,599
- ------------------------------------------------------------------------------
Class B 716,384 6,091,244 3,513,553 34,188,591
- ------------------------------------------------------------------------------
Class C 341,208 2,823,058 1,447,908 13,866,491
==============================================================================
Conversion of Class
B shares to Class
A shares:
Class A 44,051 370,988 54,117 479,487
- ------------------------------------------------------------------------------
Class B (44,403) (370,988) (54,301) (479,487)
==============================================================================
Reacquired:
Class A (2,482,891) (20,325,623) (2,163,879) (17,727,458)
- ------------------------------------------------------------------------------
Class B (546,312) (4,419,975) (897,580) (7,715,654)
- ------------------------------------------------------------------------------
Class C (499,877) (4,292,244) (492,504) (4,312,770)
==============================================================================
(1,490,530) $(11,515,292) 8,229,600 $ 85,686,799
______________________________________________________________________________
==============================================================================
</Table>
F-8
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------
SIX MONTHS DECEMBER 31,
ENDED YEAR ENDED 2001
JUNE 30, DECEMBER 31, (DATE OPERATIONS
2003 2002 COMMENCED)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.23 $ 9.99 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.06)(a) 0.00
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.26 (1.70) (0.01)
===============================================================================================================
Total from investment operations 1.22 (1.76) (0.01)
===============================================================================================================
Less dividends from net investment income (0.00) (0.00) --
===============================================================================================================
Net asset value, end of period $ 9.45 $ 8.23 $ 9.99
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 14.82% (17.62)% (0.10)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,141 $39,130 $ 400
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.81%(c) 1.80% 1.80%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 2.14%(c) 1.93% 199.49%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (1.07)%(c) (0.70)% (0.31)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 23% 41% --
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$28,775,221.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-9
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------
SIX MONTHS DECEMBER 31,
ENDED YEAR ENDED 2001
JUNE 30, DECEMBER 31, (DATE OPERATIONS
2003 2002 COMMENCED)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.18 $ 9.99 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12)(a) 0.00
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.25 (1.69) (0.01)
===============================================================================================================
Total from investment operations 1.18 (1.81) (0.01)
===============================================================================================================
Less dividends from net investment income -- (0.00) --
===============================================================================================================
Net asset value, end of period $ 9.36 $ 8.18 $ 9.99
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 14.43% (18.12)% (0.10)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,443 $21,204 $ 300
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.46%(c) 2.45% 2.45%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 2.79%(c) 2.58% 200.14%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (1.72)%(c) (1.35)% (0.96)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 23% 41% --
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$21,539,677.
(d) Annualized
(e) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS C
----------------------------------------------
SIX MONTHS DECEMBER 31,
ENDED YEAR ENDED 2001
JUNE 30, DECEMBER 31, (DATE OPERATIONS
2003 2002 COMMENCED)
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.18 $ 9.99 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12)(a) 0.00
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.25 (1.69) (0.01)
==============================================================================================================
Total from investment operations 1.18 (1.81) (0.01)
==============================================================================================================
Less dividends from net investment income -- (0.00) --
==============================================================================================================
Net asset value, end of period $ 9.36 $ 8.18 $ 9.99
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 14.43% (18.12)% (0.10)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 7,735 $ 8,059 $ 300
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.46%(c) 2.45% 2.45%(d)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers 2.79%(c) 2.58% 200.14%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (1.72)%(c) (1.35)% (0.96)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 23% 41% --
______________________________________________________________________________________________________________
==============================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$7,663,160.
(d) Annualized
(e) Not annualized for periods less than one year.
F-10
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class
A shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds --Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com MCBV-SAR-1
[COVER ART]
AIM NEW TECHNOLOGY FUND
June 30, 2003
Semiannual Report to Shareholders
AIM New Technology Fund seeks to provide long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
HOLDINGS BY MARKET CAPITALIZATION
Based on total assets
[PIE CHART]
SMALL-CAP STOCKS 36%
MID-CAP STOCKS 24%
LARGE-CAP STOCKS 40%
Source: Lipper, Inc.
TOTAL NUMBER OF HOLDINGS* 102
TOTAL NET ASSETS $44.3 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (8/31/00) -39.26%
1 Year -6.52
CLASS B SHARES
Inception (8/31/00) -39.13%
1 Year -6.48
CLASS C SHARES
Inception (8/31/00) -38.38%
1 Year -2.53
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 22.86%
CLASS B SHARES 22.82
CLASS C SHARES 22.71
S&P 500 INDEX 11.75
(Broad Market Index)
PSE TECHNOLOGY 100 INDEX 22.69
(Style-Specific Index)
LIPPER SCIENCE AND TECHNOLOGY FUND INDEX 22.48
(Peer Group Index)
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.
================================================================================
<Table>
<Caption>
=========================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
- ---------------------------------------------------------------------------------------------------------
1. Dell Computer Corp. 3.3% 1. Semiconductors 15.2%
2. Gilead Sciences, Inc. 3.1 2. Communications Equipment 10.9
3. Nextel Communications Inc.-Class A 2.7 3. Semiconductor Equipment 7.7
4. Microsoft Corp. 2.6 4. Systems Software 6.7
5. eBay Inc. 2.5 5. Application Software 6.5
6. UTStarcom, Inc. 2.5 6. Computer Storage & Peripherals 5.7
7. Amazon.com, Inc. 1.8 7. Biotechnology 5.4
8. Analog Devices, Inc. 1.8 8. Computer Hardware 4.7
9. QUALCOMM Inc. 1.8 9. Wireless Telecommunication Services 4.5
10. Cisco Systems, Inc. 1.8 10. Internet Retail 4.3
*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.
=========================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o Effective 7/1/03, after the close of the reporting period, the fund's
manager is William R. Keithler.
o AIM New Technology Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o Had the advisor not waived fees and/or reimbursed expenses, returns would
have been lower.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o Investing in a single-sector mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
o The value of the fund's shares is particularly vulnerable to factors
affecting the technology and science industries, such as substantial
government regulations and the need for government approvals, dependency on
consumer and business acceptance as new technologies evolve, and large and
rapid price movements resulting from, among other things, fierce competition
in these industries. Additional factors affecting the technology and science
industries and the value of fund shares include rapid obsolescence of
products and services, short product cycles, and aggressive pricing. Many
technology companies are small and at an early state of development and,
therefore, may be subject to risks such as limited product lines, markets,
and financial and managerial resources.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged Lipper Science and Technology Fund Index represents an average
of the performance of the 30 largest science and technology funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged Pacific Stock Exchange Technology 100 Index (PSE Technology
100) is a price-weighted index of 100 listed and over-the-counter technology
stocks from 15 technology-related industries.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, the industry classifications used are according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF This is your report on AIM New Technology Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
Despite economic will provide an overview of the markets and your fund during
sluggishness, the six months covered by this report.
domestic equity
markets performed As always, timely information about your fund and the
well, markets in general is available at our Web site,
particularly aiminvestments.com. From our home page, click on Products &
during the second Performance, then Mutual Funds, then AIM Funds, and then
half select the type of information you wish to view.
of the reporting
period. MARKET CONDITIONS
ROBERT H. GRAHAM
Economic sluggishness continued during the reporting period,
particularly in manufacturing. The manufacturing sector contracted during four
of the six months in the reporting period. The overall economy grew only 1.4%,
annualized, during the first quarter of the year. In the second quarter, the
advance estimate indicated that economic growth improved, with gross domestic
product expanding at a 2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period,
then lowered it to 1.00% on June 25, its lowest level since 1958. The Fed said
it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecom-munications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
YOUR FUND
AIM New Technology Fund delivered positive returns for the six months ended June
30, 2003; indeed, at net asset value, the fund outperformed its broad market
index, its style-specific index, and its peer group index. Throughout the
reporting period, fund managers Abel Garcia and Warren Tennant sought to
identify, and invest in, technology and science companies that they believed
were likely to benefit from new or innovative products, services, or processes.
The fund's equity holdings increased from 87 at the beginning of the
reporting period to 102 at its close. The percentage of total net assets
invested in the information technology sector--the strongest sector of the S&P
500 during the first half of 2003--increased from approximately 60% at the
beginning of the reporting period to more than 69% at its close, while health
care holdings (including biotechnology stocks) declined from approximately 18%
to approximately 13% of the fund's total net assets.
IN CLOSING
I thank you for your continued participation in AIM New Technology Fund. If you
have any questions, please consult your financial advisor for help with your
investment choices. As always, members of our award-winning Client Services
department are ready to help. They can be reached at 800-959-4246.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.25%
AEROSPACE & DEFENSE-0.99%
Engineered Support Systems, Inc. 6,000 $ 251,100
- -----------------------------------------------------------------------
L-3 Communications Holdings, Inc.(a) 4,300 187,007
=======================================================================
438,107
=======================================================================
APPLICATION SOFTWARE-6.46%
Amdocs Ltd. (United Kingdom)(a) 24,800 595,200
- -----------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 7,700 207,900
- -----------------------------------------------------------------------
Documentum, Inc.(a) 22,300 438,641
- -----------------------------------------------------------------------
FileNet Corp.(a) 6,600 119,064
- -----------------------------------------------------------------------
Intuit Inc.(a) 3,900 173,667
- -----------------------------------------------------------------------
Macromedia, Inc.(a) 15,400 324,016
- -----------------------------------------------------------------------
Mercury Interactive Corp.(a) 15,300 590,733
- -----------------------------------------------------------------------
Verint Systems Inc.(a) 16,200 411,642
=======================================================================
2,860,863
=======================================================================
AUTO PARTS & EQUIPMENT-0.93%
Gentex Corp.(a) 13,400 410,174
=======================================================================
BIOTECHNOLOGY-5.39%
Charles River Laboratories International,
Inc.(a) 4,300 138,374
- -----------------------------------------------------------------------
Gilead Sciences, Inc.(a) 24,800 1,378,384
- -----------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 3,600 122,400
- -----------------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 7,900 266,072
- -----------------------------------------------------------------------
OraSure Technologies, Inc.(a) 23,500 175,310
- -----------------------------------------------------------------------
PRAECIS Pharmaceuticals Inc.(a) 42,300 207,270
- -----------------------------------------------------------------------
Trimeris, Inc.(a) 2,200 100,496
=======================================================================
2,388,306
=======================================================================
BROADCASTING & CABLE TV-0.91%
TiVo Inc.(a) 33,200 404,376
=======================================================================
COMMUNICATIONS EQUIPMENT-10.92%
Advanced Fibre Communications, Inc.(a) 21,600 351,432
- -----------------------------------------------------------------------
Cisco Systems, Inc.(a) 46,900 782,761
- -----------------------------------------------------------------------
McDATA Corp.-Class A(a) 9,600 140,832
- -----------------------------------------------------------------------
NetScreen Technologies, Inc.(a) 27,800 626,890
- -----------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 31,300 514,259
- -----------------------------------------------------------------------
QUALCOMM Inc. 22,500 804,375
- -----------------------------------------------------------------------
SafeNet, Inc.(a) 18,400 514,832
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
UTStarcom, Inc.(a) 31,000 $ 1,102,670
=======================================================================
4,838,051
=======================================================================
COMPUTER HARDWARE-4.73%
Dell Computer Corp.(a) 45,900 1,466,964
- -----------------------------------------------------------------------
Hewlett-Packard Co. 18,900 402,570
- -----------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 21,400 228,980
=======================================================================
2,098,514
=======================================================================
COMPUTER STORAGE & PERIPHERALS-5.72%
EMC Corp.(a) 36,700 384,249
- -----------------------------------------------------------------------
Hutchinson Technology Inc.(a) 8,500 279,565
- -----------------------------------------------------------------------
Imation Corp. 8,300 313,906
- -----------------------------------------------------------------------
Overland Storage, Inc.(a) 5,900 120,006
- -----------------------------------------------------------------------
SanDisk Corp.(a) 16,300 657,705
- -----------------------------------------------------------------------
Storage Technology Corp.(a) 9,300 239,382
- -----------------------------------------------------------------------
Synaptics Inc.(a) 23,200 312,272
- -----------------------------------------------------------------------
Western Digital Corp.(a) 22,000 226,600
=======================================================================
2,533,685
=======================================================================
CONSUMER ELECTRONICS-1.36%
Garmin Ltd. (Cayman Islands)(a) 5,200 207,324
- -----------------------------------------------------------------------
Harman International Industries, Inc. 5,000 395,700
=======================================================================
603,024
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.29%
Affiliated Computer Services, Inc.-Class A(a) 16,000 731,680
- -----------------------------------------------------------------------
eSpeed, Inc.-Class A(a) 12,400 245,024
- -----------------------------------------------------------------------
Global Payments Inc. 4,300 152,650
- -----------------------------------------------------------------------
Paychex, Inc. 11,200 328,272
=======================================================================
1,457,626
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.41%
Daktronics, Inc.(a) 14,200 232,170
- -----------------------------------------------------------------------
Itron, Inc.(a) 6,300 135,828
- -----------------------------------------------------------------------
OSI Systems, Inc.(a) 16,000 256,960
=======================================================================
624,958
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-1.08%
Trimble Navigation Ltd.(a) 20,900 479,237
=======================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
HEALTH CARE EQUIPMENT-2.51%
ALARIS Medical Systems, Inc.(a) 10,500 $ 135,975
- -----------------------------------------------------------------------
Boston Scientific Corp.(a) 11,700 714,870
- -----------------------------------------------------------------------
Cardiac Science, Inc.(a) 97,000 259,960
=======================================================================
1,110,805
=======================================================================
HEALTH CARE SERVICES-1.89%
Accredo Health, Inc.(a) 3,350 73,030
- -----------------------------------------------------------------------
Dendrite International, Inc.(a) 9,000 115,920
- -----------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 9,900 298,485
- -----------------------------------------------------------------------
Quest Diagnostics Inc.(a) 5,500 350,900
=======================================================================
838,335
=======================================================================
HEALTH CARE SUPPLIES-1.17%
Fisher Scientific International Inc.(a) 11,100 387,390
- -----------------------------------------------------------------------
ICU Medical, Inc.(a) 4,200 130,830
=======================================================================
518,220
=======================================================================
HOME ENTERTAINMENT SOFTWARE-0.56%
Take-Two Interactive Software, Inc.(a) 4,200 119,028
- -----------------------------------------------------------------------
THQ Inc.(a) 7,100 127,800
=======================================================================
246,828
=======================================================================
INTERNET RETAIL-4.33%
Amazon.com, Inc.(a) 22,300 813,727
- -----------------------------------------------------------------------
eBay Inc.(a) 10,600 1,104,308
=======================================================================
1,918,035
=======================================================================
INTERNET SOFTWARE & SERVICES-3.97%
Open Text Corp. (Canada)(a) 3,400 96,050
- -----------------------------------------------------------------------
United Online, Inc.(a) 20,500 519,470
- -----------------------------------------------------------------------
Websense, Inc.(a) 38,400 601,344
- -----------------------------------------------------------------------
Yahoo! Inc.(a) 16,600 543,816
=======================================================================
1,760,680
=======================================================================
IT CONSULTING & OTHER SERVICES-1.54%
Anteon International Corp.(a) 14,400 401,904
- -----------------------------------------------------------------------
Cognizant Technology Solutions Corp.(a) 11,600 282,576
=======================================================================
684,480
=======================================================================
PHARMACEUTICALS-2.08%
American Pharmaceutical Partners, Inc.(a) 7,500 254,250
- -----------------------------------------------------------------------
Forest Laboratories, Inc.(a) 7,900 432,525
- -----------------------------------------------------------------------
Mylan Laboratories Inc. 6,800 236,436
=======================================================================
923,211
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-7.65%
Applied Materials, Inc.(a) 21,500 $ 340,990
- -----------------------------------------------------------------------
Axcelis Technologies, Inc.(a) 67,600 413,712
- -----------------------------------------------------------------------
Entegris Inc.(a) 31,800 427,392
- -----------------------------------------------------------------------
FormFactor Inc.(a) 12,500 221,250
- -----------------------------------------------------------------------
KLA-Tencor Corp.(a) 7,600 353,324
- -----------------------------------------------------------------------
Lam Research Corp.(a) 18,400 335,064
- -----------------------------------------------------------------------
Novellus Systems, Inc.(a) 12,900 472,411
- -----------------------------------------------------------------------
Teradyne, Inc.(a) 24,800 429,288
- -----------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 13,400 398,784
=======================================================================
3,392,215
=======================================================================
SEMICONDUCTORS-15.19%
Analog Devices, Inc.(a) 23,300 811,306
- -----------------------------------------------------------------------
Cree, Inc.(a) 16,700 271,876
- -----------------------------------------------------------------------
Genesis Microchip Inc.(a) 5,600 75,824
- -----------------------------------------------------------------------
GlobespanVirata, Inc.(a) 49,900 411,675
- -----------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 22,700 713,461
- -----------------------------------------------------------------------
Intel Corp. 35,900 746,145
- -----------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 19,100 656,467
- -----------------------------------------------------------------------
Maxim Integrated Products, Inc. 4,400 150,436
- -----------------------------------------------------------------------
Microchip Technology Inc. 23,500 578,805
- -----------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 6,300 196,560
- -----------------------------------------------------------------------
Silicon Laboratories Inc.(a) 24,200 644,688
- -----------------------------------------------------------------------
STMicroelectronics N.V.-New York Shares
(Netherland) 9,100 189,189
- -----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan) 49,960 503,597
- -----------------------------------------------------------------------
Texas Instruments Inc. 28,000 492,800
- -----------------------------------------------------------------------
Xilinx, Inc.(a) 11,400 288,534
=======================================================================
6,731,363
=======================================================================
SYSTEMS SOFTWARE-6.67%
Borland Software Corp.(a) 24,600 240,342
- -----------------------------------------------------------------------
Microsoft Corp. 44,700 1,144,767
- -----------------------------------------------------------------------
Oracle Corp.(a) 36,000 432,720
- -----------------------------------------------------------------------
Symantec Corp.(a) 17,600 771,936
- -----------------------------------------------------------------------
VERITAS Software Corp.(a) 12,800 366,976
=======================================================================
2,956,741
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-4.50%
AT&T Wireless Services Inc.(a) 78,900 647,769
- -----------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 66,600 1,204,128
- -----------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-(CONTINUED)
United States Cellular Corp.(a) 5,600 $ 142,520
=======================================================================
1,994,417
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $33,814,106) 42,212,251
=======================================================================
MONEY MARKET FUNDS-4.98%
STIC Liquid Assets Portfolio(b) 1,102,703 1,102,703
- -----------------------------------------------------------------------
STIC Prime Portfolio(b) 1,102,703 1,102,703
=======================================================================
Total Money Market Funds (Cost
$2,205,406) 2,205,406
=======================================================================
TOTAL INVESTMENTS-100.23% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $36,019,512) 44,417,657
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-29.57%
STIC Liquid Assets Portfolio(b)(c) 6,552,078 $ 6,552,078
- -----------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 6,552,077 6,552,077
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $13,104,155) 13,104,155
=======================================================================
TOTAL INVESTMENTS-129.80% (Cost $49,123,667) 57,521,812
=======================================================================
OTHER ASSETS LESS LIABILITIES-(29.80%) (13,205,678)
=======================================================================
NET ASSETS-100.00% $ 44,316,134
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
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
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$49,123,667)* $ 57,521,812
- -----------------------------------------------------------
Receivables for:
Fund shares sold 110,424
- -----------------------------------------------------------
Dividends 3,574
- -----------------------------------------------------------
Investment for deferred compensation plan 11,586
- -----------------------------------------------------------
Other assets 21,026
===========================================================
Total assets 57,668,422
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 82,229
- -----------------------------------------------------------
Deferred compensation plan 11,586
- -----------------------------------------------------------
Collateral upon return of securities loaned 13,104,155
- -----------------------------------------------------------
Accrued distribution fees 47,480
- -----------------------------------------------------------
Accrued trustees' fees 55
- -----------------------------------------------------------
Accrued transfer agent fees 65,018
- -----------------------------------------------------------
Accrued operating expenses 41,765
===========================================================
Total liabilities 13,352,288
===========================================================
Net assets applicable to shares outstanding $ 44,316,134
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $127,530,380
- -----------------------------------------------------------
Undistributed net investment income (loss) (381,592)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (91,230,799)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities 8,398,145
===========================================================
$ 44,316,134
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 23,575,594
___________________________________________________________
===========================================================
Class B $ 13,752,749
___________________________________________________________
===========================================================
Class C $ 6,987,791
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,137,118
___________________________________________________________
===========================================================
Class B 5,429,875
___________________________________________________________
===========================================================
Class C 2,756,066
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 2.58
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $2.58 divided by
94.50%) $ 2.73
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 2.53
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 2.54
___________________________________________________________
===========================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $12,828,845
were on loan to brokers.
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,642) $ 23,926
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 11,897
- -------------------------------------------------------------------------
Security lending income 22,838
=========================================================================
Total investment income 58,661
=========================================================================
EXPENSES:
Advisory fees 184,973
- -------------------------------------------------------------------------
Administrative services fees 24,795
- -------------------------------------------------------------------------
Custodian fees 12,869
- -------------------------------------------------------------------------
Distribution fees -- Class A 33,697
- -------------------------------------------------------------------------
Distribution fees -- Class B 59,126
- -------------------------------------------------------------------------
Distribution fees -- Class C 29,570
- -------------------------------------------------------------------------
Transfer agent fees 208,293
- -------------------------------------------------------------------------
Trustees' fees 4,603
- -------------------------------------------------------------------------
Professional fees 41,284
- -------------------------------------------------------------------------
Other 46,023
=========================================================================
Total expenses 645,233
=========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (218,211)
=========================================================================
Net expenses 427,022
=========================================================================
Net investment income (loss) (368,361)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain (loss) from investment securities (1,145,806)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 9,488,926
=========================================================================
Net gain from investment securities 8,343,120
=========================================================================
Net increase in net assets resulting from operations $ 7,974,759
_________________________________________________________________________
=========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (368,361) $ (1,068,001)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (1,145,806) (21,511,870)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 9,488,926 (9,795,967)
=========================================================================================
Net increase (decrease) in net assets resulting from
operations 7,974,759 (32,375,838)
=========================================================================================
Share transactions-net:
Class A 1,465,345 (4,558,148)
- -----------------------------------------------------------------------------------------
Class B (49,371) (76,695)
- -----------------------------------------------------------------------------------------
Class C 105,981 (49,402)
=========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 1,521,955 (4,684,245)
=========================================================================================
Net increase (decrease) in net assets 9,496,714 (37,060,083)
=========================================================================================
NET ASSETS:
Beginning of period 34,819,420 71,879,503
=========================================================================================
End of period $44,316,134 $ 34,819,420
_________________________________________________________________________________________
=========================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM New Technology Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 at 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. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at
F-6
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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 1.00% of the Fund's
average daily net assets. AIM has contractually agreed to waive fees and/or
reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A shares to
2.00%. To the extent that the annualized expense ratio does not exceed the
contractual expense limitation, AIM will retain its ability to be reimbursed for
such fee waivers or reimbursements prior to the end of the committed period.
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, if
any). For the six months ended June 30, 2003, AIM waived fees of $184,973 and
reimbursed expenses of $32,033.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, the
Fund paid AIM $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $98,520 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $33,697, $59,126 and $29,570, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended June 30, 2003, AIM
Distributors retained $7,021 in front-end sales commissions from the sale of
Class A shares and $1, $0 and $184 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
F-7
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,372 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,139 and reductions in custodian
fees of $66 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $1,205.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under either the interfund lending facility or borrow under the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $12,828,845 were on
loan to brokers. The loans were secured by cash collateral of $13,104,155
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2003, the Fund received fees of $22,838 for
securities lending.
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2008 $ 1,713,194
- ----------------------------------------------------------
December 31, 2009 64,920,297
- ----------------------------------------------------------
December 31, 2010 20,642,862
==========================================================
Total capital loss carryforward $87,276,353
__________________________________________________________
==========================================================
</Table>
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 six months
ended June 30, 2003 was $18,877,842 and $18,499,330, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment
securities $9,131,579
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (852,298)
===========================================================
Net unrealized appreciation of investment
securities $8,279,281
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $49,242,531.
</Table>
F-8
NOTE 9--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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,139,507 $ 4,875,024 5,223,337 $ 15,302,371
- ---------------------------------------------------------------------------------------------------------------------
Class B 1,033,210 2,338,029 1,752,720 4,858,039
- ---------------------------------------------------------------------------------------------------------------------
Class C 860,254 1,845,652 2,520,889 6,642,310
=====================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 33,789 75,413 66,515 173,943
- ---------------------------------------------------------------------------------------------------------------------
Class B (34,424) (75,413) (66,825) (173,943)
=====================================================================================================================
Reacquired:
Class A (1,590,178) (3,485,092) (7,168,084) (20,034,462)
- ---------------------------------------------------------------------------------------------------------------------
Class B (1,038,554) (2,311,987) (1,811,718) (4,760,791)
- ---------------------------------------------------------------------------------------------------------------------
Class C (820,301) (1,739,671) (2,549,808) (6,691,712)
=====================================================================================================================
583,303 $ 1,521,955 (2,032,974) $ (4,684,245)
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
NOTE 10--SIGNIFICANT EVENT
The Board of Trustees of AIM Funds Group ("Seller") unanimously approved, on
June 11, 2003, and Agreement and Plan of Reorganization (the "Plan") pursuant to
which AIM New Technology Fund ("Selling Fund"), a series of Seller, would
transfer all of its assets to INVESCO Technology Fund ("Buying Fund"), a series
of INVESCO Sector Funds, Inc. (the "Reorganization"). As a result of the
Reorganization, shareholders of Selling Fund would receive shares of Buying Fund
in exchange for their shares of Selling Fund, and Selling Fund would cease
operations.
The Plan requires approval of Selling Fund shareholders and will be submitted
to the shareholders for their consideration at a meeting to be held on or around
September 25, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
Effective on or about October 1, 2003, it is anticipated that Selling Fund
will be closed to new investors.
F-9
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 2.10 $ 3.84 $ 6.74 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.06) (0.06)(a) (0.02)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.50 (1.68) (2.84) (3.24)
========================================================================================================================
Total from investment operations 0.48 (1.74) (2.90) (3.26)
========================================================================================================================
Net asset value, end of period $ 2.58 $ 2.10 $ 3.84 $ 6.74
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 22.86% (45.31)% (43.03)% (32.60)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $23,576 $17,921 $40,097 $43,732
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.00%(c) 2.00% 1.86% 1.72%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.18%(c) 2.66% 2.40% 2.47%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.68)%(c) (1.90)% (1.52)% (0.66)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 52% 144% 215% 54%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$19,414,911.
(d) Annualized.
(e) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS B
----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 2.06 $ 3.81 $ 6.72 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.07) (0.09)(a) (0.04)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.50 (1.68) (2.82) (3.24)
========================================================================================================================
Total from investment operations 0.47 (1.75) (2.91) (3.28)
========================================================================================================================
Net asset value, end of period $ 2.53 $ 2.06 $ 3.81 $ 6.72
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 22.82% (45.93)% (43.30)% (32.80)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $13,753 $11,288 $21,318 $21,296
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.65% 2.51% 2.41%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.83%(c) 3.31% 3.05% 3.16%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (2.33)%(c) (2.55)% (2.17)% (1.36)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 52% 144% 215% 54%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$11,923,238.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-10
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ----------------- DECEMBER 31,
2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 2.07 $ 3.81 $ 6.73 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.07) (0.09)(a) (0.04)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.50 (1.67) (2.83) (3.23)
=======================================================================================================================
Total from investment operations 0.47 (1.74) (2.92) (3.27)
=======================================================================================================================
Net asset value, end of period $ 2.54 $ 2.07 $ 3.81 $ 6.73
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 22.71% (45.67)% (43.39)% (32.70)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,988 $5,610 $10,465 $10,349
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.65%(c) 2.65% 2.51% 2.41%(d)
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 3.83%(c) 3.31% 3.05% 3.16%(d)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (2.33)%(c) (2.55)% (2.17)% (1.35)%(d)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(e) 52% 144% 215% 54%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$5,963,059.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com NTE-SAR-1
[COVER ART]
AIM PREMIER EQUITY FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Premier Equity Fund seeks long-term growth of capital.
Income is a secondary objective.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHART]
FINANCIALS 18.3%
INFORMATION TECHNOLOGY 17.4%
CONSUMER DISCRETIONARY 16.1%
HEALTH CARE 12.5%
CASH & OTHER 9.0%
INDUSTRIALS 8.4%
ENERGY 7.8%
CONSUMER STAPLES 6.9%
TELECOMMUNICATION SERVICES 3.7%
TOTAL NUMBER OF HOLDINGS* 89
TOTAL NET ASSETS $9.1 BILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (5/1/84) 12.18%
10 Years 6.98
5 Years -4.97
1 Year -8.31
CLASS B SHARES
Inception (10/18/93) 6.20%
5 Years -4.92
1 Year -8.54
CLASS C SHARES
Inception (8/4/97) -1.20%
5 Years -4.64
1 Year -4.69
CLASS R SHARES**
10 Years 7.33%
5 Years -4.13
1 Year -3.17
**Class R shares are generally only available to retirement plans such as
section 401 and 457 plans, section 403 plans sponsored by a section 501(c)(3)
organization and IRA rollovers from such plans if an AIM fund was offered. They
are sold at net asset value, that is, without upfront sales charges. Class R
shares were first offered on June 3, 2002. Returns prior to that date are
hypothetical results based on Class A share performance at net asset value,
adjusted to reflect Class R 12b-1 fees. (The inception date of Class A shares is
5/1/84). Class R share returns do not include a 0.75% contingent deferred sales
charge that may be imposed on a total redemption of retirement plan assets
within the first year.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 10.25%
CLASS B SHARES 9.76
CLASS C SHARES 9.76
CLASS R SHARES 10.13
S&P 500 INDEX (Broad Market Index) 11.75
LIPPER LARGE-CAP CORE FUND INDEX 10.15
(Lipper Peer Group)
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.
================================================================================
<Table>
<Caption>
=================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
=================================================================================================
1. Pfizer Inc. 4.0% 1. Pharmaceuticals 8.1%
2. Citigroup Inc. 3.8 2. Integrated Oil & Gas 5.5
3. Microsoft Corp. 3.5 3. Computer Hardware 4.8
4. General Electric Co. 2.9 4. Industrial Conglomerates 4.1
5. Exxon Mobil Corp. 2.8 5. Other Diversified Financial Services 3.8
6. Bank of America Corp. 2.4 6. Systems Software 3.7
7. Fannie Mae 2.3 7. Broadcasting & Cable TV 3.4
8. American International Group, Inc. 2.2 8. Thrifts & Mortgage Finance 3.2
9. Dell Computer Corp. 2.1 9. Semiconductors 3.0
10. Procter & Gamble Co. (The) 2.1 10. Diversified Banks 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.
=================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Premier Equity Fund seeks long-term growth of capital. Income is a
secondary objective.
o AIM Premier Equity Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales-charge structure and class expenses.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Lipper Large-Cap Core Fund Index represents an average of the
performance of the 30 biggest large-capitalization core funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Premier Equity Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appear on the opposite page. This letter
DESPITE ECONOMIC will provide an overview of the markets and your fund
SLUGGISHNESS, during the six months covered by this report.
DOMESTIC EQUITY
MARKETS PERFORMED As always, timely information about your fund and the
WELL, PARTICULARLY markets in general is available at our Web site,
DURING THE SECOND aiminvestments.com. From our home page, click on Products
HALF OF THE and Performance, then Mutual Funds, then AIM Funds, and
REPORTING PERIOD. then select the type of information you wish to view.
ROBERT H. GRAHAM
MARKET CONDITIONS
Economic sluggishness continued during the reporting period,
particularly in manufacturing. The manufacturing sector
contracted during four of the six months in the reporting period. The overall
economy grew only 1.4%, annualized, during the first quarter of the year. In the
second quarter, the advance estimate indicated that economic growth improved,
with the gross domestic product expanding at a 2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period. On
June 25, it lowered that rate to 1.00%, the lowest level since 1958. The Fed
said it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology and consumer discretionary were the
best-performing sectors; weakest were consumer staples and telecommunications
services. Generally, mid- and small-cap stocks outperformed large-cap stocks,
and the growth investment style outperformed the value investment style during
the six-month reporting period.
YOUR FUND
AIM Premier Equity Fund produced solid increases for the six-month reporting
period ended June 30, 2002. Class A shares, for example, produced total return
of 10.25%, excluding sales charges.
Effective May 1, the management team for AIM Premier Equity Fund was
composed of Abel Garcia, Robert A. Shelton, Kellie K. Veazey, Meggan M. Walsh,
and Michael Yellen. Mr. Garcia brings 30 years of diversified
investment-industry experience to the management team. Mr. Shelton has been on
AIM Premier Equity Fund's management team since 1997. He has been in the
investment industry for 12 years. Ms. Veazey has been on the AIM Premier Equity
Fund support team since 1998 and recently was promoted from senior analyst to
portfolio manager for the fund. Ms. Walsh has been in the investment industry
since 1987. Mr. Yellen has 12 years of experience.
With the additions to the management team the fund's investment objective
and strategy will remain unchanged.
IN CLOSING
I thank you for your continued participation in AIM Premier Equity Fund, and
I look forward to reporting to you again in six months. If you have any
questions, please consult your financial advisor for help with your investment
choices. And as always, members of our award-winning Client Services department
are ready to help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
SUPPLEMENT TO SEMIANNUAL REPORT DATED 6/30/03
AIM PREMIER EQUITY FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria. Performance of
Institutional Class shares will differ from performance of Class A shares due to
differing sales charges and class expenses.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended 6/30/03
Inception (3/15/02) -17.29%
1 Year -2.46
6 Months 10.46*
*Not Annualized
================================================================================
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at net asset value. Investment return and
principal value will fluctuate so your shares, when redeemed, may be worth more
or less than their original cost. See full report for information on comparative
benchmarks. If you have questions, please consult your fund prospectus or call
AIM toll free at 800-451-4246.
A I M Distributors, Inc. PEQ-INS-2 [AIM INVESTMENT LOGO APPEARS HERE]
--Servicemark--
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-90.87%
ADVERTISING-1.40%
Omnicom Group Inc. 1,775,800 $ 127,324,860
===========================================================================
AEROSPACE & DEFENSE-0.77%
Lockheed Martin Corp. 1,466,000 69,737,620
===========================================================================
AIRLINES-0.85%
Southwest Airlines Co. 4,500,000 77,400,000
===========================================================================
APPAREL RETAIL-0.66%
Gap, Inc. (The) 3,221,700 60,439,092
===========================================================================
APPLICATION SOFTWARE-0.96%
BEA Systems, Inc.(a) 3,870,000 42,028,200
- ---------------------------------------------------------------------------
SAP A.G.-ADR (Germany) 1,566,000 45,758,520
===========================================================================
87,786,720
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.57%
Bank of New York Co., Inc. (The) 4,957,800 142,536,750
===========================================================================
BIOTECHNOLOGY-0.84%
Amgen Inc.(a) 1,151,100 76,479,084
===========================================================================
BREWERS-0.76%
Anheuser-Busch Cos., Inc. 1,361,700 69,514,785
===========================================================================
BROADCASTING & CABLE TV-3.42%
Comcast Corp.-Class A(a) 752,032 22,696,326
- ---------------------------------------------------------------------------
Comcast Corp.-Special Class A(a) 5,037,500 145,231,125
- ---------------------------------------------------------------------------
Cox Communications, Inc.-Class A(a) 4,475,800 142,778,020
===========================================================================
310,705,471
===========================================================================
BUILDING PRODUCTS-0.15%
American Standard Cos. Inc.(a) 180,000 13,307,400
===========================================================================
COMMUNICATIONS EQUIPMENT-1.19%
Cisco Systems, Inc.(a) 6,483,100 108,202,939
===========================================================================
COMPUTER & ELECTRONICS RETAIL-1.47%
Best Buy Co., Inc.(a) 3,038,300 133,442,136
===========================================================================
COMPUTER HARDWARE-4.76%
Dell Computer Corp.(a) 5,968,700 190,759,652
- ---------------------------------------------------------------------------
Hewlett-Packard Co. 5,966,900 127,094,970
- ---------------------------------------------------------------------------
International Business Machines Corp. 1,398,900 115,409,250
===========================================================================
433,263,872
===========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
CONSUMER FINANCE-0.57%
American Express Co. 1,250,000 $ 52,262,500
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.39%
Affiliated Computer Services, Inc.-Class A(a) 1,589,000 72,664,970
- ---------------------------------------------------------------------------
First Data Corp. 2,828,000 117,192,320
- ---------------------------------------------------------------------------
Paychex, Inc. 929,400 27,240,714
===========================================================================
217,098,004
===========================================================================
DEPARTMENT STORES-0.99%
Federated Department Stores, Inc. 2,447,200 90,179,320
===========================================================================
DIVERSIFIED BANKS-2.84%
Bank of America Corp. 2,745,000 216,937,350
- ---------------------------------------------------------------------------
Wells Fargo & Co. 815,000 41,076,000
===========================================================================
258,013,350
===========================================================================
DIVERSIFIED CAPITAL MARKETS-0.61%
J.P. Morgan Chase & Co. 1,620,000 55,371,600
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.52%
Cendant Corp.(a) 2,600,000 47,632,000
===========================================================================
DRUG RETAIL-0.87%
Walgreen Co. 2,616,900 78,768,690
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.10%
Celestica Inc. (Canada)(a) 609,200 9,600,992
===========================================================================
ENVIRONMENTAL SERVICES-0.75%
Waste Management, Inc. 2,817,000 67,861,530
===========================================================================
FOOTWEAR-1.67%
NIKE, Inc.-Class B 2,849,200 152,403,708
===========================================================================
GENERAL MERCHANDISE STORES-1.99%
Target Corp. 4,776,500 180,742,760
===========================================================================
HEALTH CARE EQUIPMENT-0.51%
St. Jude Medical, Inc.(a) 811,900 46,684,250
===========================================================================
HEALTH CARE FACILITIES-1.01%
HCA Inc. 2,876,600 92,166,264
===========================================================================
HOME IMPROVEMENT RETAIL-0.87%
Home Depot, Inc. (The) 2,384,300 78,968,016
===========================================================================
HOTELS, RESORTS & CRUISE LINES-0.43%
Starwood Hotels & Resorts Worldwide, Inc. 1,375,000 39,311,250
===========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-2.77%
Clorox Co. (The) 860,000 $ 36,679,000
- ---------------------------------------------------------------------------
Kimberly-Clark Corp. 500,000 26,070,000
- ---------------------------------------------------------------------------
Procter & Gamble Co. (The) 2,119,400 189,008,092
===========================================================================
251,757,092
===========================================================================
HYPERMARKETS & SUPER CENTERS-1.81%
Costco Wholesale Corp.(a) 1,706,800 62,468,880
- ---------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Mexico) 17,488,800 51,525,692
- ---------------------------------------------------------------------------
Wal-Mart Stores, Inc. 937,300 50,304,891
===========================================================================
164,299,463
===========================================================================
INDUSTRIAL CONGLOMERATES-3.87%
3M Co. 385,000 49,657,300
- ---------------------------------------------------------------------------
General Electric Co. 9,231,700 264,765,156
- ---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 1,975,000 37,485,500
===========================================================================
351,907,956
===========================================================================
INDUSTRIAL MACHINERY-1.31%
Danaher Corp. 1,752,800 119,278,040
===========================================================================
INTEGRATED OIL & GAS-5.46%
BP PLC-ADR (United Kingdom) 2,302,200 96,738,444
- ---------------------------------------------------------------------------
ChevronTexaco Corp. 2,010,000 145,122,000
- ---------------------------------------------------------------------------
Exxon Mobil Corp. 7,101,700 255,022,047
===========================================================================
496,882,491
===========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.92%
SBC Communications Inc. 2,781,100 71,057,105
- ---------------------------------------------------------------------------
Verizon Communications Inc. 2,617,700 103,268,265
===========================================================================
174,325,370
===========================================================================
INVESTMENT BANKING & BROKERAGE-2.02%
Merrill Lynch & Co., Inc. 1,450,000 67,686,000
- ---------------------------------------------------------------------------
Morgan Stanley 2,725,000 116,493,750
===========================================================================
184,179,750
===========================================================================
IT CONSULTING & OTHER SERVICES-0.43%
Accenture Ltd.-Class A (Bermuda)(a) 2,180,000 39,436,200
===========================================================================
MANAGED HEALTH CARE-1.97%
Anthem, Inc.(a) 926,800 71,502,620
- ---------------------------------------------------------------------------
UnitedHealth Group Inc. 2,141,400 107,605,350
===========================================================================
179,107,970
===========================================================================
MOVIES & ENTERTAINMENT-1.11%
Viacom Inc.-Class B(a) 2,315,000 101,072,900
===========================================================================
MULTI-LINE INSURANCE-2.17%
American International Group, Inc. 3,571,000 197,047,780
===========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
OIL & GAS DRILLING-0.77%
GlobalSantaFe Corp. (Cayman Islands) 1,060,000 $ 24,740,400
- ---------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 2,070,400 45,486,688
===========================================================================
70,227,088
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.58%
Baker Hughes Inc. 2,827,400 94,915,818
- ---------------------------------------------------------------------------
BJ Services Co.(a) 1,308,500 48,885,560
===========================================================================
143,801,378
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.78%
Citigroup Inc. 8,038,400 344,043,520
===========================================================================
PHARMACEUTICALS-8.14%
Allergan, Inc. 1,001,400 77,207,940
- ---------------------------------------------------------------------------
Johnson & Johnson 2,504,700 129,492,990
- ---------------------------------------------------------------------------
Lilly (Eli) & Co. 366,700 25,291,299
- ---------------------------------------------------------------------------
Merck & Co. Inc. 1,057,900 64,055,845
- ---------------------------------------------------------------------------
Pfizer Inc. 10,530,100 359,602,915
- ---------------------------------------------------------------------------
Wyeth 1,856,000 84,540,800
===========================================================================
740,191,789
===========================================================================
PROPERTY & CASUALTY INSURANCE-1.61%
Allstate Corp. (The) 1,362,500 48,573,125
- ---------------------------------------------------------------------------
Chubb Corp. (The) 674,400 40,464,000
- ---------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class A 1,194,945 18,999,626
- ---------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class B 2,425,938 38,257,042
===========================================================================
146,293,793
===========================================================================
RESTAURANTS-1.62%
McDonald's Corp. 525,000 11,581,500
- ---------------------------------------------------------------------------
Yum! Brands, Inc.(a) 4,587,300 135,600,588
===========================================================================
147,182,088
===========================================================================
SEMICONDUCTOR EQUIPMENT-0.91%
Applied Materials, Inc.(a) 5,200,000 82,472,000
===========================================================================
SEMICONDUCTORS-2.97%
Analog Devices, Inc.(a) 4,290,600 149,398,692
- ---------------------------------------------------------------------------
Intel Corp. 3,840,000 79,810,560
- ---------------------------------------------------------------------------
Micron Technology, Inc.(a) 3,503,200 40,742,216
===========================================================================
269,951,468
===========================================================================
SOFT DRINKS-0.57%
PepsiCo, Inc. 1,165,300 51,855,850
===========================================================================
SPECIALTY STORES-0.52%
Staples, Inc.(a) 2,564,300 47,054,905
===========================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------------
SYSTEMS SOFTWARE-3.70%
Microsoft Corp. 12,575,700 $ 322,063,677
- ---------------------------------------------------------------------------
VERITAS Software Corp.(a) 510,300 14,630,301
===========================================================================
336,693,978
===========================================================================
THRIFTS & MORTGAGE FINANCE-3.15%
Fannie Mae 3,158,000 212,975,520
- ---------------------------------------------------------------------------
Freddie Mac 1,445,000 73,362,650
===========================================================================
286,338,170
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.79%
Nextel Communications, Inc.-Class A(a) 6,725,000 121,588,000
- ---------------------------------------------------------------------------
Sprint Corp. (PCS Group)(a) 7,190,000 41,342,500
===========================================================================
162,930,500
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $8,141,135,859) 8,265,536,502
===========================================================================
<Caption>
PRINCIPAL
AMOUNT
CONVERTIBLE NOTES-0.18%
INDUSTRIAL CONGLOMERATES-0.18%
Tyco International Group S.A. (Luxembourg)-
Series B, Sr. Gtd. Conv. Putable Notes,
3.13%, 01/15/15 (Acquired 01/07/03; Cost
$15,072,000)(b) $15,072,000 16,579,200
===========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. TREASURY BILLS-0.29%
0.80%, 09/18/03 (Cost $25,954,070)(c) $26,000,000(d) $ 25,954,070
===========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-9.30%
STIC Liquid Assets Portfolio(e) 423,172,057 423,172,057
- ---------------------------------------------------------------------------
STIC Prime Portfolio(e) 423,172,057 423,172,057
===========================================================================
Total Money Market Funds (Cost
$846,344,114) 846,344,114
===========================================================================
TOTAL INVESTMENTS-100.64% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$9,028,506,043) 9,154,413,886
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.76%
STIC Liquid Assets Portfolio(e)(f) 69,426,780 69,426,780
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $69,426,780) 69,426,780
===========================================================================
TOTAL INVESTMENTS-101.40% (Cost
$9,097,932,823) 9,223,840,666
===========================================================================
OTHER ASSETS LESS LIABILITIES-(1.40%) (127,711,354)
===========================================================================
NET ASSETS-100.00% $9,096,129,312
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Gtd. - Guaranteed
Sr. - Senior
</Table>
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 market value of this security at 06/30/03 was $16,579,200, which
represented 0.18% of the Fund's net assets. This security is considered to
be illiquid.
(c) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1 Section G and Note 8.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
(f) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$9,097,932,823)* $ 9,223,840,666
- ------------------------------------------------------------
Receivables for:
Investments sold 14,953,129
- ------------------------------------------------------------
Fund shares sold 4,282,648
- ------------------------------------------------------------
Dividends and interest 5,516,697
- ------------------------------------------------------------
Amount due from advisor 14,418
- ------------------------------------------------------------
Investment for deferred compensation plan 325,303
- ------------------------------------------------------------
Other assets 119,345
============================================================
Total assets 9,249,052,206
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 35,116,667
- ------------------------------------------------------------
Fund shares reacquired 31,915,290
- ------------------------------------------------------------
Foreign currency contracts closed 69,348
- ------------------------------------------------------------
Foreign currency contracts outstanding 48,084
- ------------------------------------------------------------
Deferred compensation plan 325,303
- ------------------------------------------------------------
Collateral upon return of securities
loaned 69,426,780
- ------------------------------------------------------------
Accrued distribution fees 8,724,203
- ------------------------------------------------------------
Accrued transfer agent fees 5,721,098
- ------------------------------------------------------------
Accrued operating expenses 1,576,121
============================================================
Total liabilities 152,922,894
============================================================
Net assets applicable to shares outstanding $ 9,096,129,312
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $13,769,726,667
- ------------------------------------------------------------
Undistributed net investment income (loss) (16,796,628)
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign
currencies, foreign currency contracts,
futures contracts and option contracts (4,774,036,666)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currency contracts
and futures contracts 117,235,939
============================================================
$ 9,096,129,312
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 4,778,153,403
____________________________________________________________
============================================================
Class B $ 3,890,129,269
____________________________________________________________
============================================================
Class C $ 425,123,907
____________________________________________________________
============================================================
Class R $ 513,440
____________________________________________________________
============================================================
Institutional Class $ 2,209,293
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 576,976,269
____________________________________________________________
============================================================
Class B 501,426,006
____________________________________________________________
============================================================
Class C 54,761,928
____________________________________________________________
============================================================
Class R 62,164
____________________________________________________________
============================================================
Institutional Class 264,844
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 8.28
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.28 divided by
94.50%) $ 8.76
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 7.76
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 7.76
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 8.26
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 8.34
____________________________________________________________
============================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $66,636,263
were on loan to brokers.
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $147,122) $ 52,243,209
- ----------------------------------------------------------------------------
Dividends from affiliated money market funds 4,607,450
- ----------------------------------------------------------------------------
Interest 364,017
- ----------------------------------------------------------------------------
Security lending income 52,359
============================================================================
Total investment income 57,267,035
============================================================================
EXPENSES:
Advisory fees 27,997,648
- ----------------------------------------------------------------------------
Administrative services fees 376,750
- ----------------------------------------------------------------------------
Custodian fees 207,611
- ----------------------------------------------------------------------------
Distribution fees -- Class A 5,663,307
- ----------------------------------------------------------------------------
Distribution fees -- Class B 19,822,266
- ----------------------------------------------------------------------------
Distribution fees -- Class C 2,100,002
- ----------------------------------------------------------------------------
Distribution fees -- Class R 894
- ----------------------------------------------------------------------------
Transfer agent fees 16,428,693
- ----------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 556
- ----------------------------------------------------------------------------
Trustees' fees 34,602
- ----------------------------------------------------------------------------
Other 1,206,127
============================================================================
Total expenses 73,838,456
============================================================================
Less: Fees waived and expenses paid indirectly (686,121)
============================================================================
Net expenses 73,152,335
============================================================================
Net investment income (loss) (15,885,300)
============================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY
CONTRACTS, FUTURES CONTRACTS AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (627,755,461)
- ----------------------------------------------------------------------------
Foreign currencies 9,825
- ----------------------------------------------------------------------------
Foreign currency contracts (3,719,632)
- ----------------------------------------------------------------------------
Futures contracts 40,504,659
- ----------------------------------------------------------------------------
Option contracts written 679,078
============================================================================
(590,281,531)
============================================================================
Change in net unrealized appreciation of:
Investment securities 1,447,008,304
- ----------------------------------------------------------------------------
Foreign currency contracts 32,612
- ----------------------------------------------------------------------------
Futures contracts 1,161,713
============================================================================
1,448,202,629
============================================================================
Net gain from investment securities, foreign currencies,
foreign currency contracts, futures contracts and option
contracts 857,921,098
============================================================================
Net increase in net assets resulting from operations $ 842,035,798
____________________________________________________________________________
============================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- ------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (15,885,300) $ (64,174,804)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts, futures
contracts and option contracts (590,281,531) (2,370,879,580)
- ------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currency contracts and
futures contracts 1,448,202,629 (2,871,180,046)
================================================================================================
Net increase (decrease) in net assets resulting from
operations 842,035,798 (5,306,234,430)
================================================================================================
Share transactions-net:
Class A (309,188,320) (1,392,867,197)
- ------------------------------------------------------------------------------------------------
Class B (742,682,894) (2,339,535,311)
- ------------------------------------------------------------------------------------------------
Class C (58,241,476) (232,888,880)
- ------------------------------------------------------------------------------------------------
Class R 251,584 200,138
- ------------------------------------------------------------------------------------------------
Institutional Class (259,014) 2,649,533
================================================================================================
Net increase (decrease) in net assets resulting from
share transactions (1,110,120,120) (3,962,441,717)
================================================================================================
Net increase (decrease) in net assets (268,084,322) (9,268,676,147)
================================================================================================
NET ASSETS:
Beginning of period 9,364,213,634 18,632,889,781
================================================================================================
End of period $ 9,096,129,312 $ 9,364,213,634
________________________________________________________________________________________________
================================================================================================
</Table>
See Notes to Financial Statements.
F-6
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Premier Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 to achieve long-term growth of
capital. Income is a secondary objective. 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately
F-7
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.
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
disclosed in the Statement of Assets and Liabilities.
H. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
I. 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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to such class. All other expenses are allocated among the
classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first
$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 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. Voluntary fee waivers
or reimbursements may be rescinded, terminated or modified 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 six months ended June 30, 2003, AIM
waived fees of $568,864.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $376,750 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $6,624,233 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, the Fund may pay a service fee of 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 the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. NASD Rules also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by any class of
shares of the Fund. Pursuant to the Plans, for the six months ended June 30,
2003, the Class A, Class B, Class C and Class R shares paid $5,663,307,
$19,822,266, $2,100,002, and $894, respectively.
Front-end sales commissions and contingent deferred sales charges
(collectively the "sales charges") are not recorded as expenses of the
F-8
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. Contingent
deferred sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $252,192 in front-end sales commissions from the sale of
Class A shares and $9,275, $999, $14,554 and $0 for Class A, Class B, Class C
and Class R shares, respectively, for CDSCs imposed upon redemptions by
shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$10,800 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $115,124 and reductions in
custodian fees of $2,133 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $117,257.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $66,636,263 were on
loan to brokers. The loans were secured by cash collateral of $69,426,780
received by the Fund and subsequently invested in an affiliated money market
fund. For the six months ended June 30, 2003, the Fund received fees of $52,359
for securities lending.
NOTE 7--FOREIGN CURRENCY CONTRACTS
Outstanding foreign currency contracts at June 30, 2003 were as follows:
<Table>
<Caption>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------ APPRECIATION
DATE CURRENCY DELIVER RECEIVE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------
08/21/03 CAD 16,900,000 $12,454,280 $12,502,364 $(48,084)
______________________________________________________________________________
==============================================================================
</Table>
NOTE 8--FUTURES CONTRACTS
On June 30, 2003, $25,101,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts as of June 30, 2003 were as follows:
<Table>
<Caption>
UNREALIZED
NO. OF MONTH/ MARKET APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------
S&P 500 Index 1,585 Sep.-03/Long $385,670,125 $(8,623,821)
_______________________________________________________________________________
===============================================================================
</Table>
F-9
NOTE 9--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------
Beginning of period -- $ --
- ------------------------------------------------------------
Written 12,750 1,934,923
- ------------------------------------------------------------
Closed (5,250) (1,058,353)
- ------------------------------------------------------------
Exercised (7,500) (876,570)
============================================================
End of period -- $ --
____________________________________________________________
============================================================
</Table>
NOTE 10--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ------------------------------------------------------------
December 31, 2009 $1,670,556,615
- ------------------------------------------------------------
December 31, 2010 2,276,920,883
============================================================
Total capital loss carryforward $3,947,477,498
____________________________________________________________
============================================================
</Table>
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $1,164,961,051 and $2,343,308,362, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $1,040,608,223
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (921,825,018)
==============================================================================
Net unrealized appreciation of investment securities $ 118,783,205
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $9,105,057,461.
</Table>
NOTE 12--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares,
Class B shares, Class C shares, Class R shares and 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 a 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 CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 36,914,628 $ 284,391,406 73,118,435 $ 657,092,554
- --------------------------------------------------------------------------------------------------------------------------------
Class B 8,296,185 60,215,709 22,610,679 195,949,105
- --------------------------------------------------------------------------------------------------------------------------------
Class C 1,853,627 13,382,091 5,748,410 50,204,828
- --------------------------------------------------------------------------------------------------------------------------------
Class R* 71,149 539,459 29,155 211,650
- --------------------------------------------------------------------------------------------------------------------------------
Institutional Class** -- -- 345,082 3,005,669
================================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 23,493,065 183,879,166 37,066,076 329,215,215
- --------------------------------------------------------------------------------------------------------------------------------
Class B (25,038,220) (183,879,166) (39,184,836) (329,215,215)
================================================================================================================================
Reacquired:
Class A (101,179,126) (777,458,892) (274,622,366) (2,379,174,966)
- --------------------------------------------------------------------------------------------------------------------------------
Class B (86,722,021) (619,019,437) (270,457,065) (2,206,269,201)
- --------------------------------------------------------------------------------------------------------------------------------
Class C (10,011,312) (71,623,567) (34,348,509) (283,093,708)
- --------------------------------------------------------------------------------------------------------------------------------
Class R* (36,607) (287,875) (1,533) (11,512)
- --------------------------------------------------------------------------------------------------------------------------------
Institutional Class** (33,889) (259,014) (46,349) (356,136)
================================================================================================================================
(152,392,521) $(1,110,120,120) (479,742,821) $(3,962,441,717)
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
* Class R shares commenced sales on June 3, 2002.
** Institutional Class shares commenced sales on March 15, 2002.
F-10
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999(a) 1998(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 7.51 $ 10.87 $ 12.51 $ 16.28 $ 13.40 $ 10.81
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 (0.01)(b) 0.00 (0.04)(b) (0.01) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.77 (3.35) (1.63) (2.42) 3.97 3.46
=================================================================================================================================
Total from investment
operations 0.77 (3.36) (1.63) (2.46) 3.96 3.49
=================================================================================================================================
Less distributions:
Dividends from net investment
income -- -- -- -- -- (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- -- (0.01) (1.31) (1.08) (0.87)
=================================================================================================================================
Total distributions -- -- (0.01) (1.31) (1.08) (0.90)
=================================================================================================================================
Net asset value, end of period $ 8.28 $ 7.51 $ 10.87 $ 12.51 $ 16.28 $ 13.40
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 10.25% (30.91)% (12.99)% (14.95)% 29.95% 32.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $4,778,153 $4,642,361 $8,502,699 $11,223,504 $12,640,073 $8,823,094
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers 1.27%(d) 1.17% 1.08% 1.00% 1.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.29%(d) 1.19% 1.12% 1.04% 1.02% 1.02%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.01%(d) (0.08)% (0.03)% (0.11)% (0.09)% 0.26%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 14% 36% 38% 67% 66% 113%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Per share information and shares have been restated to reflect a 3 for 1
stock split, effected in the form of a 200% stock dividend on November
10, 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 annualized and based on average daily net assets of
$4,568,192,174.
(e) Not annualized for periods less than one year.
F-11
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999(a) 1998(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 7.07 $ 10.30 $ 11.94 $ 15.73 $ 13.08 $ 10.63
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.07)(b) (0.09) (0.31)(b) (0.13)(b) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.72 (3.16) (1.54) (2.17) 3.86 3.38
=================================================================================================================================
Total from investment
operations 0.69 (3.23) (1.63) (2.48) 3.73 3.32
=================================================================================================================================
Less distributions from net
realized gains -- -- (0.01) (1.31) (1.08) (0.87)
=================================================================================================================================
Net asset value, end of period $ 7.76 $ 7.07 $ 10.30 $ 11.94 $ 15.73 $ 13.08
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.76% (31.36)% (13.61)% (15.65)% 28.94% 31.70%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $3,890,129 $4,274,489 $9,186,980 $12,491,366 $14,338,087 $9,680,068
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers 2.02%(d) 1.92% 1.84% 1.77% 1.79% 1.80%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.04%(d) 1.94% 1.88% 1.81% 1.81% 1.82%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.74)(d) (0.84)% (0.79)% (0.89)% (0.88)% (0.54)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 14% 36% 38% 67% 66% 113%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Per share information and shares have been restated to reflect a 3 for 1
stock split, effected in the form of a 200% stock dividend on November
10, 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 annualized and based on average daily net assets of
$3,997,307,847.
(e) Not annualized for periods less than one year.
F-12
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------
2003 2002 2001 2000(a) 1999(a) 1998(a)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.07 $ 10.31 $ 11.95 $ 15.74 $ 13.09 $ 10.63
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.07)(b) (0.09) (0.31)(b) (0.13)(b) (0.06)(b)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.72 (3.17) (1.54) (2.17) 3.86 3.39
=============================================================================================================================
Total from investment operations 0.69 (3.24) (1.63) (2.48) 3.73 3.33
=============================================================================================================================
Less distributions from net realized gains -- -- (0.01) (1.31) (1.08) (0.87)
=============================================================================================================================
Net asset value, end of period $ 7.76 $ 7.07 $ 10.31 $ 11.95 $ 15.74 $ 13.09
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(c) 9.76% (31.43)% (13.60)% (15.62)% 28.92% 31.72%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $425,124 $444,901 $943,211 $1,262,192 $860,859 $212,095
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.02%(d) 1.92% 1.84% 1.77% 1.79% 1.80%
- -----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.04%(d) 1.94% 1.88% 1.81% 1.81% 1.82%
=============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.74)(d) (0.84)% (0.79)% (0.88)% (0.88)% (0.54)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate(e) 14% 36% 38% 67% 66% 113%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Per share information and shares have been restated to reflect a 3 for 1
stock split, effected in the form of a 200% stock dividend on November
10, 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 annualized and based on average daily net assets of
$423,480,976.
(e) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS R
---------------------------------------
SIX MONTHS JUNE 3, 2002
ENDED (DATE SALES COMMENCED)
JUNE 30, TO DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.50 $ 9.16
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.02)(a)
- -----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.77 (1.64)
=====================================================================================================
Total from investment operations 0.76 (1.66)
=====================================================================================================
Net asset value, end of period $ 8.26 $ 7.50
_____________________________________________________________________________________________________
=====================================================================================================
Total return(b) 10.13% (18.12)%
_____________________________________________________________________________________________________
=====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 513 $ 207
_____________________________________________________________________________________________________
=====================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.52%(c) 1.48%(d)
- -----------------------------------------------------------------------------------------------------
Without fee waivers 1.54%(c) 1.50%(d)
=====================================================================================================
Ratio of net investment income (loss) to average net assets (0.24)(c) (0.40)%(d)
_____________________________________________________________________________________________________
=====================================================================================================
Portfolio turnover rate(e) 14% 36%
_____________________________________________________________________________________________________
=====================================================================================================
</Table>
(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 $360,511.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-13
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
---------------------------------------
SIX MONTHS MARCH 15, 2002
ENDED (DATE SALES COMMENCED)
JUNE 30, TO DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.55 $ 10.66
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02 0.03(a)
- -----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.77 (3.14)
=====================================================================================================
Total from investment operations 0.79 (3.11)
=====================================================================================================
Net asset value, end of period $ 8.34 $ 7.55
_____________________________________________________________________________________________________
=====================================================================================================
Total return(b) 10.46% (29.17)%
_____________________________________________________________________________________________________
=====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,209 $ 2,255
_____________________________________________________________________________________________________
=====================================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.70%(c) 0.66%(d)
- -----------------------------------------------------------------------------------------------------
Without fee waivers 0.72%(c) 0.68%(d)
=====================================================================================================
Ratio of net investment income to average net assets 0.58%(c) 0.42%(d)
_____________________________________________________________________________________________________
=====================================================================================================
Portfolio turnover rate(e) 14% 36%
_____________________________________________________________________________________________________
=====================================================================================================
</Table>
(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
$2,153,784.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-14
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
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(5),(6)
AIM Constellation Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund SECTOR EQUITY
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5),(6)
AIM Opportunities I Fund(2) AIM Global Science and Technology Fund
AIM Opportunities II Fund(2) AIM Global Utilities Fund
AIM Opportunities III Fund(2) AIM New Technology Fund
AIM Premier Equity Fund AIM Real Estate Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for
approximately 11 million shareholders, including individual investors, corporate
clients and financial institutions. The AIM Family of Funds--Registered
Trademark-- is distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one
of the world's largest independent financial services companies with $348
billion in assets under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com PEQ-SAR-1
[COVER ART]
AIM PREMIER EQUITY II FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Premier Equity II Fund seeks long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Service Mark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Service Mark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHART]
MATERIALS 1.0%
TELECOMMUNICATIONS SERVICES 1.5%
ENERGY 5.2%
CONSUMER STAPLES 5.6%
CASH & OTHER 8.1%
INDUSTRIALS 9.9%
HEALTH CARE 12.7%
CONSUMER DISCRETIONARY 13.6%
INFORMATION TECHNOLOGY 20.2%
FINANCIALS 22.2%
TOTAL NUMBER OF HOLDINGS* 88
TOTAL NET ASSETS $71.2 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (8/31/00) -21.39%
1 Year -12.46
CLASS B SHARES
Inception (8/31/00) -21.17%
1 Year -12.50
CLASS C SHARES
Inception (8/31/00) -20.32%
1 Year -8.66
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 7.88%
CLASS B SHARES 7.58
CLASS C SHARES 7.80
S&P 500 Index (Broad Market Index) 11.75
Lipper Mid-Cap Core Fund Index 13.19
(Lipper Peer Group)
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.
================================================================================
<Table>
<Caption>
================================================================================================
Top 10 Equity Holdings* Top 10 Industries*
- ------------------------------------------------------------------------------------------------
1. Microsoft Corp. 3.5% 1. Pharmaceuticals 5.9%
2. Pfizer Inc. 3.4 2. Computer Hardware 5.0
3. Citigroup Inc. 3.3 3. Semiconductors 4.6
4. Bank of America Corp. 2.5 4. Investment Banking & Brokerage 3.8
5. Willis Group Holdings Ltd. (Bermuda) 2.4 5. Systems Software 3.7
6. Fannie Mae 2.3 6. Other Diversified Financial Services 3.3
7. American International Group, Inc. 2.2 7. Data Processing & Outsourced Services 3.3
8. General Electric Co. 2.2 8. Thrifts & Mortgage Finance 3.1
9. Dell Computer Corp. 2.1 9. Diversified Banks 3.0
10. Anthem, Inc. 2.1 10. Managed Health Care 2.9
*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.
================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Premier Equity II Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales-charge structure and class expenses.
o The fund may participate in the Initial Public Offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Lipper Mid-Cap Core Fund Index represents an average of the
performance of the 30 largest mid-capitalization core funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses.
Performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMINVESTMENTS.COM.
To Our Shareholders
Dear Shareholder:
This is your report on AIM Premier Equity II Fund for the
six months ended June 30, 2003. Important information such
[PHOTO OF as top holdings and fund performance as of the close of the
ROBERT H. reporting period appear on the opposite page. This letter
GRAHAM] will provide an overview of the markets and your fund
during the six months covered by this report.
DESPITE ECONOMIC As always, timely information about your fund and the
SLUGGISNESS, markets in general is available at our Web site,
DOMESTIC EQUITY aiminvestments.com. From our home page, click on Products
MARKETS PERFORMED and Performance, then Mutual Funds, then AIM funds, and
WELL, PARTICULARLY then select the type of information you wish to view.
DURING THE SECOND
HALF OF THE MARKET CONDITIONS
REPORTING PERIOD.
ROBERT H. GRAHAM Economic sluggishness continued during the reporting
period, particularly in manufacturing. The manufacturing
sector contracted during four of the six months in the
reporting period. The overall economy grew only 1.4%, annualized, during the
first quarter of the year. In the second quarter, the advance estimate indicated
that economic growth improved, with the gross domestic product expanding at a
2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period,
then lowered it to 1.00% on June 25, its lowest level since 1958. The Fed said
it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and Small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology and consumer discretionary were the
best-performing sectors; weakest were consumer staples, telecommunication
services and materials. Generally, mid- and Small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
YOUR FUND
AIM Premier Equity II Fund produced positive performance for the six-month
reporting period ended June 30, 2003. Class A shares returned 7.88% at net asset
value for the period.
Effective May 1, the management team for AIM Premier Equity II Fund was
composed of Abel Garcia, Robert A. Shelton, Kellie K. Veazey, Meggan M. Walsh
and Michael Yellen. Mr. Garcia brings 30 years of diversified
investment-industry experience to the management team. Mr. Shelton has been on
the AIM Premier Equity Fund's management team since 1997. He has been in the
investment industry for 12 years. Ms. Veazey has been on the AIM Premier Equity
Fund support team since 1998 and recently was promoted from senior analyst to
portfolio manager for the fund. Ms. Walsh has been in the investment industry
since 1987. Mr. Yellen has 12 years of experience.
The additions to the management team do not represent a change in the fund's
investment objective or strategy.
IN CLOSING
I thank you for your continued participation in AIM Premier Equity II Fund. If
you have any questions, please consult your financial advisor for help with your
investment choices. And as always, members of our award-winning Client Services
department are ready to help. They can be reached at 800-959-4246.
Sincerely.
/s/ Robert H. Graham
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.89%
ADVERTISING-1.55%
Omnicom Group Inc. 15,400 $ 1,104,180
=======================================================================
AEROSPACE & DEFENSE-0.77%
Lockheed Martin Corp. 11,500 547,055
=======================================================================
AIRLINES-1.10%
Ryanair Holdings PLC-ADR (Ireland)(a) 17,500 785,750
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.21%
Coach, Inc.(a) 17,300 860,502
=======================================================================
APPLICATION SOFTWARE-0.63%
BEA Systems, Inc.(a) 9,300 100,998
- -----------------------------------------------------------------------
SAP A.G.-ADR (Germany) 12,000 350,640
=======================================================================
451,638
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.31%
Bank of New York Co., Inc. (The) 32,400 931,500
=======================================================================
BIOTECHNOLOGY-1.20%
Amgen Inc.(a) 12,900 857,076
=======================================================================
BREWERS-0.76%
Anheuser-Busch Cos., Inc. 10,600 541,130
=======================================================================
BROADCASTING & CABLE TV-2.62%
Comcast Corp.-Special Class A(a) 47,700 1,375,191
- -----------------------------------------------------------------------
Univision Communications Inc.-Class A(a) 16,200 492,480
=======================================================================
1,867,671
=======================================================================
BUILDING PRODUCTS-0.15%
American Standard Cos. Inc.(a) 1,400 103,502
=======================================================================
COMMUNICATIONS EQUIPMENT-0.59%
NetScreen Technologies, Inc.(a) 18,500 417,175
=======================================================================
COMPUTER & ELECTRONICS RETAIL-1.02%
Best Buy Co., Inc.(a) 16,500 724,680
=======================================================================
COMPUTER HARDWARE-5.03%
Dell Computer Corp.(a) 46,500 1,486,140
- -----------------------------------------------------------------------
Diebold, Inc. 10,000 432,500
- -----------------------------------------------------------------------
Hewlett-Packard Co. 39,200 834,960
- -----------------------------------------------------------------------
International Business Machines Corp. 10,000 825,000
=======================================================================
3,578,600
=======================================================================
CONSTRUCTION & ENGINEERING-1.95%
Jacobs Engineering Group Inc.(a) 33,000 1,390,950
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-3.30%
Affiliated Computer Services, Inc.-Class A(a) 24,000 $ 1,097,520
- -----------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 25,800 473,946
- -----------------------------------------------------------------------
First Data Corp. 13,600 563,584
- -----------------------------------------------------------------------
Paychex, Inc. 7,200 211,032
=======================================================================
2,346,082
=======================================================================
DIVERSIFIED BANKS-2.95%
Bank of America Corp. 22,500 1,778,175
- -----------------------------------------------------------------------
Wells Fargo & Co. 6,400 322,560
=======================================================================
2,100,735
=======================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.53%
Cendant Corp.(a) 20,500 375,560
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.10%
Celestica Inc. (Canada)(a) 4,700 74,072
=======================================================================
EMPLOYMENT SERVICES-0.77%
Robert Half International Inc.(a) 28,900 547,366
=======================================================================
GENERAL MERCHANDISE STORES-0.59%
Target Corp. 11,100 420,024
=======================================================================
HEALTH CARE EQUIPMENT-1.02%
St. Jude Medical, Inc.(a) 6,200 356,500
- -----------------------------------------------------------------------
STERIS Corp.(a) 15,900 367,131
=======================================================================
723,631
=======================================================================
HEALTH CARE FACILITIES-1.02%
HCA Inc. 22,600 724,104
=======================================================================
HEALTH CARE SUPPLIES-0.72%
Fisher Scientific International Inc.(a) 14,700 513,030
=======================================================================
HOME IMPROVEMENT RETAIL-0.87%
Home Depot, Inc. (The) 18,800 622,656
=======================================================================
HOUSEHOLD PRODUCTS-2.28%
Clorox Co. (The) 6,700 285,755
- -----------------------------------------------------------------------
Procter & Gamble Co. (The) 15,000 1,337,700
=======================================================================
1,623,455
=======================================================================
HYPERMARKETS & SUPER CENTERS-2.53%
Costco Wholesale Corp.(a) 13,500 494,100
- -----------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series C
(Mexico) 485,000 1,303,228
=======================================================================
1,797,328
=======================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-2.57%
General Electric Co. 53,400 $ 1,531,512
- -----------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 15,500 294,190
=======================================================================
1,825,702
=======================================================================
INDUSTRIAL MACHINERY-2.08%
Danaher Corp. 18,500 1,258,925
- -----------------------------------------------------------------------
SPX Corp.(a) 5,100 224,706
=======================================================================
1,483,631
=======================================================================
INSURANCE BROKERS-2.39%
Willis Group Holdings Ltd. (Bermuda) 55,300 1,700,475
=======================================================================
INTEGRATED OIL & GAS-2.15%
ChevronTexaco Corp. 11,000 794,200
- -----------------------------------------------------------------------
Exxon Mobil Corp. 20,500 736,155
=======================================================================
1,530,355
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.51%
SBC Communications Inc. 19,000 485,450
- -----------------------------------------------------------------------
Verizon Communications Inc. 15,000 591,750
=======================================================================
1,077,200
=======================================================================
INVESTMENT BANKING & BROKERAGE-3.76%
Goldman Sachs Group, Inc. (The) 8,500 711,875
- -----------------------------------------------------------------------
Lehman Brothers Holdings Inc. 8,000 531,840
- -----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 11,200 522,816
- -----------------------------------------------------------------------
Morgan Stanley 21,200 906,300
=======================================================================
2,672,831
=======================================================================
IT CONSULTING & OTHER SERVICES-0.72%
Accenture Ltd.-Class A (Bermuda)(a) 28,500 515,565
=======================================================================
MANAGED HEALTH CARE-2.86%
Anthem, Inc.(a) 19,200 1,481,280
- -----------------------------------------------------------------------
WellPoint Health Networks Inc.(a) 6,600 556,380
=======================================================================
2,037,660
=======================================================================
METAL & GLASS CONTAINERS-1.04%
Pactiv Corp.(a) 37,700 743,067
=======================================================================
MOVIES & ENTERTAINMENT-1.17%
Viacom Inc.-Class B(a) 19,000 829,540
=======================================================================
MULTI-LINE INSURANCE-2.16%
American International Group, Inc. 27,800 1,534,004
=======================================================================
OIL & GAS DRILLING-1.44%
ENSCO International Inc. 19,000 511,100
- -----------------------------------------------------------------------
GlobalSantaFe Corp. (Cayman Islands) 22,000 513,480
=======================================================================
1,024,580
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-1.57%
Baker Hughes Inc. 21,800 $ 731,826
- -----------------------------------------------------------------------
BJ Services Co.(a) 10,300 384,808
=======================================================================
1,116,634
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.33%
Citigroup Inc. 55,300 2,366,840
=======================================================================
PHARMACEUTICALS-5.90%
Allergan, Inc. 12,000 925,200
- -----------------------------------------------------------------------
Lilly (Eli) & Co. 2,800 193,116
- -----------------------------------------------------------------------
Pfizer Inc. 71,000 2,424,650
- -----------------------------------------------------------------------
Wyeth 14,400 655,920
=======================================================================
4,198,886
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.16%
Allstate Corp. (The) 11,000 392,150
- -----------------------------------------------------------------------
Ambac Financial Group, Inc. 6,700 443,875
- -----------------------------------------------------------------------
Chubb Corp. (The) 5,300 318,000
- -----------------------------------------------------------------------
Travelers Property Casualty Corp.-Class A 12,389 196,985
- -----------------------------------------------------------------------
Travelers Property Casualty Corp.-Class B 11,908 187,789
=======================================================================
1,538,799
=======================================================================
REINSURANCE-0.98%
Everest Re Group, Ltd. (Bermuda) 9,100 696,150
=======================================================================
RESTAURANTS-2.38%
Brinker International, Inc.(a) 22,400 806,848
- -----------------------------------------------------------------------
Yum! Brands, Inc.(a) 30,000 886,800
=======================================================================
1,693,648
=======================================================================
SEMICONDUCTORS-4.59%
Analog Devices, Inc.(a) 25,000 870,500
- -----------------------------------------------------------------------
Intel Corp. 30,000 623,520
- -----------------------------------------------------------------------
Microchip Technology Inc. 40,000 985,200
- -----------------------------------------------------------------------
Micron Technology, Inc.(a) 39,000 453,570
- -----------------------------------------------------------------------
National Semiconductor Corp.(a) 16,900 333,268
=======================================================================
3,266,058
=======================================================================
SPECIALTY STORES-2.18%
Advance Auto Parts, Inc.(a) 14,000 852,600
- -----------------------------------------------------------------------
Weight Watchers International, Inc.(a) 5,200 236,548
- -----------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 15,900 464,280
=======================================================================
1,553,428
=======================================================================
SYSTEMS SOFTWARE-3.68%
Microsoft Corp. 97,800 2,504,658
- -----------------------------------------------------------------------
VERITAS Software Corp.(a) 3,900 111,813
=======================================================================
2,616,471
=======================================================================
TECHNOLOGY DISTRIBUTORS-1.55%
CDW Corp.(a) 24,100 1,103,780
=======================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-3.15%
Fannie Mae 24,700 $ 1,665,768
- -----------------------------------------------------------------------
Freddie Mac 11,300 573,701
=======================================================================
2,239,469
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $62,816,978) 65,394,225
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.42%
0.81%, 09/18/03 (Cost $299,470)(b) $ 300,000(c) 299,470
=======================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-6.91%
STIC Liquid Assets Portfolio(d) 2,458,772 2,458,772
- -----------------------------------------------------------------------
STIC Prime Portfolio(d) 2,458,772 2,458,772
=======================================================================
Total Money Market Funds (Cost
$4,917,544) 4,917,544
=======================================================================
TOTAL INVESTMENTS-99.22% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $68,033,992) 70,611,239
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.83%
STIC Liquid Assets Portfolio(d)(e) 2,726,150 $ 2,726,150
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $2,726,150) 2,726,150
=======================================================================
TOTAL INVESTMENTS-103.05% (Cost $70,760,142) 73,337,389
=======================================================================
OTHER ASSETS LESS LIABILITIES-(3.05%) (2,167,419)
=======================================================================
NET ASSETS-100.00% $71,169,970
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1 Section F and Note 7.
(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-3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$70,760,142)* $ 73,337,389
- -----------------------------------------------------------
Receivables for:
Investments sold 1,178,065
- -----------------------------------------------------------
Fund shares sold 62,922
- -----------------------------------------------------------
Dividends 33,413
- -----------------------------------------------------------
Investment for deferred compensation plan 11,953
- -----------------------------------------------------------
Other assets 21,398
===========================================================
Total assets 74,645,140
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 382,183
- -----------------------------------------------------------
Fund shares reacquired 135,172
- -----------------------------------------------------------
Deferred compensation plan 11,953
- -----------------------------------------------------------
Collateral upon return of securities loaned 2,726,150
- -----------------------------------------------------------
Accrued distribution fees 86,737
- -----------------------------------------------------------
Accrued transfer agent fees 79,255
- -----------------------------------------------------------
Accrued operating expenses 53,720
===========================================================
Total liabilities 3,475,170
===========================================================
Net assets applicable to shares outstanding $ 71,169,970
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $151,408,998
- -----------------------------------------------------------
Undistributed net investment income (loss) (500,231)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
futures contracts and option contracts (82,251,443)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and futures contracts 2,512,646
===========================================================
$ 71,169,970
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 25,558,218
___________________________________________________________
===========================================================
Class B $ 32,700,834
___________________________________________________________
===========================================================
Class C $ 12,910,918
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 4,782,863
___________________________________________________________
===========================================================
Class B 6,227,695
___________________________________________________________
===========================================================
Class C 2,459,285
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 5.34
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $5.34 divided by
94.50%) $ 5.65
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 5.25
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 5.25
___________________________________________________________
===========================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $2,675,424 were
on loan to brokers.
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $140) $ 311,860
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 31,529
- -------------------------------------------------------------------------
Interest 1,709
- -------------------------------------------------------------------------
Security lending income 1,184
=========================================================================
Total investment income 346,282
=========================================================================
EXPENSES:
Advisory fees 263,226
- -------------------------------------------------------------------------
Administrative services fees 24,795
- -------------------------------------------------------------------------
Custodian fees 13,972
- -------------------------------------------------------------------------
Distribution fees -- Class A 44,105
- -------------------------------------------------------------------------
Distribution fees -- Class B 160,526
- -------------------------------------------------------------------------
Distribution fees -- Class C 64,427
- -------------------------------------------------------------------------
Transfer agent fees 189,381
- -------------------------------------------------------------------------
Trustees' fees 4,665
- -------------------------------------------------------------------------
Other 68,927
=========================================================================
Total expenses 834,024
=========================================================================
Less: Fees waived and expenses paid indirectly (1,777)
=========================================================================
Net expenses 832,247
=========================================================================
Net investment income (loss) (485,965)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS AND
OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (3,689,157)
- -------------------------------------------------------------------------
Foreign currencies 273
- -------------------------------------------------------------------------
Futures contracts 302,016
- -------------------------------------------------------------------------
Option contracts written 2,583
=========================================================================
(3,384,285)
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 8,928,312
- -------------------------------------------------------------------------
Futures contracts (17,309)
=========================================================================
8,911,003
=========================================================================
Net gain from investment securities, foreign currencies,
futures contracts and option contracts 5,526,718
=========================================================================
Net increase in net assets resulting from operations $ 5,040,753
_________________________________________________________________________
=========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (485,965) $ (1,620,509)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts (3,384,285) (33,555,883)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and futures contracts 8,911,003 (7,094,921)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 5,040,753 (42,271,313)
==========================================================================================
Share transactions-net:
Class A (3,791,209) (14,729,388)
- ------------------------------------------------------------------------------------------
Class B (4,161,524) (14,325,805)
- ------------------------------------------------------------------------------------------
Class C (2,059,426) (7,723,830)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (10,012,159) (36,779,023)
==========================================================================================
Net increase (decrease) in net assets (4,971,406) (79,050,336)
==========================================================================================
NET ASSETS:
Beginning of period 76,141,376 155,191,712
==========================================================================================
End of period $ 71,169,970 $ 76,141,376
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-6
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Premier Equity II Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from
F-7
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.
F. 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
disclosed in the Statement of Assets and Liabilities.
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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 Fund's
average daily net assets. 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 six months ended June 30, 2003, AIM
waived fees of $560.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $85,539 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $44,105, $160,526 and $64,427, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended June 30, 2003, AIM
Distributors retained $4,595 in front-end sales commissions from the sale of
Class A shares and $0, $0, and $288 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,378 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,217 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$1,217.
F-8
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $2,675,424 were on
loan to brokers. The loans were secured by cash collateral of $2,726,150
received by the Fund and subsequently invested in an affiliated money market
fund. For the six months ended June 30, 2003, the Fund received fees of $1,184
for securities lending.
NOTE 7--FUTURES CONTRACTS
On June 30, 2003, $195,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts as of June 30, 2003 were as follows:
<Table>
<Caption>
UNREALIZED
NO. OF MONTH/ MARKET APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------
S&P 500 Index 12 Sep.-03/Long $2,919,900 $(64,600)
_____________________________________________________________________________
=============================================================================
</Table>
NOTE 8--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ---------------------------------------------------------
Beginning of period -- $ --
- ---------------------------------------------------------
Written 21 2,583
- ---------------------------------------------------------
Expired (21) (2,583)
=========================================================
End of period -- $ --
_________________________________________________________
=========================================================
</Table>
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2009 $40,823,682
- ----------------------------------------------------------
December 31, 2010 36,704,676
==========================================================
Total capital loss carryforward $77,528,358
__________________________________________________________
==========================================================
</Table>
F-9
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $16,616,156 and $28,313,941, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $ 7,144,832
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (5,141,214)
=========================================================================
Net unrealized appreciation of investment securities $ 2,003,618
_________________________________________________________________________
=========================================================================
Cost of investments for tax purposes is $71,333,771.
</Table>
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 a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 235,306 $ 1,166,095 1,076,445 $ 6,447,123
- ----------------------------------------------------------------------------------------------------------------------
Class B 250,065 1,228,524 960,623 5,706,122
- ----------------------------------------------------------------------------------------------------------------------
Class C 143,457 700,751 455,967 2,722,417
======================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 83,494 419,276 101,565 589,137
- ----------------------------------------------------------------------------------------------------------------------
Class B (84,838) (419,276) (102,385) (589,137)
======================================================================================================================
Reacquired:
Class A (1,096,252) (5,376,580) (3,775,111) (21,765,648)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,033,818) (4,970,772) (3,408,797) (19,442,790)
- ----------------------------------------------------------------------------------------------------------------------
Class C (565,687) (2,760,177) (1,861,996) (10,446,247)
======================================================================================================================
(2,068,273) $(10,012,159) (6,553,689) $(36,779,023)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
F-10
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.95 $ 7.06 $ 8.64 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.06)(a) (0.04) 0.00(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.41 (2.05) (1.53) (1.35)
========================================================================================================================
Total from investment operations 0.39 (2.11) (1.57) (1.35)
========================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.01) --
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.00) (0.01)
========================================================================================================================
Total distributions -- -- (0.01) (0.01)
========================================================================================================================
Net asset value, end of period $ 5.34 $ 4.95 $ 7.06 $ 8.64
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 7.88% (29.89)% (18.17)% (13.49)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,558 $27,499 $57,591 $55,409
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.96%(c) 1.70% 1.52% 1.40%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.96%(c) 1.70% 1.54% 2.00%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.97)%(c) (1.04)% (0.56)% 0.10%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 25% 63% 67% 13%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles, does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$25,411,829.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-11
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.88 $ 7.00 $ 8.61 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.10)(a) (0.09) (0.02)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.41 (2.02) (1.52) (1.36)
========================================================================================================================
Total from investment operations 0.37 (2.12) (1.61) (1.38)
========================================================================================================================
Less distributions from net realized gains -- -- (0.00) (0.01)
========================================================================================================================
Net asset value, end of period $ 5.25 $ 4.88 $ 7.00 $ 8.61
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 7.58% (30.29)% (18.68)% (13.79)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,701 $34,596 $67,571 $62,792
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.61%(c) 2.35% 2.18% 2.10%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.61%(c) 2.35% 2.20% 2.70%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.62)%(c) (1.69)% (1.22)% (0.60)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 25% 63% 67% 13%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles, does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$32,371,316.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-12
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------
AUGUST 31, 2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.87 $ 7.00 $ 8.62 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.10)(a) (0.09) (0.02)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.42 (2.03) (1.53) (1.35)
========================================================================================================================
Total from investment operations 0.38 (2.13) (1.62) (1.37)
========================================================================================================================
Less distributions from net realized gains -- -- (0.00) (0.01)
========================================================================================================================
Net asset value, end of period $ 5.25 $ 4.87 $ 7.00 $ 8.62
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 7.80% (30.43)% (18.77)% (13.69)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $12,911 $14,046 $30,030 $30,557
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.61%(c) 2.35% 2.18% 2.10%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.61%(c) 2.35% 2.20% 2.70%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.62)%(c) (1.69)% (1.22)% (0.60)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 25% 63% 67% 13%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles, does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$12,992,224.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--SUBSEQUENT EVENT
The Board of Trustees unanimously approved, on July 30, 2003, an Agreement and
Plan of Reorganization ("Plan") pursuant to which AIM Premier Equity II Fund
("Premier Equity II Fund"), a series of AIM Funds Group, would transfer all of
its assets to AIM Premier Equity Fund ("Premier Equity Fund"), a series of AIM
Funds Group. As a result of the transaction, shareholders of Premier Equity II
Fund would receive shares of Premier Equity Fund in exchange for their shares of
Premier Equity II Fund, and Premier Equity II Fund would cease operations.
The Plan requires approval of Premier Equity II Fund shareholders and will be
submitted to the shareholders for their consideration at a meeting to be held on
or around October 21, 2003. If the Plan is approved by shareholders of Premier
Equity II Fund and certain conditions required by the Plan are satisfied, the
transaction is expected to become effective shortly thereafter.
It is anticipated that Premier Equity II Fund will be closed to new investors
during the fourth quarter of 2003.
F-13
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges and
expenses, ask your financial advisor for a prospectus. Please read it carefully
before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com PEQ2-SAR-1
[COVER ART]
AIM SELECT EQUITY FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Select Equity Fund seeks to achieve long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHART]
CONSUMER DISCRETIONARY 15.0%
FINANCIALS 15.2%
HEALTH CARE 17.5%
INFORMATION TECHNOLOGY 24.2%
CASH & OTHER 4.3%
CONSUMER STAPLES 5.3%
ENERGY 6.4%
INDUSTRIALS 12.1%
TOTAL NUMBER OF HOLDINGS* 197
TOTAL NET ASSETS $489 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (12/04/67) 8.02%
10 Years 6.33
5 Years -3.28
1 Year -12.79
CLASS B SHARES
Inception (9/01/93) 5.70%
5 Years -3.24
1 Year -12.96
CLASS C SHARES
Inception (8/04/97) -0.94%
5 Years -2.95
1 Year -9.31
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 11.11%
CLASS B SHARES 10.68
CLASS C SHARES 10.70
S&P 500 INDEX (Broad Market Index) 11.75
RUSSELL 3000--Registered Trademark-- INDEX 12.71
(Style-Specific Index)
LIPPER MULTI-CAP CORE FUND INDEX 13.19
(Peer Group Index)
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.
================================================================================
<Table>
<Caption>
=================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
- -----------------------------------------------------------------------------------------------------------------
1. Computer Associates International, Inc. 1.9% 1. Data Processing & Outsourced Services 5.7%
2. Citigroup Inc. 1.8 2. Systems Software 5.4
3. Microsoft Corp. 1.6 3. Pharmaceuticals 5.1
4. Pfizer Inc. 1.5 4. Health Care Services 3.5
5. Medicis Pharmaceutical Corp.-Class A 1.4 5. Oil & Gas Equipment & Services 3.1
6. UnitedHealth Group Inc. 1.3 6. Health Care Equipment 3.1
7. Bard (C.R.), Inc. 1.3 7. Semiconductors 2.8
8. Gap, Inc. (The) 1.2 8. Apparel Retail 2.5
9. PepsiCo, Inc. 1.2 9. Electronic Equipment Manufacturers 2.4
10. First Data Corp. 1.2 10. Managed Health Care 2.3
*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.
=================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o AIM Select Equity Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions, and changes in net
asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o A significant portion of the fund's returns during certain periods was
attributable to its investments in initial public offerings (IPO)s. These
investments had a magnified impact when the fund's asset base was relatively
small. As the fund's assets grow, the impact of IPO investments will
decline, which may reduce the effect of IPO investments on the fund's total
return. For additional information regarding the impact of IPO investments
on the fund's performance, please see the fund's prospectus.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Russell 3000--Registered Trademark-- Index is an index of
common stocks that measures performance of the largest 3,000 U.S. companies
based on market capitalization.
o The unmanaged Lipper Multi-Cap Core Equity Fund Index represents an average
of the performance of the 30 largest multi-capitalization core funds tracked
by Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Select Equity Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and fund performance as of the close of the
reporting period appears on the opposite page. This letter
will provide an overview of the markets and your fund
DESPITE ECONOMIC during the six months covered by this report.
SLUGGISHNESS,
DOMESTIC EQUITY As always, timely information about your fund and the
MARKETS PERFORMED markets in general is available at our Web site,
WELL, PARTICULARLY aiminvestments.com. From our home page, click on Products &
DURING THE SECOND Performance, then Mutual Funds, then AIM Funds, and select
HALF OF THE the type of information you wish to view.
REPORTING PERIOD.
ROBERT H. GRAHAM MARKET CONDITIONS
Economic sluggishness continued during the reporting period,
particularly in manufacturing. The manufacturing sector
contracted during four of the six months in the reporting period. The overall
economy grew only 1.4%, annualized, during the first quarter of the year. In the
second quarter, the advance estimate indicated that economic growth improved,
with the gross domestic product expanding at a 2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period,
then lowered it to 1.00% on June 25, its lowest level since 1958. The Fed said
it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecommunications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
YOUR FUND
For the six-month period that this report covers, Class A shares of AIM Select
Equity Fund returned 11.11% at net asset value. Within the U.S market, the fund
provides its investors diversification across sectors (see pie chart, opposite),
investment style, and market capitalization.
Portfolio managers Phil Ferguson and Duy Nguyen have maintained a relatively
large portfolio of stocks (197 as of June 30, 2003, up slightly from 190 when
the reporting period began) representing the growth, GARP (growth at a
reasonable price), and value investment categories. As indicated in the
prospectus, the fund "anticipates allocating a significant portion of its
assets, generally in approximately equal amounts, among those investment
disciplines." The fund currently maintains an equal weighting in GARP, growth,
and value stocks. As for diversification across market capitalizations, as of
June 30, the fund's portfolio was characterized by Lipper, Inc., an independent
mutual fund performance monitor, as containing 43.2% large-cap stocks, 31.2%
mid-cap stocks, and 25.6% small-cap stocks.
IN CLOSING
I thank you for your continued participation in AIM Select Equity Fund, and I
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.48%
ADVERTISING-1.69%
Interpublic Group of Cos., Inc. (The)(a) 345,100 $ 4,617,438
- ------------------------------------------------------------------------
Omnicom Group Inc. 51,100 3,663,870
========================================================================
8,281,308
========================================================================
AEROSPACE & DEFENSE-1.04%
Engineered Support Systems, Inc. 37,500 1,569,375
- ------------------------------------------------------------------------
Honeywell International Inc. 53,600 1,439,160
- ------------------------------------------------------------------------
Rockwell Collins, Inc. 60,800 1,497,504
- ------------------------------------------------------------------------
United Technologies Corp. 8,400 594,972
========================================================================
5,101,011
========================================================================
AIR FREIGHT & LOGISTICS-0.73%
C.H. Robinson Worldwide, Inc. 45,200 1,607,312
- ------------------------------------------------------------------------
Expeditors International of Washington, Inc. 56,700 1,964,088
========================================================================
3,571,400
========================================================================
APPAREL RETAIL-2.47%
Abercrombie & Fitch Co.-Class A(a) 46,600 1,323,906
- ------------------------------------------------------------------------
Aeropostale, Inc.(a) 59,300 1,273,764
- ------------------------------------------------------------------------
Christopher & Banks Corp.(a) 42,500 1,572,075
- ------------------------------------------------------------------------
Gap, Inc. (The) 316,300 5,933,788
- ------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 90,500 1,977,425
========================================================================
12,080,958
========================================================================
APPLICATION SOFTWARE-1.10%
Amdocs Ltd. (United Kingdom)(a) 36,000 864,000
- ------------------------------------------------------------------------
Business Objects S.A.-ADR (France)(a) 106,900 2,346,455
- ------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 50,800 1,450,848
- ------------------------------------------------------------------------
SAP A.G.-ADR (Germany) 25,200 736,344
========================================================================
5,397,647
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.89%
Affiliated Managers Group, Inc.(a) 45,000 2,742,750
- ------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 105,000 3,018,750
- ------------------------------------------------------------------------
Janus Capital Group Inc. 133,500 2,189,400
- ------------------------------------------------------------------------
Legg Mason, Inc. 19,500 1,266,525
========================================================================
9,217,425
========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
BIOTECHNOLOGY-1.40%
Amgen Inc.(a) 29,400 $ 1,953,336
========================================================================
Gilead Sciences, Inc.(a)(b) 88,000 4,891,040
========================================================================
6,844,376
========================================================================
BROADCASTING & CABLE TV-0.51%
EchoStar Communications Corp.-Class A(a) 42,600 1,474,812
- ------------------------------------------------------------------------
Mediacom Communications Corp.(a) 105,600 1,042,272
========================================================================
2,517,084
========================================================================
BUILDING PRODUCTS-1.89%
American Standard Cos. Inc.(a) 62,700 4,635,411
- ------------------------------------------------------------------------
Masco Corp. 193,200 4,607,820
========================================================================
9,243,231
========================================================================
CASINOS & GAMING-0.36%
Shuffle Master, Inc.(a) 60,200 1,769,278
========================================================================
COMMUNICATIONS EQUIPMENT-1.95%
Cisco Systems, Inc.(a) 112,000 1,869,280
- ------------------------------------------------------------------------
Inter-Tel, Inc. 49,400 1,048,268
- ------------------------------------------------------------------------
Juniper Networks, Inc.(a) 110,200 1,363,174
- ------------------------------------------------------------------------
McDATA Corp.-Class A(a) 77,000 1,129,590
- ------------------------------------------------------------------------
Motorola, Inc. 125,500 1,183,465
- ------------------------------------------------------------------------
UTStarcom, Inc.(a) 82,800 2,945,196
========================================================================
9,538,973
========================================================================
COMPUTER & ELECTRONICS RETAIL-1.11%
Best Buy Co., Inc.(a) 101,200 4,444,704
- ------------------------------------------------------------------------
GameStop Corp.(a) 75,600 976,752
========================================================================
5,421,456
========================================================================
COMPUTER HARDWARE-1.70%
Dell Computer Corp.(a) 166,600 5,324,536
- ------------------------------------------------------------------------
Diebold, Inc. 43,900 1,898,675
- ------------------------------------------------------------------------
Hewlett-Packard Co. 51,400 1,094,820
========================================================================
8,318,031
========================================================================
CONSTRUCTION & ENGINEERING-0.53%
Jacobs Engineering Group Inc.(a) 61,800 2,604,870
========================================================================
CONSUMER ELECTRONICS-0.41%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 104,007 1,987,574
========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
CONSUMER FINANCE-0.85%
American Express Co. 74,800 $ 3,127,388
========================================================================
SLM Corp. 26,400 1,034,088
========================================================================
4,161,476
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-5.71%
Alliance Data Systems Corp.(a) 58,700 1,373,580
- ------------------------------------------------------------------------
Ceridian Corp.(a) 336,200 5,705,314
- ------------------------------------------------------------------------
Certegy Inc.(a) 125,900 3,493,725
- ------------------------------------------------------------------------
DST Systems, Inc.(a) 30,100 1,143,800
- ------------------------------------------------------------------------
First Data Corp. 142,700 5,913,488
- ------------------------------------------------------------------------
Fiserv, Inc.(a) 59,000 2,100,990
- ------------------------------------------------------------------------
Global Payments Inc. 32,100 1,139,550
- ------------------------------------------------------------------------
Paychex, Inc. 54,800 1,606,188
- ------------------------------------------------------------------------
SunGard Data Systems Inc.(a) 211,000 5,467,010
========================================================================
27,943,645
========================================================================
DIVERSIFIED BANKS-2.05%
Bank of America Corp. 32,100 2,536,863
- ------------------------------------------------------------------------
Bank One Corp. 139,000 5,168,020
- ------------------------------------------------------------------------
U.S. Bancorp 94,100 2,305,450
========================================================================
10,010,333
========================================================================
DIVERSIFIED CAPITAL MARKETS-0.79%
J.P. Morgan Chase Co. 113,600 3,882,848
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.19%
Career Education Corp.(a) 15,900 1,087,878
- ------------------------------------------------------------------------
Cendant Corp.(a) 112,000 2,051,840
- ------------------------------------------------------------------------
Corinthian Colleges, Inc.(a) 28,700 1,393,959
- ------------------------------------------------------------------------
Corporate Executive Board Co. (The)(a) 35,100 1,422,603
- ------------------------------------------------------------------------
H&R Block, Inc. 49,400 2,136,550
- ------------------------------------------------------------------------
Tetra Tech, Inc. 91,400 1,565,682
- ------------------------------------------------------------------------
Viad Corp. 47,300 1,059,047
========================================================================
10,717,559
========================================================================
DRUG RETAIL-0.53%
CVS Corp. 76,000 2,130,280
- ------------------------------------------------------------------------
Walgreen Co. 16,000 481,600
========================================================================
2,611,880
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.26%
Rockwell Automation, Inc. 53,100 1,265,904
========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
ELECTRONIC EQUIPMENT MANUFACTURERS-2.36%
Amphenol Corp.-Class A(a) 20,300 $ 950,446
- ------------------------------------------------------------------------
Cognex Corp.(a) 30,600 683,910
- ------------------------------------------------------------------------
Itron, Inc.(a) 77,300 1,666,588
- ------------------------------------------------------------------------
Mettler-Toledo International Inc.
(Switzerland)(a) 36,700 1,345,055
- ------------------------------------------------------------------------
National Instruments Corp.(a) 53,500 2,021,230
- ------------------------------------------------------------------------
Tektronix, Inc.(a) 55,600 1,200,960
- ------------------------------------------------------------------------
Waters Corp.(a) 125,600 3,658,728
========================================================================
11,526,917
========================================================================
EMPLOYMENT SERVICES-0.30%
Robert Half International Inc.(a) 76,600 1,450,804
========================================================================
ENVIRONMENTAL SERVICES-1.31%
Republic Services, Inc.(a) 23,300 528,211
- ------------------------------------------------------------------------
Waste Connections, Inc.(a) 57,800 2,025,890
- ------------------------------------------------------------------------
Waste Management, Inc. 159,400 3,839,946
========================================================================
6,394,047
========================================================================
FOOD RETAIL-1.27%
Kroger Co. (The)(a) 299,600 4,997,328
- ------------------------------------------------------------------------
Safeway Inc.(a) 59,000 1,207,140
========================================================================
6,204,468
========================================================================
FOOTWEAR-0.40%
Reebok International Ltd.(a) 58,200 1,957,266
========================================================================
FOREST PRODUCTS-0.40%
Louisiana-Pacific Corp.(a) 181,200 1,955,148
========================================================================
GENERAL MERCHANDISE STORES-1.18%
Target Corp.(b) 152,800 5,781,952
========================================================================
HEALTH CARE DISTRIBUTORS-0.69%
McKesson Corp. 94,600 3,381,004
========================================================================
HEALTH CARE EQUIPMENT-3.07%
Bard (C.R.), Inc. 90,200 6,432,162
- ------------------------------------------------------------------------
Becton, Dickinson & Co. 26,800 1,041,180
- ------------------------------------------------------------------------
Biomet, Inc. 141,000 4,041,060
- ------------------------------------------------------------------------
Cytyc Corp.(a) 175,100 1,842,052
- ------------------------------------------------------------------------
STERIS Corp.(a) 72,100 1,664,789
========================================================================
15,021,243
========================================================================
HEALTH CARE FACILITIES-0.35%
VCA Antech, Inc.(a) 87,900 1,720,203
========================================================================
HEALTH CARE SERVICES-3.54%
AdvancePCS(a) 70,600 2,699,038
- ------------------------------------------------------------------------
Apria Healthcare Group Inc.(a) 119,100 2,963,208
- ------------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
HEALTH CARE SERVICES-(CONTINUED)
Caremark Rx, Inc.(a) 66,500 $ 1,707,720
- ------------------------------------------------------------------------
eResearch Technology, Inc.(a) 57,000 1,263,120
- ------------------------------------------------------------------------
Express Scripts, Inc.(a) 75,000 5,124,000
- ------------------------------------------------------------------------
IMS Health Inc. 141,700 2,549,183
- ------------------------------------------------------------------------
Lincare Holdings Inc.(a) 31,600 995,716
========================================================================
17,301,985
========================================================================
HEALTH CARE SUPPLIES-1.02%
Fisher Scientific International Inc.(a) 142,900 4,987,210
========================================================================
HOME IMPROVEMENT RETAIL-0.24%
Home Depot, Inc. (The) 34,900 1,155,888
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.33%
Starwood Hotels & Resorts Worldwide, Inc. 57,100 1,632,489
========================================================================
HOUSEHOLD PRODUCTS-1.45%
Dial Corp. (The) 148,800 2,894,160
- ------------------------------------------------------------------------
Procter & Gamble Co. (The) 47,000 4,191,460
========================================================================
7,085,620
========================================================================
INDUSTRIAL CONGLOMERATES-1.69%
General Electric Co. 99,900 2,865,132
- ------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 285,600 5,420,688
========================================================================
8,285,820
========================================================================
INDUSTRIAL GASES-0.67%
Airgas, Inc. 196,200 3,286,350
========================================================================
INDUSTRIAL MACHINERY-1.51%
Illinois Tool Works Inc. 24,600 1,619,910
- ------------------------------------------------------------------------
Kennametal Inc. 32,600 1,103,184
- ------------------------------------------------------------------------
Parker-Hannifin Corp. 22,600 948,974
- ------------------------------------------------------------------------
Pentair, Inc. 34,800 1,359,288
- ------------------------------------------------------------------------
SPX Corp.(a) 52,900 2,330,774
========================================================================
7,362,130
========================================================================
INSURANCE BROKERS-0.10%
Marsh & McLennan Cos., Inc. 10,200 520,914
========================================================================
INTEGRATED OIL & GAS-0.80%
Exxon Mobil Corp. 39,100 1,404,081
- ------------------------------------------------------------------------
Occidental Petroleum Corp. 74,000 2,482,700
========================================================================
3,886,781
========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
INVESTMENT BANKING & BROKERAGE-1.84%
Lehman Brothers Holdings Inc. 24,100 $ 1,602,168
- ------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 108,000 5,041,440
- ------------------------------------------------------------------------
Morgan Stanley 55,600 2,376,900
========================================================================
9,020,508
========================================================================
IT CONSULTING & OTHER SERVICES-0.20%
Acxiom Corp.(a) 64,200 968,778
========================================================================
LEISURE PRODUCTS-1.26%
Brunswick Corp. 87,400 2,186,748
- ------------------------------------------------------------------------
Mattel, Inc. 209,000 3,954,280
========================================================================
6,141,028
========================================================================
LIFE & HEALTH INSURANCE-0.47%
Nationwide Financial Services, Inc.-Class A 38,900 1,264,250
- ------------------------------------------------------------------------
Prudential Financial, Inc. 30,500 1,026,325
========================================================================
2,290,575
========================================================================
MANAGED HEALTH CARE-2.32%
Aetna Inc. 31,300 1,884,260
- ------------------------------------------------------------------------
Anthem, Inc.(a) 18,400 1,419,560
- ------------------------------------------------------------------------
First Health Group Corp.(a) 52,600 1,451,760
- ------------------------------------------------------------------------
UnitedHealth Group Inc. 130,800 6,572,700
========================================================================
11,328,280
========================================================================
MOVIES & ENTERTAINMENT-0.73%
Walt Disney Co. (The) 179,700 3,549,075
========================================================================
MULTI-LINE INSURANCE-0.76%
American Financial Group, Inc. 27,800 633,840
- ------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 103,900 3,072,323
========================================================================
3,706,163
========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.67%
MDU Resources Group, Inc. 97,200 3,255,228
========================================================================
OFFICE ELECTRONICS-0.31%
Zebra Technologies Corp.-Class A(a) 20,400 1,533,876
========================================================================
OFFICE SERVICES & SUPPLIES-0.35%
Moore Wallace Inc. (Canada)(a) 118,100 1,733,708
========================================================================
OIL & GAS DRILLING-2.08%
ENSCO International Inc. 108,500 2,918,650
- ------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a) 49,000 1,937,950
- ------------------------------------------------------------------------
Pride International, Inc.(a) 101,300 1,906,466
- ------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 156,000 3,427,320
========================================================================
10,190,386
========================================================================
</Table>
F-3
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-3.08%
Baker Hughes Inc. 15,700 $ 527,049
- ------------------------------------------------------------------------
Cooper Cameron Corp.(a) 28,700 1,445,906
- ------------------------------------------------------------------------
FMC Technologies, Inc.(a) 165,200 3,477,460
- ------------------------------------------------------------------------
Halliburton Co. 102,700 2,362,100
- ------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 26,000 1,236,820
- ------------------------------------------------------------------------
Smith International, Inc.(a) 44,500 1,634,930
- ------------------------------------------------------------------------
Superior Energy Services, Inc.(a) 157,000 1,488,360
- ------------------------------------------------------------------------
Varco International, Inc.(a) 56,800 1,113,280
- ------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 42,400 1,776,560
========================================================================
15,062,465
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.48%
Apache Corp. 1,871 121,728
- ------------------------------------------------------------------------
Comstock Resources, Inc.(a) 68,000 930,240
- ------------------------------------------------------------------------
Ultra Petroleum Corp.(a) 99,700 1,287,127
========================================================================
2,339,095
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.22%
Citigroup Inc. 202,600 8,671,280
- ------------------------------------------------------------------------
Principal Financial Group, Inc. 67,300 2,170,425
========================================================================
10,841,705
========================================================================
PACKAGED FOODS & MEATS-0.53%
ConAgra Foods, Inc. 110,000 2,596,000
========================================================================
PERSONAL PRODUCTS-0.30%
Estee Lauder Cos. Inc. (The)-Class A 43,600 1,461,908
========================================================================
PHARMACEUTICALS-5.14%
Allergan, Inc. 26,100 2,012,310
- ------------------------------------------------------------------------
Biovail Corp. (Canada)(a) 34,400 1,618,864
- ------------------------------------------------------------------------
Forest Laboratories, Inc.(a)(b) 44,700 2,447,325
- ------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(b) 123,800 7,019,460
- ------------------------------------------------------------------------
Pfizer Inc. 216,860 7,405,769
- ------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 54,600 2,204,202
- ------------------------------------------------------------------------
Wyeth 53,000 2,414,150
========================================================================
25,122,080
========================================================================
PROPERTY & CASUALTY INSURANCE-1.17%
ACE Ltd. (Cayman Islands) 167,000 5,726,430
========================================================================
PUBLISHING-0.43%
Getty Images, Inc.(a) 50,600 2,089,780
========================================================================
RAILROADS-0.10%
Union Pacific Corp. 8,600 498,972
========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
REGIONAL BANKS-1.04%
Cullen/Frost Bankers, Inc. 51,500 $ 1,653,150
- ------------------------------------------------------------------------
TCF Financial Corp. 34,800 1,386,432
- ------------------------------------------------------------------------
Zions Bancorp 40,400 2,044,644
========================================================================
5,084,226
========================================================================
REINSURANCE-0.16%
Platinum Underwriters Holdings Ltd. (Bermuda) 28,300 768,062
========================================================================
RESTAURANTS-1.72%
Brinker International, Inc.(a) 50,000 1,801,000
- ------------------------------------------------------------------------
CBRL Group, Inc. 84,600 3,287,556
- ------------------------------------------------------------------------
Outback Steakhouse, Inc. 46,700 1,821,300
- ------------------------------------------------------------------------
Ruby Tuesday, Inc. 61,100 1,511,003
========================================================================
8,420,859
========================================================================
SEMICONDUCTOR EQUIPMENT-1.26%
Applied Materials, Inc.(a) 195,300 3,097,458
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 84,100 3,079,826
========================================================================
6,177,284
========================================================================
SEMICONDUCTORS-2.80%
DSP Group, Inc.(a) 106,800 2,299,404
- ------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 42,600 1,338,918
- ------------------------------------------------------------------------
Intel Corp. 187,300 3,892,843
- ------------------------------------------------------------------------
Linear Technology Corp. 63,300 2,038,893
- ------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 31,400 1,079,218
- ------------------------------------------------------------------------
Xilinx, Inc.(a) 119,800 3,032,138
========================================================================
13,681,414
========================================================================
SOFT DRINKS-1.21%
PepsiCo, Inc. 133,200 5,927,400
========================================================================
SPECIALTY STORES-2.14%
Claire's Stores, Inc. 66,300 1,681,368
- ------------------------------------------------------------------------
Regis Corp. 67,800 1,969,590
- ------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 22,300 1,690,563
- ------------------------------------------------------------------------
Select Comfort Corp.(a) 100,000 1,638,000
- ------------------------------------------------------------------------
Staples, Inc.(a) 157,100 2,882,785
- ------------------------------------------------------------------------
Tractor Supply Co.(a) 12,300 587,325
========================================================================
10,449,631
========================================================================
SYSTEMS SOFTWARE-5.38%
Adobe Systems Inc. 35,300 1,132,071
- ------------------------------------------------------------------------
Computer Associates International, Inc. 413,500 9,212,780
- ------------------------------------------------------------------------
Macrovision Corp.(a) 198,700 3,958,104
- ------------------------------------------------------------------------
Microsoft Corp. 307,200 7,867,392
- ------------------------------------------------------------------------
Oracle Corp.(a) 342,300 4,114,446
========================================================================
26,284,793
========================================================================
</Table>
F-4
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-1.40%
CDW Corp.(a) 71,500 $ 3,274,700
- ------------------------------------------------------------------------
Global Imaging Systems, Inc.(a) 155,200 3,594,432
========================================================================
6,869,132
========================================================================
THRIFTS & MORTGAGE FINANCE-1.89%
Charter Municipal Mortgage Acceptance Co. 108,600 2,064,486
- ------------------------------------------------------------------------
Freddie Mac 49,100 2,492,807
- ------------------------------------------------------------------------
IndyMac Bancorp, Inc. 60,000 1,525,200
- ------------------------------------------------------------------------
MGIC Investment Corp. 35,200 1,641,728
- ------------------------------------------------------------------------
Radian Group Inc. 41,500 1,520,975
========================================================================
9,245,196
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.20%
MSC Industrial Direct Co., Inc.-Class A(a) 54,100 968,390
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $426,036,505) 476,718,933
========================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.31%
0.80%, 09/18/03 (Cost $1,497,350)(c) $1,500,000 1,497,350
========================================================================
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
MONEY MARKET FUNDS-2.60%
STIC Liquid Assets Portfolio(d) 6,365,078 $ 6,365,078
- ------------------------------------------------------------------------
STIC Prime Portfolio(d) 6,365,078 6,365,078
========================================================================
Total Money Market Funds (Cost
$12,730,156) 12,730,156
========================================================================
TOTAL INVESTMENTS-100.39% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $440,264,011) 490,946,439
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-0.79%
STIC Liquid Assets Portfolio (Cost
$3,855,000)(d)(e) 3,855,000 3,855,000
========================================================================
TOTAL INVESTMENTS-101.18% (Cost $444,119,011) 494,801,439
========================================================================
OTHER ASSETS LESS LIABILITIES-(1.18%) (5,762,862)
========================================================================
NET ASSETS-100.00% $489,038,577
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
<Caption>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 1
section F and Note 7.
(c) Security traded on a discount basis. The interest rate shown represents the
rate of discount paid or received at the time of purchase by the Fund.
(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-5
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$444,119,011)* $ 494,801,439
- ------------------------------------------------------------
Receivables for:
Investments sold 607,651
- ------------------------------------------------------------
Fund shares sold 375,728
- ------------------------------------------------------------
Dividends 302,934
- ------------------------------------------------------------
Investment for deferred compensation plan 61,645
- ------------------------------------------------------------
Other assets 53,821
============================================================
Total assets 496,203,218
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 2,160,026
- ------------------------------------------------------------
Options written (premiums received $89,296) 69,000
- ------------------------------------------------------------
Deferred compensation plan 61,645
- ------------------------------------------------------------
Collateral upon return of securities loaned 3,855,000
- ------------------------------------------------------------
Accrued distribution fees 468,032
- ------------------------------------------------------------
Accrued trustees' fees 72
- ------------------------------------------------------------
Accrued transfer agent fees 399,231
- ------------------------------------------------------------
Accrued operating expenses 151,635
============================================================
Total liabilities 7,164,641
============================================================
Net assets applicable to shares outstanding $ 489,038,577
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 694,813,400
- ------------------------------------------------------------
Undistributed net investment income (loss) (2,472,051)
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, futures contracts
and option contracts (254,005,495)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 50,702,723
============================================================
$ 489,038,577
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 258,116,009
____________________________________________________________
============================================================
Class B $ 199,743,490
____________________________________________________________
============================================================
Class C $ 31,179,078
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 19,407,123
____________________________________________________________
============================================================
Class B 16,615,037
____________________________________________________________
============================================================
Class C 2,597,254
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 13.30
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $13.30 divided by
94.50%) $ 14.07
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 12.02
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 12.00
____________________________________________________________
============================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $3,750,977 were
on loan to brokers.
See Notes to Financial Statements.
F-6
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $6,644) $ 1,872,945
- --------------------------------------------------------------------------
Dividends from affiliated money market funds 97,052
- --------------------------------------------------------------------------
Interest 3,730
- --------------------------------------------------------------------------
Security lending income 16,696
==========================================================================
Total investment income 1,990,423
==========================================================================
EXPENSES:
Advisory fees 1,604,841
- --------------------------------------------------------------------------
Administrative services fees 64,186
- --------------------------------------------------------------------------
Custodian fees 31,937
- --------------------------------------------------------------------------
Distribution fees -- Class A 304,639
- --------------------------------------------------------------------------
Distribution fees -- Class B 987,836
- --------------------------------------------------------------------------
Distribution fees -- Class C 153,080
- --------------------------------------------------------------------------
Transfer agent fees 1,103,877
- --------------------------------------------------------------------------
Trustees' fees 6,092
- --------------------------------------------------------------------------
Other 150,530
==========================================================================
Total expenses 4,407,018
==========================================================================
Less: Fees waived and expenses paid indirectly (10,103)
==========================================================================
Net expenses 4,396,915
==========================================================================
Net investment income (loss) (2,406,492)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FUTURES CONTRACTS AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (24,740,373)
- --------------------------------------------------------------------------
Futures contracts 1,155,270
- --------------------------------------------------------------------------
Option contracts written 220,913
==========================================================================
(23,364,190)
==========================================================================
Change in net unrealized appreciation of:
Investment securities 74,669,190
- --------------------------------------------------------------------------
Option contracts written 5,096
==========================================================================
74,674,286
==========================================================================
Net gain from investment securities, futures contracts and
option contracts 51,310,096
==========================================================================
Net increase in net assets resulting from operations $ 48,903,604
__________________________________________________________________________
==========================================================================
</Table>
See Notes to Financial Statements.
F-7
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,406,492) $ (5,779,008)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and option contracts (23,364,190) (160,704,077)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts 74,674,286 (82,229,216)
===========================================================================================
Net increase (decrease) in net assets resulting from
operations 48,903,604 (248,712,301)
===========================================================================================
Share transactions-net:
Class A (18,898,973) (29,981,711)
- -------------------------------------------------------------------------------------------
Class B (34,417,271) (101,502,496)
- -------------------------------------------------------------------------------------------
Class C (4,482,081) (9,762,755)
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (57,798,325) (141,246,962)
===========================================================================================
Net increase (decrease) in net assets (8,894,721) (389,959,263)
===========================================================================================
NET ASSETS:
Beginning of period 497,933,298 887,892,561
===========================================================================================
End of period $489,038,577 $ 497,933,298
___________________________________________________________________________________________
===========================================================================================
</Table>
See Notes to Financial Statements.
F-8
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Select Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. 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
F-9
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 disclosed in the Statement of Assets and
Liabilities.
F. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to such class. All other expenses are allocated among the
classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first
$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, if any). For the six months ended
June 30, 2003, AIM waived fees of $2,720.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $64,186 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $482,899 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 0.25% 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, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges, that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B and Class C
shares paid $304,639, $987,836 and $153,080, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended June 30, 2003, AIM
Distributors retained $21,590 in front-end sales commissions from the sale of
Class A shares and $103, $0 and $1,371 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,921 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $7,328 and reductions in custodian
fees of $55 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $7,383.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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
F-10
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $3,750,977 were on
loan to brokers. The loans were secured by cash collateral of $3,855,000
received by the Fund and subsequently invested in an affiliated money market
fund. For the six months ended June 30, 2003, the Fund received fees of $16,696
for securities lending.
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ----------------------------------------------------------
Beginning of period 400 $ 17,199
- ----------------------------------------------------------
Written 8,020 486,153
- ----------------------------------------------------------
Exercised (2,730) (193,143)
- ----------------------------------------------------------
Expired (4,990) (220,913)
==========================================================
End of period 700 $ 89,296
__________________________________________________________
==========================================================
</Table>
Open call options written as of June 30, 2003 are as follows:
<Table>
<Caption>
JUNE 30,
2003 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------
Forest Laboratories,
Inc. Jul-03 60 100 $ 7,800 $ 2,750 $ 5,050
- ------------------------------------------------------------------------------------------
Gilead Sciences, Inc. Jul-03 55 100 20,799 24,750 (3,951)
- ------------------------------------------------------------------------------------------
Medicis
Pharmaceuticals
Corp.-Class A Jul-03 55 100 28,699 29,000 (301)
- ------------------------------------------------------------------------------------------
Medicis
Pharmaceuticals
Corp.-Class A Jul-03 60 200 19,399 7,500 11,899
- ------------------------------------------------------------------------------------------
Target Corp. Jul-03 40 200 12,599 5,000 7,599
==========================================================================================
700 $89,296 $69,000 $20,296
__________________________________________________________________________________________
==========================================================================================
</Table>
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -------------------------------------------------------
December 31, 2009 $ 47,261,707
- -------------------------------------------------------
December 31, 2010 120,187,758
=======================================================
Total capital loss carryforward $167,449,465
_______________________________________________________
=======================================================
</Table>
F-11
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $119,111,080 and $175,966,176, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $ 74,062,578
- ----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (25,487,305)
============================================================================
Net unrealized appreciation of investment securities $ 48,575,273
____________________________________________________________________________
============================================================================
Cost of investments for tax purposes is $446,226,166.
</Table>
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,376,265 $ 16,552,235 4,095,378 $ 59,894,387
- ------------------------------------------------------------------------------------------------------------------------
Class B 574,687 6,261,588 1,801,311 23,788,330
- ------------------------------------------------------------------------------------------------------------------------
Class C 258,234 2,839,985 630,709 8,316,201
========================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 631,491 7,773,354 1,319,880 19,006,319
- ------------------------------------------------------------------------------------------------------------------------
Class B (697,789) (7,773,354) (1,446,033) (19,006,319)
========================================================================================================================
Reacquired:
Class A (3,543,080) (43,224,562) (7,806,746) (108,882,417)
- ------------------------------------------------------------------------------------------------------------------------
Class B (3,038,113) (32,905,505) (8,328,431) (106,284,507)
- ------------------------------------------------------------------------------------------------------------------------
Class C (663,740) (7,322,066) (1,436,948) (18,078,956)
========================================================================================================================
(5,102,045) $(57,798,325) (11,170,880) $(141,246,962)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
F-12
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.97 $ 17.00 $ 22.88 $ 26.23 $ 19.35 $ 15.67
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.06)(a) (0.08)(a) (0.01)(a) (0.06) (0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.37 (4.97) (5.79) (0.44) 8.00 4.24
=================================================================================================================================
Total from investment operations 1.33 (5.03) (5.87) (0.45) 7.94 4.20
=================================================================================================================================
Less distributions from net realized gains -- -- (0.01) (2.90) (1.06) (0.52)
=================================================================================================================================
Net asset value, end of period $ 13.30 $ 11.97 $ 17.00 $ 22.88 $ 26.23 $ 19.35
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 11.11% (29.59)% (25.64)% (1.77)% 41.48% 27.09%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $258,116 $250,666 $396,779 $532,042 $461,628 $320,143
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.51%(c) (1.32)% 1.24% 1.07% 1.09% 1.11%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.66)%(c) (0.45)% (0.45)% (0.02)% (0.31)% (0.22)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 26% 86% 117% 56% 31% 68%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$245,730,612.
(d) Not annualized for periods less than one year.
F-13
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.86 $ 15.54 $ 21.07 $ 24.57 $ 18.33 $ 14.98
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.16)(a) (0.20)(a) (0.22)(a) (0.23)(a) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.24 (4.52) (5.32) (0.38) 7.53 4.04
=================================================================================================================================
Total from investment operations 1.16 (4.68) (5.52) (0.60) 7.30 3.87
=================================================================================================================================
Less distributions from net realized gains -- -- (0.01) (2.90) (1.06) (0.52)
=================================================================================================================================
Net asset value, end of period $ 12.02 $ 10.86 $ 15.54 $ 21.07 $ 24.57 $ 18.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.68% (30.12)% (26.19)% (2.50)% 40.29% 26.13%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $199,743 $214,709 $432,002 $661,445 $592,555 $428,002
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.26%(c) 2.07% 2.00% 1.84% 1.90% 1.93%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.41)%(c) (1.20)% (1.21)% (0.80)% (1.12)% (1.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 26% 86% 117% 56% 31% 68%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$199,204,546.
(d) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2003 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.84 $ 15.52 $ 21.05 $ 24.55 $ 18.32 $14.98
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.16)(a) (0.20)(a) (0.22)(a) (0.23)(a) (0.17)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 1.24 (4.52) (5.32) (0.38) 7.52 4.03
==========================================================================================================================
Total from investment operations 1.16 (4.68) (5.52) (0.60) 7.29 3.86
==========================================================================================================================
Less distributions from net realized gains -- -- (0.01) (2.90) (1.06) (0.52)
==========================================================================================================================
Net asset value, end of period $ 12.00 $ 10.84 $ 15.52 $ 21.05 $ 24.55 $18.32
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 10.70% (30.15)% (26.21)% (2.50)% 40.26% 26.07%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,179 $32,558 $59,112 $71,989 $25,275 $8,501
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 2.26%(c) 2.07% 2.00% 1.84% 1.90% 1.93%
==========================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.41)%(c) (1.20)% (1.21)% (0.80)% (1.12)% (1.04)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(d) 26% 86% 117% 56% 31% 68%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$30,869,789.
(d) Not annualized for periods less than one year.
F-14
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1)
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund AIM Global Energy Fund TAX-FREE
AIM Libra Fund AIM Global Financial Services Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM High Income Municipal Fund
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund AIM Municipal Bond Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund AIM Tax-Exempt Cash Fund
AIM Opportunities I Fund(2) AIM New Technology Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class
A shares closed to new investors on October 30, 2002. (6) Class A3 shares were
first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com SEQ-SAR-1
[COVER ART]
AIM SMALL CAP EQUITY FUND
June 30, 2003
SEMIANNUAL REPORT TO SHAREHOLDERS
AIM Small Cap Equity Fund seeks long-term growth of capital.
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
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.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY SECTOR
As of 6/30/03
[PIE CHART]
HEALTH CARE 9.9%
CONSUMER DISCRETIONARY 13.9%
INFORMATION TECHNOLOGY 16.9%
FINANCIALS 17.9%
CASH & OTHER 10.7%
ENERGY 5.7%
CONSUMER STAPLES 2.2%
UTILITIES 2.1%
MATERIALS 2.0%
TELECOMMUNICATIONS SERVICES 0.8%
INDUSTRIALS 17.9%
TOTAL NUMBER OF HOLDINGS* 114
TOTAL NET ASSETS $341.8 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
Including sales charges
CLASS A SHARES
Inception (8/31/00) -3.57%
1 Year -11.50
CLASS B SHARES
Inception (8/31/00) -3.32%
1 Year -11.60
CLASS C SHARES
Inception (8/31/00) -2.31%
1 Year -7.98
CLASS R SHARES**
Inception -1.80%
1 Year -6.58
**Class R shares are generally only available to retirement plans such as
section 401 and 457 plans, section 403 plans sponsored by a section 501(c)(3)
organization and IRA rollovers from such plans if an AIM fund was offered. They
are sold at net asset value, that is, without up-front sales charges. Class R
shares were first offered on June 3, 2002. Returns prior to that date are
hypothetical results based on Class A share performance at net asset value,
adjusted to reflect Class R 12b-1 fees. (The inception date of Class A shares is
8/31/01.) Class R share returns do not include a 0.75% contingent deferred sales
charge that may be imposed on a total redemption of retirement plan assets
within the first year.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 12/31/02-6/30/03
excluding sales charges
CLASS A SHARES 15.92%
CLASS B SHARES 15.54
CLASS C SHARES 15.41
CLASS R SHARES 15.82
S&P 500 INDEX (Broad Market Index) 11.75
RUSSELL 2000--Registered Trademark-- INDEX
(Style-Specific Index) 17.88
LIPPER SMALL-CAP CORE FUND INDEX 14.33
(Peer Group Index)
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.
================================================================================
<Table>
<Caption>
==========================================================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 INDUSTRIES*
- --------------------------------------------------------------------------------------------------------------------------
1. iShares Russell 2000--Registered Trademark-- 1. Diversified Commercial Services 6.8%
Growth Index Fund 1.4%
2. Specialty Stores 4.7
2. Ultra Petroleum Corp. 1.3
3. Electronic Equipment Manufacturers 3.9
3. iDine Rewards Network Inc. 1.3
4. Thrifts & Mortgage Finance 3.2
4. Alliance Data Systems Corp. 1.3
5. Semiconductors 3.1
5. LandStar System, Inc. 1.2
6. Health Care Facilities 3.1
6. Louisiana-Pacific Corp. 1.2
7. Asset Management & Custody Banks 3.0
7. Advance Auto Parts, Inc. 1.2
8. Oil & Gas Exploration & Production 2.9
8. Sylvan Learning Systems, Inc. 1.2
9. Oil & Gas Equipment & Services 2.8
9. Key Energy Services, Inc. 1.2
10. Data Processing & Outsourced Services 2.7
10. Sierra Health Services, Inc. 1.2
*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.
==========================================================================================================================
</Table>
ABOUT INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information provided is as of 6/30/03 and is based
on total net assets.
o Effective July 1, 2003, after the close of the reporting period, the fund's
management team was composed of: Michael Chapman and Paul J. Rasplicka.
o AIM Small Cap Equity Fund's performance figures are historical, and they
reflect the reinvestment of distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Russell 2000--Registered Trademark-- Index represents the
performance of the stocks of small-capitalization companies.
o The unmanaged Lipper Small-Cap Core Fund Index represents an average of the
performance of the 30 largest small-capitalization core equity funds tracked
by Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses;
performance of a market index does not.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o In this report, industry classifications used are according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
To Our Shareholders
Dear Shareholder:
[PHOTO OF This is your report on AIM Small Cap Equity Fund for the six
ROBERT H. months ended June 30, 2003. Important information such as
GRAHAM] top holdings and performance as of the close of the
reporting period appears on the opposite page. This letter
DESPITE ECONOMIC will provide an overview of the markets and your fund during
SLUGGISHNESS, the six months covered by this report.
DOMESTIC EQUITY
MARKETS PERFORMED As always, timely information about your fund and the
WELL, markets in general is available at our Web site,
PARTICULARLY aiminvestments.com. From our home page, click on Products &
DURING THE SECOND Performance, then Mutual Funds, then AIM Funds, and then
HALF select the type of information you wish to view.
OF THE REPORTING
PERIOD. MARKET CONDITIONS
ROBERT H. GRAHAM
Economic sluggishness continued during the reporting period,
particularly in manufacturing. The manufacturing sector
contracted during four of the six months in the reporting period. The overall
economy grew only 1.4%, annualized, during the first quarter of the year. In the
second quarter, the advance estimate indicated that economic growth improved,
with the gross domestic product expanding at a 2.4% annualized rate.
In its Beige Book issued in June, the Federal Reserve Board (the Fed) noted
such factors as lackluster consumer spending, evidence of a sluggish service
sector, and weak commercial construction and real estate markets. The Fed kept
the short-term federal funds rate at 1.25% for most of the reporting period. On
June 25, it lowered that rate to 1.00%, a level not seen since 1958. The Fed
said it favored a more expansive monetary policy because the economy had not yet
exhibited sustainable growth.
Despite economic sluggishness, domestic equity markets performed well,
particularly during the second half of the reporting period. While virtually all
benchmarks of the U.S. equity market were negative for the first quarter of
2003, virtually all were positive for the second quarter. The S&P 500, for
example, returned -3.15% during the first quarter of 2003, but it was up 15.39%
for the second quarter, bringing its total return for the six months covered by
this report to 11.75%. The Standard & Poor's indexes of mid-cap and small-cap
stocks behaved in a similar fashion and also were positive for the reporting
period.
All sectors of the S&P 500 produced positive returns for the reporting
period. Information technology, consumer discretionary, and utilities were the
best-performing sectors; weakest were consumer staples, telecom-munications
services, and materials. Generally, mid- and small-cap stocks outperformed
large-cap stocks, and the growth investment style outperformed the value
investment style during the six-month reporting period.
YOUR FUND
All share classes of AIM Small Cap Equity Fund produced positive total returns
for the six months ended June 30, 2003, with Class A shares, for example,
producing total return of 15.92% at net asset value. The fund paced its
benchmark indexes, as shown on the opposite page.
The fund's management team during the reporting period of Michael Chapman,
James Gassman and Paul J. Rasplicka noted that performance was helped by
exposure to the information technology sector, one of the better-performing
sectors of the S&P 500 index. The fund's exposure to information technology was
higher at the close of the reporting period than it had been as the period
opened. In addition, the small-cap segment of the market, in which the fund
predominantly invests, did well.
As the reporting period closed, the fund had 114 holdings, with 96% of these
holdings in the small-cap segment of the stock market as defined by Lipper, Inc.
IN CLOSING
I thank you for your continued participation in AIM Small Cap Equity Fund, and
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor for help with your investment choices. And
as always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
June 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.72%
ADVERTISING-1.02%
ADVO, Inc.(a) 78,400 $ 3,480,960
========================================================================
AGRICULTURAL PRODUCTS-0.81%
Delta & Pine Land Co. 126,600 2,782,668
========================================================================
AIR FREIGHT & LOGISTICS-2.00%
Pacer International, Inc.(a) 200,000 3,772,000
- ------------------------------------------------------------------------
UTI Worldwide, Inc. (United Kingdom) 98,800 3,081,572
========================================================================
6,853,572
========================================================================
AIRLINES-0.63%
AirTran Holdings, Inc.(a) 204,800 2,144,256
========================================================================
ALTERNATIVE CARRIERS-0.79%
TALK America Holdings, Inc.(a) 248,200 2,707,862
========================================================================
APPAREL RETAIL-1.16%
Aeropostale, Inc.(a) 184,100 3,954,468
========================================================================
APPLICATION SOFTWARE-0.75%
Hyperion Solutions Corp.(a) 75,800 2,559,008
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.00%
Affiliated Managers Group, Inc.(a) 60,400 3,681,380
- ------------------------------------------------------------------------
American Capital Strategies, Ltd. 123,700 3,085,078
- ------------------------------------------------------------------------
MCG Capital Corp. 91,500 1,326,750
- ------------------------------------------------------------------------
W.P. Stewart & Co., Ltd. (Bermuda) 97,000 2,172,800
========================================================================
10,266,008
========================================================================
BIOTECHNOLOGY-0.90%
Serologicals Corp.(a) 225,600 3,074,928
========================================================================
BROADCASTING & CABLE TV-1.89%
Cumulus Media Inc.-Class A(a) 177,600 3,361,968
- ------------------------------------------------------------------------
Mediacom Communications Corp.(a) 312,300 3,082,401
========================================================================
6,444,369
========================================================================
BUILDING PRODUCTS-1.11%
ElkCorp. 169,300 3,809,250
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
CASINOS & GAMING-0.86%
Argosy Gaming Co.(a) 69,900 $ 1,461,609
- ------------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 158,100 1,486,140
========================================================================
2,947,749
========================================================================
COMMUNICATIONS EQUIPMENT-1.92%
Avocent Corp.(a) 55,700 1,667,101
- ------------------------------------------------------------------------
Inter-Tel, Inc. 95,200 2,020,144
- ------------------------------------------------------------------------
Plantronics, Inc.(a) 80,200 1,737,934
- ------------------------------------------------------------------------
Tekelec(a) 100,000 1,130,000
========================================================================
6,555,179
========================================================================
CONSTRUCTION & ENGINEERING-1.01%
Chicago Bridge & Iron Co. N.V.-New York
Shares (Netherlands) 151,700 3,440,556
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.48%
Wabash National Corp.(a) 117,000 1,641,510
========================================================================
CONSUMER FINANCE-1.28%
iDine Rewards Network Inc.(a) 320,000 4,368,000
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.70%
Alliance Data Systems Corp.(a) 183,300 4,289,220
- ------------------------------------------------------------------------
Certegy Inc.(a) 111,800 3,102,450
- ------------------------------------------------------------------------
iPayment Holdings, Inc.(a) 76,300 1,821,281
========================================================================
9,212,951
========================================================================
DIVERSIFIED BANKS-0.39%
Franklin Bancorp, Inc. (Acquired 10/29/02;
Cost $1,350,000)(a)(b)(c) 135,000 1,350,000
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-6.77%
Coinstar, Inc.(a) 174,000 3,281,640
- ------------------------------------------------------------------------
Corporate Executive Board Co. (The)(a) 40,000 1,621,200
- ------------------------------------------------------------------------
Kroll Inc.(a) 40,000 1,082,400
- ------------------------------------------------------------------------
Navigant Consulting, Inc.(a) 256,800 3,043,080
- ------------------------------------------------------------------------
NCO Group, Inc.(a) 128,800 2,306,808
- ------------------------------------------------------------------------
Sotheby's Holdings, Inc.-Class A(a) 225,000 1,674,000
- ------------------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 176,500 4,031,260
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Tetra Tech, Inc. 152,500 $ 2,612,325
- ------------------------------------------------------------------------
United Rentals, Inc.(a) 250,000 3,472,500
========================================================================
23,125,213
========================================================================
ELECTRIC UTILITIES-1.01%
Black Hills Corp. 112,500 3,453,750
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.85%
Amphenol Corp.-Class A(a) 46,700 2,186,494
- ------------------------------------------------------------------------
Itron, Inc.(a) 158,200 3,410,792
- ------------------------------------------------------------------------
ScanSource, Inc.(a) 145,100 3,881,425
- ------------------------------------------------------------------------
Varian Inc.(a) 106,300 3,685,421
========================================================================
13,164,132
========================================================================
ENVIRONMENTAL SERVICES-0.89%
Casella Waste Systems, Inc.-Class A(a) 338,700 3,058,461
========================================================================
FOOTWEAR-0.87%
Reebok International Ltd.(a) 88,400 2,972,892
========================================================================
FOREST PRODUCTS-1.19%
Louisiana-Pacific Corp.(a) 375,900 4,055,961
========================================================================
GENERAL MERCHANDISE STORES-0.51%
Fred's, Inc. 46,500 1,728,870
========================================================================
HEALTH CARE EQUIPMENT-0.78%
LifePoint, Inc.-Wts., expiring 04/02/07
(Acquired 04/02/02; Cost $0)(b)(d)(e) 80,000 0
- ------------------------------------------------------------------------
ResMed Inc. 68,400 2,681,281
========================================================================
2,681,281
========================================================================
HEALTH CARE FACILITIES-3.09%
Genesis Health Ventures, Inc.(a) 200,000 3,530,000
- ------------------------------------------------------------------------
United Surgical Partners International,
Inc.(a) 152,200 3,438,198
- ------------------------------------------------------------------------
VCA Antech, Inc.(a) 184,500 3,610,665
========================================================================
10,578,863
========================================================================
HEALTH CARE SERVICES-1.40%
Apria Healthcare Group Inc.(a) 59,300 1,475,384
- ------------------------------------------------------------------------
Cerner Corp.(a) 75,500 1,732,725
- ------------------------------------------------------------------------
IMPAC Medical Systems, Inc.(a) 76,000 1,586,880
========================================================================
4,794,989
========================================================================
HOUSEHOLD APPLIANCES-0.68%
Snap-on Inc. 79,600 2,310,788
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
INDUSTRIAL GASES-0.82%
Airgas, Inc. 168,300 $ 2,819,025
========================================================================
INDUSTRIAL MACHINERY-0.97%
Kennametal Inc. 97,600 3,302,784
========================================================================
INSURANCE BROKERS-0.72%
Hub International Ltd. (Canada) 143,600 2,455,560
========================================================================
INVESTMENT BANKING & BROKERAGE-1.21%
Friedman, Billings, Ramsey Group, Inc.-Class
A 265,720 3,560,648
- ------------------------------------------------------------------------
LaBranche & Co. Inc. 27,600 571,044
========================================================================
4,131,692
========================================================================
IT CONSULTING & OTHER SERVICES-1.59%
Acxiom Corp.(a) 186,400 2,812,776
- ------------------------------------------------------------------------
ManTech International Corp.-Class A(a) 94,300 1,808,674
- ------------------------------------------------------------------------
Titan Corp. (The)(a) 77,500 797,475
========================================================================
5,418,925
========================================================================
LEISURE PRODUCTS-0.55%
Leapfrog Enterprises, Inc.-Class A(a) 58,900 1,873,609
========================================================================
LIFE & HEALTH INSURANCE-1.12%
American Medical Security Group, Inc.(a) 200,600 3,831,460
========================================================================
MANAGED HEALTH CARE-1.67%
Coventry Health Care, Inc.(a) 37,800 1,744,848
- ------------------------------------------------------------------------
Sierra Health Services, Inc.(a) 198,700 3,974,000
========================================================================
5,718,848
========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.11%
MDU Resources Group, Inc. 113,800 3,811,162
========================================================================
MUTUAL FUNDS-2.39%
iShares Nasdaq Biotechnology Index Fund(a) 48,800 3,269,112
- ------------------------------------------------------------------------
iShares Russell 2000 Growth Index Fund 103,100 4,907,560
========================================================================
8,176,672
========================================================================
OFFICE ELECTRONICS-0.99%
Zebra Technologies Corp.-Class A(a) 44,800 3,368,512
========================================================================
OFFICE SERVICES & SUPPLIES-1.61%
Danka Business Systems PLC-ADR (United
Kingdom)(a) 522,300 2,015,555
- ------------------------------------------------------------------------
Moore Wallace Inc. (Canada)(a) 238,000 3,493,840
========================================================================
5,509,395
========================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-2.82%
FMC Technologies, Inc.(a) 155,900 $ 3,281,695
- ------------------------------------------------------------------------
Key Energy Services, Inc.(a) 375,000 4,020,000
- ------------------------------------------------------------------------
W-H Energy Services, Inc.(a) 120,100 2,339,548
========================================================================
9,641,243
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.89%
Comstock Resources, Inc.(a) 140,000 1,915,200
- ------------------------------------------------------------------------
Ultra Petroleum Corp.(a) 353,800 4,567,558
- ------------------------------------------------------------------------
Westport Resources Corp.(a) 149,300 3,396,575
========================================================================
9,879,333
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.32%
Oxford Finance Corp. (Acquired 03/25/02; Cost
$1,500,000)(b)(c) 150,000 1,102,500
========================================================================
PACKAGED FOODS & MEATS-0.70%
Flowers Foods, Inc. 121,200 2,394,912
========================================================================
PERSONAL PRODUCTS-0.64%
NBTY, Inc.(a) 103,300 2,175,498
========================================================================
PHARMACEUTICALS-2.03%
Axcan Pharma Inc. (Canada)(a) 150,700 1,891,285
- ------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 58,200 3,299,940
- ------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 31,700 1,739,696
========================================================================
6,930,921
========================================================================
PROPERTY & CASUALTY INSURANCE-0.97%
Infinity Property & Casualty Corp. 140,000 3,309,600
========================================================================
RAILROADS-0.91%
Genesee & Wyoming Inc.-Class A(a) 150,500 3,095,785
========================================================================
REAL ESTATE-2.26%
American Financial Realty Trust 55,000 820,050
- ------------------------------------------------------------------------
American Financial Realty Trust (Acquired
09/04/02; Cost $2,902,000)(b)(c)(e) 290,200 3,894,194
- ------------------------------------------------------------------------
MFA Mortgage Investments, Inc. 300,000 3,012,000
========================================================================
7,726,244
========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.74%
Corrections Corp. of America(a) 100,000 2,533,000
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
REGIONAL BANKS-0.47%
East West Bancorp, Inc. 44,600 $ 1,611,844
========================================================================
REINSURANCE-2.24%
IPC Holdings, Ltd. (Bermuda) 113,700 3,808,950
- ------------------------------------------------------------------------
Platinum Underwriters Holdings, Ltd.
(Bermuda) 141,200 3,832,168
========================================================================
7,641,118
========================================================================
RESTAURANTS-1.72%
Landry's Restaurants, Inc. 115,100 2,716,360
- ------------------------------------------------------------------------
Ruby Tuesday, Inc. 127,900 3,162,967
========================================================================
5,879,327
========================================================================
SEMICONDUCTOR EQUIPMENT-0.88%
FEI Co.(a) 160,400 3,009,104
========================================================================
SEMICONDUCTORS-3.12%
Actel Corp.(a) 165,300 3,388,650
- ------------------------------------------------------------------------
DSP Group, Inc.(a) 182,800 3,935,684
- ------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 106,800 3,356,724
========================================================================
10,681,058
========================================================================
SPECIALTY STORES-4.66%
Advance Auto Parts, Inc.(a) 66,200 4,031,580
- ------------------------------------------------------------------------
Big 5 Sporting Goods Corp.(a) 141,200 1,769,236
- ------------------------------------------------------------------------
Guitar Center Inc.(a) 132,500 3,842,500
- ------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 48,200 3,654,042
- ------------------------------------------------------------------------
Select Comfort Corp.(a) 160,500 2,628,990
========================================================================
15,926,348
========================================================================
TECHNOLOGY DISTRIBUTORS-1.13%
Global Imaging Systems, Inc.(a) 167,300 3,874,668
========================================================================
THRIFTS & MORTGAGE FINANCE-3.18%
Charter Municipal Mortgage Acceptance Co. 42,400 806,024
- ------------------------------------------------------------------------
First Niagara Financial Group, Inc. 265,000 3,699,400
- ------------------------------------------------------------------------
Saxon Capital Acquisition Corp.(a)(e) 70,000 1,209,600
- ------------------------------------------------------------------------
Saxon Capital, Inc.(a) 184,700 3,210,086
- ------------------------------------------------------------------------
TierOne Corp.(a) 100,000 1,947,000
========================================================================
10,872,110
========================================================================
TRUCKING-1.55%
Dollar Thrifty Automotive Group, Inc.(a) 58,000 1,075,900
- ------------------------------------------------------------------------
Landstar System, Inc.(a) 67,400 4,236,090
========================================================================
5,311,990
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $257,515,567) 313,532,741
========================================================================
</Table>
F-3
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
MONEY MARKET FUNDS-8.17%
STIC Liquid Assets Portfolio(f) 13,962,620 $ 13,962,620
- ------------------------------------------------------------------------
STIC Prime Portfolio(f) 13,962,620 13,962,620
========================================================================
Total Money Market Funds (Cost
$27,925,240) 27,925,240
========================================================================
TOTAL INVESTMENTS-99.89% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $285,440,807) 341,457,981
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-19.11%
STIC Liquid Assets Portfolio(f)(g) 32,669,628 $ 32,669,628
- ------------------------------------------------------------------------
STIC Prime Portfolio(f)(g) 32,669,629 32,669,629
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $65,339,257) 65,339,257
========================================================================
TOTAL INVESTMENTS-119.00% (Cost $350,780,064) 406,797,238
========================================================================
OTHER ASSETS LESS LIABILITIES-(19.00%) (64,964,958)
========================================================================
NET ASSETS-100.00% $341,832,280
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at 06/30/03 was $6,346,694 which represented
1.86% of the Fund's net assets.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 06/30/03 was $6,346,694,
which represented 1.86% of the Fund's net assets.
(d) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(e) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
(g) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
F-4
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$350,780,064)* $406,797,238
- -----------------------------------------------------------
Receivables for:
Investments sold 5,085,623
- -----------------------------------------------------------
Fund shares sold 1,174,221
- -----------------------------------------------------------
Dividends 354,368
- -----------------------------------------------------------
Investment for deferred compensation plan 12,203
- -----------------------------------------------------------
Other assets 36,622
===========================================================
Total assets 413,460,275
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 4,771,087
- -----------------------------------------------------------
Fund shares reacquired 866,670
- -----------------------------------------------------------
Deferred compensation plan 12,203
- -----------------------------------------------------------
Collateral upon return of securities loaned 65,339,257
- -----------------------------------------------------------
Accrued distribution fees 371,179
- -----------------------------------------------------------
Accrued transfer agent fees 215,241
- -----------------------------------------------------------
Accrued operating expenses 52,358
===========================================================
Total liabilities 71,627,995
===========================================================
Net assets applicable to shares outstanding $341,832,280
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $358,371,874
- -----------------------------------------------------------
Undistributed net investment income (loss) (1,404,257)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (71,152,511)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities 56,017,174
===========================================================
$341,832,280
___________________________________________________________
===========================================================
NET ASSETS:
Class A $171,308,694
___________________________________________________________
===========================================================
Class B $118,914,162
___________________________________________________________
===========================================================
Class C $ 50,970,945
___________________________________________________________
===========================================================
Class R $ 638,479
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 17,960,124
___________________________________________________________
===========================================================
Class B 12,694,601
___________________________________________________________
===========================================================
Class C 5,442,653
___________________________________________________________
===========================================================
Class R 67,078
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 9.54
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $9.54 divided by
94.50%) $ 10.10
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 9.37
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 9.37
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 9.52
___________________________________________________________
===========================================================
</Table>
* At June 30, 2003, securities with an aggregate market value of $64,180,547
were on loan to brokers.
See Notes to Financial Statements.
F-5
STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $4,676) $ 1,358,495
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 100,885
- -------------------------------------------------------------------------
Security lending income 171,001
=========================================================================
Total investment income 1,630,381
=========================================================================
EXPENSES:
Advisory fees 1,233,968
- -------------------------------------------------------------------------
Administrative services fees 48,266
- -------------------------------------------------------------------------
Custodian fees 31,025
- -------------------------------------------------------------------------
Distribution fees -- Class A 255,725
- -------------------------------------------------------------------------
Distribution fees -- Class B 504,698
- -------------------------------------------------------------------------
Distribution fees -- Class C 214,684
- -------------------------------------------------------------------------
Distribution fees -- Class R 852
- -------------------------------------------------------------------------
Transfer agent fees 735,244
- -------------------------------------------------------------------------
Trustees' fees 5,383
- -------------------------------------------------------------------------
Other 132,879
=========================================================================
Total expenses 3,162,724
=========================================================================
Less: Fees waived and expenses paid indirectly (8,733)
=========================================================================
Net expenses 3,153,991
=========================================================================
Net investment income (loss) (1,523,610)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from investment securities and
option contracts (9,752,160)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 57,169,430
=========================================================================
Net gain from investment securities and option contracts 47,417,270
=========================================================================
Net increase in net assets resulting from operations $45,893,660
_________________________________________________________________________
=========================================================================
</Table>
See Notes to Financial Statements.
F-6
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2003 and the year ended December 31, 2002
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
- ---------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,523,610) $ (2,453,128)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (9,752,160) (51,756,756)
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 57,169,430 (25,094,706)
=============================================================================================
Net increase (decrease) in net assets resulting from
operations 45,893,660 (79,304,590)
=============================================================================================
Share transactions-net:
Class A 7,037,345 75,475,822
- ---------------------------------------------------------------------------------------------
Class B 3,881,056 63,981,320
- ---------------------------------------------------------------------------------------------
Class C 3,128,560 22,474,509
- ---------------------------------------------------------------------------------------------
Class R 501,123 56,926
=============================================================================================
Net increase in net assets resulting from share
transactions 14,548,084 161,988,577
=============================================================================================
Net increase in net assets 60,441,744 82,683,987
=============================================================================================
NET ASSETS:
Beginning of period 281,390,536 198,706,549
=============================================================================================
End of period $341,832,280 $281,390,536
_____________________________________________________________________________________________
=============================================================================================
</Table>
See Notes to Financial Statements.
F-7
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 twelve 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 at 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. 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 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
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from
F-8
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.
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. 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. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to 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 Fund's
average daily net assets. 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 six months ended June 30, 2003, AIM
waived fees of $1,904.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended June 30, 2003, AIM was
paid $48,266 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 2003, AFS
retained $317,283 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Class R shares of the Fund. The Trust has adopted
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the
average daily net assets of Class B and Class C shares and 0.50% of the average
daily net assets of Class R shares. Of these amounts, the Fund may pay a service
fee of 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
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended June 30, 2003, the Class A, Class B, Class C and
Class R shares paid $255,725, $504,698, $214,684 and $852, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended June 30, 2003, AIM
Distributors retained $53,821 in front-end sales commissions from the sale of
Class A shares and $180, $0, $7,565 and $0 for Class A, Class B, Class C and
Class R shares, respectively, for CDSCs imposed upon redemptions by
shareholders.
F-9
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended June 30, 2003, the Fund paid legal fees of
$1,573 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended June 30, 2003, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $4,694 and reductions in custodian
fees of $2,135 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $6,829.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee 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 all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
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 six months ended June 30, 2003, the Fund did not borrow or lend
under the interfund lending facility or borrow under either the committed line
of credit facility or the uncommitted unsecured revolving line of credit
facility.
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 June 30, 2003, securities with an aggregate value of $64,180,547 were on
loan to brokers. The loans were secured by cash collateral of $65,339,257
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2003, the Fund received fees of $171,001 for
securities lending.
NOTE 7--CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ----------------------------------------------------------
Beginning of period -- $ --
- ----------------------------------------------------------
Written 1,250 146,942
- ----------------------------------------------------------
Exercised (1,250) (146,942)
==========================================================
End of period -- $ --
__________________________________________________________
==========================================================
</Table>
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2008 $ 700,371
- ----------------------------------------------------------
December 31, 2009 8,314,191
- ----------------------------------------------------------
December 31, 2010 51,195,091
==========================================================
Total capital loss carryforward $60,209,653
__________________________________________________________
==========================================================
</Table>
F-10
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2003 was $180,938,271 and $179,726,423, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of June 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $58,356,935
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,004,586)
===========================================================================
Net unrealized appreciation of investment securities $55,352,349
___________________________________________________________________________
===========================================================================
Cost of investments for tax purposes is $351,444,889.
</Table>
NOTE 10--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares,
Class B shares, Class C shares and Class R shares. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
CDSC. Class R shares are sold at net asset value. Under some circumstances,
Class A shares and Class R shares are subject to CDSCs. 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 during the six
months ended June 30, 2003 and the year ended December 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,380,307 $ 36,723,428 20,734,085 $ 207,041,581
- ------------------------------------------------------------------------------------------------------------------------
Class B 2,235,722 18,645,352 10,459,416 103,695,654
- ------------------------------------------------------------------------------------------------------------------------
Class C 1,107,771 9,228,791 4,842,924 46,658,247
- ------------------------------------------------------------------------------------------------------------------------
Class R* 68,015 566,448 6,714 56,937
========================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 112,722 971,180 172,467 1,560,774
- ------------------------------------------------------------------------------------------------------------------------
Class B (114,682) (971,180) (174,243) (1,560,774)
========================================================================================================================
Reacquired:
Class A (3,620,192) (30,657,263) (14,135,868) (133,126,533)
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,701,777) (13,793,116) (4,344,297) (38,153,560)
- ------------------------------------------------------------------------------------------------------------------------
Class C (737,285) (6,100,231) (2,695,124) (24,183,738)
- ------------------------------------------------------------------------------------------------------------------------
Class R* (7,650) (65,325) (1) (11)
========================================================================================================================
1,722,951 $ 14,548,084 14,866,073 $ 161,988,577
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
* Class R shares commenced sales on June 3, 2002.
F-11
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------------- DECEMBER 31,
2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.23 $ 10.19 $ 9.36 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.05)(a) (0.05)(a) (0.00)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.34 (1.91) 0.88 (0.64)
=================================================================================================================================
Total from investment operations 1.31 (1.96) 0.83 (0.64)
=================================================================================================================================
Less dividends from net investment income -- -- (0.00) --
=================================================================================================================================
Net asset value, end of period $ 9.54 $ 8.23 $ 10.19 $ 9.36
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 15.92% (19.23)% 8.92% (6.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $171,309 $140,652 $105,146 $32,805
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.86%(c) 1.67% 1.78% 1.78%(d)(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.73)%(c) (0.54)% (0.57)% (0.12)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 65% 117% 123% 49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$147,339,261.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 2.72% (annualized).
(e) Annualized.
(f) Not annualized for periods less than one year.
F-12
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.11 $ 10.11 $ 9.33 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.11)(a) (0.11)(a) (0.03)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.32 (1.89) 0.89 (0.64)
===========================================================================================================================
Total from investment operations 1.26 (2.00) 0.78 (0.67)
===========================================================================================================================
Net asset value, end of period $ 9.37 $ 8.11 $ 10.11 $ 9.33
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 15.54% (19.78)% 8.36% (6.70)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $118,914 $99,551 $64,012 $16,385
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.51%(c) 2.32% 2.44% 2.49%(d)(e)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.38)%(c) (1.19)% (1.23)% (0.83)%(e)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 65% 117% 123% 49%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$101,776,198.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 3.43% (annualized).
(e) Annualized.
(f) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS C
-------------------------------------------------------------
AUGUST 31,
2000
SIX MONTHS YEAR ENDED (DATE OPERATIONS
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.11 $ 10.10 $ 9.34 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06)(a) (0.11)(a) (0.11)(a) (0.03)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.32 (1.88) 0.87 (0.63)
===========================================================================================================================
Total from investment operations 1.26 (1.99) 0.76 (0.66)
===========================================================================================================================
Net asset value, end of period $ 9.37 $ 8.11 $ 10.10 $ 9.34
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 15.54% (19.70)% 8.14% (6.60)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $50,971 $41,132 $29,548 $9,028
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 2.51%(c) 2.32% 2.44% 2.49%(d)(e)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.38)%(c) (1.19)% (1.23)% (0.83)%(e)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 65% 117% 123% 49%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(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 annualized and based on average daily net assets of
$43,292,646.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 3.43% (annualized).
(e) Annualized.
(f) Not annualized for periods less than one year.
F-13
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS R
---------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.22 $ 10.58
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.04)(a)
- -----------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.34 (2.32)
=========================================================================================
Total from investment operations 1.30 (2.36)
=========================================================================================
Net asset value, end of period $ 9.52 $ 8.22
_________________________________________________________________________________________
=========================================================================================
Total return(b) 15.82% (22.31)%
_________________________________________________________________________________________
=========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 638 $ 55
_________________________________________________________________________________________
=========================================================================================
Ratio of expenses to average net assets 2.01%(c) 1.92%(d)
=========================================================================================
Ratio of net investment income (loss) to average net assets (0.88)%(c) (0.78)%(d)
_________________________________________________________________________________________
=========================================================================================
Portfolio turnover rate(e) 65% 117%
_________________________________________________________________________________________
=========================================================================================
</Table>
(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 $343,568.
(d) Annualized.
(e) Not annualized for periods less than one year.
F-14
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Frank S. Bayley Robert H. Graham 11 Greenway Plaza
Bruce L. Crockett Chairman and President Suite 100
Albert R. Dowden Houston, TX 77046
Edward K. Dunn Jr. Mark H. Williamson
Jack M. Fields Executive Vice President INVESTMENT ADVISOR
Carl Frischling A I M Advisors, Inc.
Robert H. Graham Kevin M. Carome 11 Greenway Plaza
Prema Mathai-Davis Senior Vice President Suite 100
Lewis F. Pennock Houston, TX 77046
Ruth H. Quigley Gary T. Crum
Louis S. Sklar Senior Vice President TRANSFER AGENT
Mark H. Williamson A I M Fund Services, Inc.
Dana R. Sutton P.O. Box 4739
Vice President and Treasurer Houston, TX 77210-4739
Robert G. Alley CUSTODIAN
Vice President State Street Bank and Trust Company
225 Franklin Street
Stuart W. Coco Boston, MA 02110
Vice President
COUNSEL TO THE FUND
Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll, LLP
1735 Market Street
Karen Dunn Kelley Philadelphia, PA 19103
Vice President
COUNSEL TO THE TRUSTEES
Edgar M. Larsen Kramer, Levin, Naftalis & Frankel LLP
Vice President 919 Third Avenue
New York, NY 10022
Nancy L. Martin
Secretary DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Asia Pacific Growth Fund TAXABLE
AIM Developing Markets Fund
AIM Aggressive Growth Fund AIM European Growth Fund AIM Floating Rate Fund
AIM Balanced Fund* AIM European Small Company Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM Global Aggressive Growth Fund AIM Income Fund
AIM Basic Value Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(5,6)
AIM Capital Development Fund AIM Global Value Fund(4) AIM Money Market Fund
AIM Charter Fund AIM International Core Equity Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund
AIM Diversified Dividend Fund(1) TAX-FREE
AIM Emerging Growth Fund SECTOR EQUITY
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(5,6)
AIM Mid Cap Core Equity Fund AIM Global Science and Technology Fund
AIM Mid Cap Growth Fund AIM Global Utilities Fund
AIM Opportunities I Fund(2) AIM New Technology Fund
AIM Opportunities II Fund(2) AIM Real Estate Fund
AIM Opportunities III Fund(2)
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(3)
AIM Weingarten Fund
*Domestic equity and income fund
</Table>
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) Effective October 1, 2002, the fund was reopened
to new investors. (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) Class A
shares closed to new investors on October 30, 2002. 6Class A3 shares were first
offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. If used after October 20, 2003, 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 $147 billion in assets for approximately 11
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $348 billion in assets
under management. As of June 30, 2003.
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
[AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.
--Servicemark--
AIMinvestments.com SCE-SAR-1
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. [RESERVED]
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.
As of June 20, 2003, an evaluation was performed under the supervision and with
the participation of the officers of AIM Funds Group (the "Funds"), including
the Principal Executive Officer ("PEO") and Principal Financial Officer ("PFO"),
of the effectiveness of the Company's disclosure controls and procedures. Based
on that evaluation, the Fund's officers, including the PEO and PFO, concluded
that, as of June 20, 2003, the Fund's disclosure controls and procedures were
reasonably designed so as to ensure that material information relating to the
Funds is made known to the PEO and PFO. There have been no significant changes
in the Fund's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation and until the
filing of this report, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.
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.
By: /s/ ROBERT H. GRAHAM
-------------------------------
Robert H. Graham
Principal Executive Officer
Date: September 3, 2003
By: /s/ DANA R. SUTTON
------------------------------
Dana R. Sutton
Principal Financial Officer
Date: September 3, 2003
EXHIBIT INDEX
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.