<PAGE> 1
ANNUAL REPORT / JULY 31 2000
AIM MID CAP OPPORTUNITIES FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
THE ARTIST'S GARDEN AT VETHEUIL BY CLAUDE MONET
A BEAUTIFUL GARDEN, SUCH AS THE ONE DEPICTED IN MONET'S CLASSIC
PAINTING, IS USUALLY A PLEASING COMBINATION OF MANY DIFFERENT
FLOWERING PLANTS. SIMILARLY, IN AIM MID CAP OPPORTUNITIES
FUND, WE SEEK TO OWN THE STOCKS OF A BROAD CROSS-SECTION OF
RAPIDLY GROWING MID-SIZED COMPANIES IN AN EFFORT TO PRODUCE
ATTRACTIVE TOTAL RETURN.
-------------------------------------
AIM Mid Cap Opportunities Fund is for shareholders who seek long-term growth of
capital by investing in a portfolio consisting primarily of the stocks of
medium-sized companies which management believes involve "special
opportunities."
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Mid Cap Opportunities 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 Class B and Class C shares will differ from
that of its Class A shares due to different sales-charge structure and class
expenses.
o The fund's average annual total returns (including sales charges) for the
period ended 6/30/00 (the most recent calendar quarter-end) are as follows:
Class A shares, one year, 71.96%; inception (12/30/98), 84.61%, Class B
shares, inception (11/12/99), 29.03%. Class C shares, inception (11/12/99),
33.03%. Because the fund's Class B and Class C shares have been offered for
less than a year, total returns provided are cumulative total returns that
have not been annualized.
o Effective as of the close of business on 3/21/00, the fund was closed to new
investors.
o During the fiscal year ended 7/31/00, the fund paid distributions of $1.8571
per share for Class A shares and $0.0104 per share for Class B and C shares.
o The fund participates in the initial public offering (IPO) market, and a
significant portion of its returns may be attributable to its investment in
IPOs, which may have a magnified impact due to the fund's relatively small
asset base. As the fund's assets grow, it is probable that the effect of its
investment in IPOs on its total return will decline, which may reduce the
fund's total return.
o Leveraging and short-selling, along with other hedging strategies, may
present higher risks, but also offer greater potential rewards. Short sales
are riskier because they rely on the managers' ability to anticipate a
security's future value.
o Investing in micro-, small and mid-sized companies may involve risks not
associated with investing in more established companies. Also, micro and
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.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper Mid-Cap Growth Fund Index represents an average of the
performance of the 30 largest mid-capitalization growth funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged Standard & Poor's MidCap 400 index (the S&P 400) represents
the performance of mid-capitalization stocks.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is widely regarded as representative of the performance of the U.S. stock
market.
o An investment cannot be made in an Index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NEITHER GUARANTEED
NOR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM MID CAP OPPORTUNITIES FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
When we started AIM in 1976, we had only a table, two chairs
[PHOTO OF and a telephone. At the time, Bob Graham, Gary Crum and I
Charles T. had the idea of creating a mutual fund company that put
Bauer, people first. Our slogan, "people are the product," means
Chairman of that people -- our employees and our investors -- are our
the Board of company.
THE FUND Almost a quarter-century later, we've grown to more than
APPEARS HERE] eight million investors, with $176 billion in assets under
management. Over that time, the industry as a whole has
[PHOTO OF grown from $51 billion in assets to more than $7 trillion
Robert H. today. I never dreamed we would see such phenomenal growth.
Graham You are the main reason for our success, and I want you to
APPEARS HERE] know how much I appreciate your loyalty and trust over the
past 24 years.
Usually in this letter I review market activity during
the period covered by the report. This time, I'd just like
to say thank you. I am retiring as chairman of the AIM Funds effective September
30, and as chairman of AIM effective December 31, 2000. Bob Graham, whose
picture appears under mine, will succeed me as AIM's chairman and chairman of
the AIM Funds. Gary Crum will remain president of A I M Capital Management,
Inc., leading our investment division. I am enormously proud to leave AIM in
such capable hands.
I'm also very proud of our team of employees, now more than 2,500 strong.
Because of their collective commitment to excellence and ethical business
practices, AIM has earned the trust of investors and financial advisors alike.
And every employee, from portfolio managers to client services representatives,
is dedicated to serving our shareholders.
Rest assured that nothing at AIM will change because of my retirement. You
can still depend on this company to manage your money responsibly and provide
you with top-notch service. As chairman of AIM and chairman of the AIM Funds,
Bob is committed to preserving the things that have made AIM great in the past
and positioning it to succeed in the future. And Gary is dedicated to
maintaining the quality and long-term performance you've come to expect from
AIM.
In the pages that follow, the managers of your fund comment on recent market
activity, how they have managed your fund over the past year and their outlook
for the coming months. We trust you will find their comments helpful.
If you have any questions or comments, please contact us through our Web
site, www.aimfunds.com, or call our Client Services department at 800-959-4246
during normal business hours. Information about your account is available at
our Web site and on our automated AIM Investor Line, 800-246-5463.
Thank you again for the support and trust you've shown us. I feel privileged
to have helped you with your financial goals, and I wish you success in all your
endeavors.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
AIM MID CAP OPPORTUNITIES FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND PRODUCES OUTSTANDING RETURNS DESPITE ROLLER-COASTER MARKET
MARKET TURBULENCE HAS BEEN IN THE NEWS A LOT THIS YEAR. HOW HAS THE FUND
PERFORMED?
The fund achieved exceptional performance for the year ended July 31, 2000.
Total return for the fund's Class A shares was an impressive 65.58% at net
asset value, that is, excluding sales charges. These results far surpassed the
returns of the fund's benchmarks: 47.39% for the Lipper Mid-Cap Growth Fund
Index and 21.41% for the S&P 400. The S&P 500, regarded as a measure of the
stock market in general, produced a return of 8.97%. That means the fund's
Class A shares returned more than seven times as much as the stock market as a
whole. Of course, as always, we must remind our shareholders that past
performance cannot guarantee comparable future results.
Class B and Class C shares have been in existence only since November 12,
1999, but since their inception, Class B shares returned 31.95% and Class C
shares returned 31.90%, at net asset value. Because the fund's Class B and
Class C shares have been offered for less than a year, these are cumulative
total returns.
WHAT WERE THE KEY TRENDS IN THE STOCK MARKET?
While stock valuations continued to rise during the latter part of 1999,
volatility has gripped the equity markets in 2000. In the spring, investors
questioned the high market valuations of many technology-oriented stocks and
withdrew from that sector in droves, effecting a major price correction.
As the burgeoning economy continued to drive up demand for credit, the
Federal Reserve Board (the Fed) worried that excessively rapid growth would set
off inflation, and continued to raise the federal funds rate to dampen demand.
The Fed, which launched a monetary tightening policy in June 1999, raised the
key federal funds rate--the rate banks charge one another for overnight
loans--from 6.0% to 6.5% at its May 16 meeting.
Markets rallied in June as key economic data, such as housing starts and
retail sales, indicated that the economy might be slowing, diminishing the
possibility of further Fed rate hikes. The Fed left rates unchanged at its June
meeting, but its future actions will depend on what the economy does.
WHAT WAS BEHIND THE FUND'S SOLID PERFORMANCE IN A DIFFICULT MARKET?
We credit stock selection for the fund's impressive performance. In choosing
holdings for the portfolio, we seek to own mid-cap stocks of companies with
sound fundamentals and accelerating earnings growth. The fund invests primarily
in the stocks of companies that we believe represent "special opportunities."
These include companies that have made significant technological advances or
discoveries, or that are taking advantage of positive or negative changes in
the competitive outlook for a company or an industry. Special opportunities can
also arise from changes in economic or political circumstances, or from
important management changes within the company itself.
A significant portion of the fund's return is attributable to its
participation in the initial public offering (IPO) market. IPOs have a
magnified impact on results because of the fund's relatively small asset base.
There is no guarantee that as the fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
The fund also benefited from its alternative investment strategy.
CAN YOU DESCRIBE THIS ALTERNATIVE INVESTMENT STRATEGY?
Owning the stocks of companies expected to experience strong earnings growth is
only one of the ways the fund seeks to generate total return. The fund can also
employ short-selling and leveraging. The fund can borrow the stocks of firms
expected to experience declining earnings. These borrowed stocks (short
positions) are subsequently sold, with the intention of buying them later at a
price we anticipate will be lower. We believe that a mixed portfolio of owned
and borrowed stocks (long and short positions) can potentially protect the fund
during market downturns while allowing it to take advantage of market rallies.
Leveraging involves borrowing money, usually to buy additional stocks.
HOW WAS THE FUND STRUCTURED AT THE END OF THE FISCAL YEAR?
As of July 31, 2000, the fund had 132 long positions. Technology stocks made up
39% of the portfolio. Although tech stocks were extremely volatile during the
reporting period, the fund avoided most of the damage, since it was not heavily
involved with the parts of the sector that were most vulnerable to the spring
sell-off.
[BAR GRAPH]
TOTAL RETURNS
Year ended 7/31/00, at net asset value
================================================================================
FUND CLASS A SHARES 65.58%
LIPPER MID-CAP GROWTH FUND INDEX 47.39%
S&P 400 MIDCAP INDEX 21.41%
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
See important fund and index disclosures inside front cover.
AIM MID-CAP OPPORTUNITIES FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGER'S OVERVIEW
Energy stocks were the next-largest segment at 11%, with capital goods third
at 6%. Please note that our sector weightings were the result of our
earnings-based stock-selection process, not macroeconomic predictions. We found
more companies with excellent growth prospects in the technology, energy and
capital-goods sectors.
WHAT WERE A FEW OF THE TECH STOCKS IN THE PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
o ADC Telecommunications is a global supplier of broadband transmission and
networking systems for cable television, broadcast, wireless and enterprise
networks.
o Check Point Software Technologies provides infrastructure for Internet
security, especially for business-to-business communications.
o Scientific-Atlanta produces video-compression systems, remote-monitoring
systems and fiber-optic and coaxial cable-based broadband access systems.
o Veeco Instruments manufactures metrology tools, ion-beam etching and
deposition equipment, and X-ray fluorescence systems used in fabricating
microelectronic components.
o Methode Electronics produces electrical, electronic and optical components
for manufacturers of information-processing, communications and networking
equipment.
o Comverse Technology's platforms enable wireless, wireline and Internet
companies to provide message-processing and personal-communication services.
WHAT OTHER STOCKS PERFORMED WELL FOR THE FUND?
o Newport Corp. operates the Port of Newcastle, one of Australia's major
shipping ports for bulk export shipments, especially coal and metals.
o Univision Communications operates a 14-nation Spanish-language television
production and distribution system providing news, information and
entertainment.
o Medicis Pharmaceutical develops and markets dermatological-treatment
products.
o Harley-Davidson produces an extensive line of motorcycles and related
products and services bearing the firm's popular brand name.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
The near-term outlook for stocks could depend to a large extent on the Fed's
ability to bring the economy to a "soft landing." If Fed policy succeeds in
keeping economic growth at a sustainably low rate and in keeping inflation at
bay, there may be no need for further interest-rate increases. Such an
environment could prolong the current record economic expansion, helping to
sustain corporate earnings growth, which could prove favorable for stocks.
The Fed left interest rates unchanged at its meeting in August, after the
reporting period ended, but if new evidence indicates that economic growth is
not slowing enough, rates could rise again later in the year. Uncertainty over
the Fed's actions and other factors could perpetuate the volatility that has
characterized markets in recent months. In such an environment, investors would
be well advised to take a long-term perspective on their investment.
PORTFOLIO COMPOSITION
As of 7/31/00, based on total net assets
<TABLE>
<CAPTION>
=======================================================================================================================
TOP 10 STOCK HOLDINGS TOP 10 INDUSTRIES
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. ADC Telecommunications, Inc. 2.92% 1. Computers (Software & Services) 13.87%
2. Check Point Software Technologies Ltd. (Israel) 1.92 2. Communications Equipment 12.10
3. Scientific-Atlanta, Inc. 1.75 3. Oil & Gas (Drilling & Equipment) 8.60
4. Veeco Instruments Inc. 1.73 4. Electrical Equipment 6.10
5. Methode Electronics, Inc. -- Class A 1.67 5. Investments 5.77
6. Newport Corp. 1.45 6. Electronics (Instrumentation) 4.31
7. Univision Communications Inc. -- Class A 1.37 7. Electronics (Semiconductors) 4.05
8. Medicis Pharmaceutical Corp. -- Class A 1.36 8. Broadcasting (Television, Radio & Cable) 3.48
9. Comverse Technology, Inc. 1.34 9. Retail (Specialty) 3.30
10. Harley-Davidson, Inc. 1.30 10. Services (Data Processing) 2.81
<CAPTION>
TOP 10 SHORT POSITIONS
<S> <C>
1. UnitedHealth Group Inc. 1.00%
2. Stryker Corp. 0.98
3. Orthodontic Centers of America, Inc. 0.90
4. Express Scripts, Inc. -- Class A 0.86
5. Fastenal Co. 0.82
6. Yahoo! Inc. 0.79
7. Silicon Storage Technology, Inc. 0.72
8. Newell Rubbermaid Inc. 0.72
9. Metris Companies Inc. 0.56
10. QUALCOMM Inc. 0.53
Please keep in mind that the fund's portfolio is subject to change, and there
is no assurance that the fund will continue to hold any particular security.
=======================================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM MID CAP OPPORTUNITIES FUND VS. BENCHMARK INDEXES
12/30/98-7/31/00
HYPO CHART
<TABLE>
================================================================================
<CAPTION>
AIM Mid Cap Lipper Mid Cap S&P Mid-Cap
Opportunities Growth Fund 400
Fund Index Index
------------- -------------- -------------
<S> <C> <C> <C>
12/30/99 9,450 10,000 10,000
2/99 9,848 9,681 9,107
3/99 11,257 10,371 9,362
4/99 12,476 10,797 10,100
5/99 13,119 10,752 10,145
6/99 13,771 11,618 10,687
7/99 14,915 11,459 10,460
8/99 15,529 11,401 10,102
9/99 16,219 11,734 9,790
10/99 17,032 12,772 10,289
11/99 19,228 14,374 10,829
12/99 21,319 17,372 11,472
1/00 21,235 17,074 11,149
2/00 27,393 21,352 11,929
3/00 27,864 19,849 12,928
4/00 25,219 17,231 12,476
5/00 23,378 15,682 12,321
6/00 25,062 18,119 12,502
7/00 24,696 16,890 12,670
</TABLE>
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
This chart compares your fund's Class A shares to benchmark indexes. It is
intended to give you an idea of how your fund performed compared to those
indexes over the period 12/30/98-7/31/00. (The data for the indexes are for the
period 12/31/98-7/31/00.) It is important to understand the differences between
your fund and an index. An index measures the performance of a hypothetical
portfolio. A market index such as the S&P 400 is unmanaged, incurring no sales
charges, expenses or fees. If you could buy all the securities that make up a
market index, you would incur expenses that would affect the return on your
investment. An index of funds such as the Lipper Mid-Cap Growth Fund Index
includes a number of mutual funds grouped by investment objective. Each of those
funds interprets that objective differently, and each employs a different
management style and investment strategy.
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/00, including sales charges
================================================================================
CLASS A SHARES
Inception (12/30/98) 76.99%
1 year 56.46*
*65.58% excluding sales charges
CLASS B SHARES**
Inception (11/12/99) 26.95%*
*31.95% excluding CDSC
CLASS C SHARES**
Inception (11/12/99) 30.90%*
*31.90% excluding CDSC
================================================================================
**Because the fund's Class B and Class C shares have been offered for less than
a year, total returns provided for those classes are cumulative total returns
that have not been annualized.
Your fund's total return includes sales charges, expenses and management
fees. The performance of the fund's Class B and Class C shares will differ from
that of its Class A shares due to different sales-charge structure and class
expenses. For fund performance calculations and descriptions of the indexes
cited on this page, please see the inside front cover.
AIM MID CAP OPPORTUNITIES FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
STOCKS & OTHER EQUITY INTERESTS-85.39%
AUTO PARTS & EQUIPMENT-0.45%
Danaher Corp. 60,900 $ 3,102,094
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.64%
Adolph Coors Co.-Class B 70,400 4,435,200
--------------------------------------------------------------
BIOTECHNOLOGY-1.12%
Affymetrix, Inc.(a) 25,000 3,413,672
--------------------------------------------------------------
PE Corp.-Celera Genomics Group(a) 50,000 4,343,750
--------------------------------------------------------------
7,757,422
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.46%
Hispanic Broadcasting Corp.(a) 148,300 5,644,669
--------------------------------------------------------------
Pegasus Communications Corp.(a) 113,000 4,774,250
--------------------------------------------------------------
Univision Communications Inc.-Class
A(a) 76,300 9,480,275
--------------------------------------------------------------
Westwood One, Inc.(a) 145,000 4,032,812
--------------------------------------------------------------
23,932,006
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-11.40%
ADC Telecommunications, Inc.(a) 481,400 20,188,712
--------------------------------------------------------------
Andrew Corp.(a) 200,000 5,637,500
--------------------------------------------------------------
Bookham Technology PLC-ADR (United
Kingdom)(a) 100,000 6,275,000
--------------------------------------------------------------
Comverse Technology, Inc.(a) 106,000 9,301,500
--------------------------------------------------------------
Digital Lightwave, Inc.(a) 55,100 4,817,806
--------------------------------------------------------------
Ditech Communications Corp.(a) 63,300 3,030,487
--------------------------------------------------------------
Harris Corp. 149,800 5,130,650
--------------------------------------------------------------
Polycom, Inc.(a) 68,200 6,469,409
--------------------------------------------------------------
Sawtek Inc.(a) 112,500 5,990,625
--------------------------------------------------------------
Scientific-Atlanta, Inc. 156,900 12,081,300
--------------------------------------------------------------
78,922,989
--------------------------------------------------------------
COMPUTERS (NETWORKING)-0.65%
Virata Corp.(a) 70,800 4,531,200
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.24%
SanDisk Corp.(a) 135,000 8,606,250
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.69%
Advanced Fibre Communications,
Inc.(a) 153,200 6,568,450
--------------------------------------------------------------
Allaire Corp.(a) 113,100 3,490,195
--------------------------------------------------------------
Check Point Software Technologies
Ltd. (Israel)(a) 114,400 13,270,400
--------------------------------------------------------------
Digex, Inc.(a) 125,000 7,882,812
--------------------------------------------------------------
i2 Technologies, Inc.(a) 52,400 6,798,900
--------------------------------------------------------------
Macromedia, Inc.(a) 67,300 5,148,450
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Macrovision Corp.(a) 102,100 $ 7,708,550
--------------------------------------------------------------
Mercury Interactive Corp.(a) 79,800 7,921,397
--------------------------------------------------------------
Orbotech, Ltd. (Israel)(a) 63,700 5,247,287
--------------------------------------------------------------
Portal Software, Inc.(a) 132,700 6,682,689
--------------------------------------------------------------
Quest Software, Inc.(a) 102,500 4,843,125
--------------------------------------------------------------
Rational Software Corp.(a) 79,000 8,038,250
--------------------------------------------------------------
Titan Capital Trust-$2.88 Conv.
Pfd. (Acquired 02/03/00-04/04/00;
Cost $3,262,947)(b) 62,000 2,573,000
--------------------------------------------------------------
Verity, Inc.(a) 78,400 2,856,700
--------------------------------------------------------------
Websense, Inc.(a) 137,200 3,155,600
--------------------------------------------------------------
WebTrends Corp.(a) 85,000 2,555,312
--------------------------------------------------------------
94,741,117
--------------------------------------------------------------
CONSUMER FINANCE-0.64%
Capital One Financial Corp. 75,000 4,396,875
--------------------------------------------------------------
ELECTRIC COMPANIES-0.51%
Montana Power Co. (The) 121,700 3,521,694
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-5.86%
American Power Conversion Corp.(a) 124,100 3,156,794
--------------------------------------------------------------
CommScope, Inc.(a) 90,650 3,031,109
--------------------------------------------------------------
Cree, Inc.(a) 38,900 4,373,819
--------------------------------------------------------------
Electro Scientific Industries,
Inc.(a) 114,000 5,179,875
--------------------------------------------------------------
Sanmina Corp.(a)(b) 77,600 7,207,100
--------------------------------------------------------------
Veeco Instruments Inc.(a) 152,000 11,970,000
--------------------------------------------------------------
Viasystems Group, Inc.(a) 345,000 5,670,937
--------------------------------------------------------------
40,589,634
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.40%
Aeroflex Inc.(a) 95,550 2,735,119
--------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-4.31%
Coherent, Inc.(a) 54,800 3,281,150
--------------------------------------------------------------
Methode Electronics, Inc.-Class A 254,700 11,572,931
--------------------------------------------------------------
Newport Corp. 102,600 10,041,975
--------------------------------------------------------------
PerkinElmer, Inc. 76,600 4,897,612
--------------------------------------------------------------
29,793,668
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.83%
Intersil Holding Corp.(a) 84,000 4,814,250
--------------------------------------------------------------
Micrel, Inc.(a) 69,800 3,494,362
--------------------------------------------------------------
Microchip Technology Inc.(a) 59,750 4,148,891
--------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 5,300 247,113
--------------------------------------------------------------
Semtech Corp.(a) 71,600 5,741,425
--------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Vitesse Semiconductor Corp.(a) 135,000 $ 8,049,375
--------------------------------------------------------------
26,495,416
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.23%
Credence Systems Corp.(a) 10,700 457,425
--------------------------------------------------------------
Novellus Systems, Inc.(a) 55,400 2,988,138
--------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 103,800 5,040,788
--------------------------------------------------------------
8,486,351
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.95%
SEI Investments Co. 120,600 6,602,850
--------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.34%
Forest Laboratories, Inc.(a) 39,900 4,269,300
--------------------------------------------------------------
Jones Pharma Inc. 76,500 2,500,594
--------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class
A(a) 167,100 9,399,375
--------------------------------------------------------------
16,169,269
--------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.27%
Health Management Associates,
Inc.-Class A(a) 561,700 8,811,669
--------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.83%
First Health Group Corp.(a) 188,300 5,766,688
--------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.93%
ACE Ltd. (Bermuda) 178,300 6,418,800
--------------------------------------------------------------
INSURANCE BROKERS-0.36%
Aon Corp. 70,100 2,523,600
--------------------------------------------------------------
INVESTMENT MANAGEMENT-0.62%
Federated Investors, Inc.-Class B 165,000 4,320,938
--------------------------------------------------------------
IRON & STEEL-0.93%
NS Group, Inc.(a) 450,000 6,468,750
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.30%
Harley-Davidson, Inc. 200,000 8,975,000
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.64%
Millipore Corp. 70,000 4,401,250
--------------------------------------------------------------
NATURAL GAS-0.45%
Dynegy Inc.-Class A 44,054 3,100,300
--------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-8.60%
BJ Services Co.(a) 50,000 2,918,750
--------------------------------------------------------------
Cooper Cameron Corp.(a) 82,300 5,318,638
--------------------------------------------------------------
ENSCO International Inc. 175,000 5,906,250
--------------------------------------------------------------
Grant Prideco, Inc.(a) 168,100 3,383,013
--------------------------------------------------------------
Nabors Industries, Inc.(a) 137,400 5,719,275
--------------------------------------------------------------
National-Oilwell, Inc.(a) 232,500 7,672,500
--------------------------------------------------------------
Patterson Energy, Inc.(a) 150,000 3,740,625
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
R&B Falcon Corp.(a) 249,300 $ 4,970,419
--------------------------------------------------------------
Rowan Cos., Inc.(a) 186,800 4,716,700
--------------------------------------------------------------
Smith International, Inc.(a) 83,100 5,931,263
--------------------------------------------------------------
Transocean Sedco Forex Inc. 115,200 5,702,400
--------------------------------------------------------------
Weatherford International, Inc.(a) 88,500 3,545,531
--------------------------------------------------------------
59,525,364
--------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.56%
Anadarko Petroleum Corp. 82,992 3,968,055
--------------------------------------------------------------
Kerr-McGee Corp. 125,000 6,859,375
--------------------------------------------------------------
10,827,430
--------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.50%
Valero Energy Corp.-$1.94 Conv.
Pfd. 150,000 3,468,750
--------------------------------------------------------------
RAILROADS-0.76%
Stilwell Financial, Inc.(a) 120,000 5,287,500
--------------------------------------------------------------
RESTAURANTS-0.82%
Brinker International, Inc.(a) 110,000 3,141,875
--------------------------------------------------------------
Outback Steakhouse, Inc.(a) 110,350 2,531,153
--------------------------------------------------------------
5,673,028
--------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.01%
Dollar Tree Stores, Inc.(a) 92,400 3,932,775
--------------------------------------------------------------
Family Dollar Stores, Inc. 181,000 3,054,375
--------------------------------------------------------------
6,987,150
--------------------------------------------------------------
RETAIL (SPECIALTY)-3.30%
Bed Bath & Beyond Inc.(a) 178,600 6,574,713
--------------------------------------------------------------
Linens 'n Things, Inc.(a) 243,500 7,289,781
--------------------------------------------------------------
Tiffany & Co. 109,000 3,733,250
--------------------------------------------------------------
Zale Corp.(a) 140,000 5,232,500
--------------------------------------------------------------
22,830,244
--------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.40%
Intimate Brands, Inc. 240,000 4,185,000
--------------------------------------------------------------
Talbots, Inc. (The) 108,500 5,479,250
--------------------------------------------------------------
9,664,250
--------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.99%
Lamar Advertising Co.(a) 150,000 6,843,750
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.76%
Critical Path, Inc.(a) 94,000 5,234,625
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.81%
CheckFree Corp.(a) 135,000 8,201,250
--------------------------------------------------------------
CSG Systems International, Inc.(a) 107,100 5,696,381
--------------------------------------------------------------
Fiserv, Inc.(a) 99,100 5,531,019
--------------------------------------------------------------
19,428,650
--------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.29%
Crown Castle International Corp.(a) 146,000 $ 4,964,000
--------------------------------------------------------------
Powerwave Technologies, Inc.(a) 115,700 4,013,344
--------------------------------------------------------------
Western Wireless Corp.-Class A(a) 125,000 6,875,000
--------------------------------------------------------------
15,852,344
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.12%
Corvis Corp.(a) 10,360 852,919
--------------------------------------------------------------
TELEPHONE-0.42%
NTL Inc.(a) 64,000 2,884,000
--------------------------------------------------------------
Total Stocks & Other Equity
Interests (Cost $546,634,042) 590,966,153
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE CONVERTIBLE BONDS &
NOTES-1.67%
COMMUNICATIONS EQUIPMENT-0.70%
Kestrel Solutions, Conv. Notes
5.50%, 07/15/05 (Acquired
07/20/00; Cost $4,500,000)(c) $4,500,000 4,860,000
--------------------------------------------------------------
COMPUTERS (NETWORKING)-0.14%
Exodus Communications, Inc., Conv.
Notes
4.75%, 07/15/08 (Acquired
12/02/99; Cost $310,000)(c) 310,000 438,650
--------------------------------------------------------------
4.75%, 07/15/08 350,000 495,250
--------------------------------------------------------------
933,900
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.83%
Primus Telecomm Group, Conv. Debs.
5.75%, 02/15/07 (Acquired
02/17/00-07/24/00; Cost
$7,726,662)(c) 10,000,000 5,737,500
--------------------------------------------------------------
Total Corporate Convertible
Bonds & Notes (Cost
$13,123,745) 11,531,400
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-6.69%
CALLS-0.58%
Freddie Mac
(Financial-
Diversified) 2,297 $ 40 Aug-00 308,659
------------------------------------------------------------------------
Lycos, Inc.
(Computers-Software
& Services) 1,134 60 Oct-00 1,247,400
------------------------------------------------------------------------
Micron Technology,
Inc. (Electronics-
Semiconductors) 2,500 85 Aug-00 1,093,750
------------------------------------------------------------------------
NS Group, Inc. (Iron &
Steel) 2,500 18 Oct-00 359,375
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
CALLS-(CONTINUED)
Philadelphia Oil
Service Sector Index
(Oil & Gas-Exploration
& Production) 2,437 $ 140 Sep-00 $ 502,631
------------------------------------------------------------------------
Philadelphia
Semiconductor Index
(Electronics-
Semiconductors) 240 1,100 Aug-00 456,000
------------------------------------------------------------------------
S&P 500 Index
(Investments) 1,171 1,550 Aug-00 62,209
------------------------------------------------------------------------
4,030,024
------------------------------------------------------------------------
PUTS-6.11%
AMEX Pharmaceutical
Index (Health
Care-Drugs-Major
Pharmaceuticals) 655 370 Oct-00 630,438
------------------------------------------------------------------------
Morgan Stanley
Internet Index
(Investments) 2,777 70 Dec-00 2,707,575
------------------------------------------------------------------------
Nasdaq 100 Index
(Investments) 274 3,300 Sep-00 3,421,575
------------------------------------------------------------------------
147 3,600 Dec-00 5,582,325
------------------------------------------------------------------------
Pegasus Communications
Corp. (Broadcasting-
Television, Radio &
Cable) 1,130 32 Sep-00 162,438
------------------------------------------------------------------------
Russell 2000 Index
(Investments) 2,512 500 Sep-00 4,553,000
------------------------------------------------------------------------
2,473 510 Dec-00 8,717,325
------------------------------------------------------------------------
S&P 500 Index
(Investments) 580 1,450 Aug-00 1,943,000
------------------------------------------------------------------------
1,484 1,420 Aug-00 3,134,950
------------------------------------------------------------------------
600 1,400 Sep-00 1,432,500
------------------------------------------------------------------------
1,185 1,350 Dec-00 3,851,250
------------------------------------------------------------------------
975 1,400 Dec-00 4,533,750
------------------------------------------------------------------------
Symbol Technologies,
Inc. (Electrical
Equipment) 1,615 50 Aug-00 1,615,000
------------------------------------------------------------------------
42,285,126
------------------------------------------------------------------------
Total Options Purchased (Cost $51,718,702) 46,315,150
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-4.94%
STIC Liquid Assets Portfolio(d) 17,090,354 17,090,354
--------------------------------------------------------------
STIC Prime Portfolio(d) 17,090,354 17,090,354
--------------------------------------------------------------
Total Money Market Funds (Cost
$34,180,708) 34,180,708
--------------------------------------------------------------
TOTAL INVESTMENTS-98.69% (Cost
$645,657,197) 682,993,411
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.31% 9,100,746
--------------------------------------------------------------
NET ASSETS-100.00% $692,094,157
==============================================================
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(e)
Advanced Micro Devices, Inc. 35,000 $ 2,517,812
-------------------------------------------------------------
Amazon.com, Inc. 113,600 3,422,200
-------------------------------------------------------------
Amkor Technology, Inc. 100,000 2,750,000
-------------------------------------------------------------
ANTEC Corp. 55,000 2,079,687
-------------------------------------------------------------
ARM Holdings PLC-ADR (United Kingdom) 78,100 2,679,806
-------------------------------------------------------------
Atmel Corp. 105,600 3,161,400
-------------------------------------------------------------
Audiovox Corp-Class A 72,100 1,117,550
-------------------------------------------------------------
BroadVision, Inc. 77,700 2,811,769
-------------------------------------------------------------
CacheFlow Inc. 40,000 2,720,000
-------------------------------------------------------------
Carrier Access Corp. 39,000 2,335,125
-------------------------------------------------------------
Costco Wholesale Corp. 100,000 3,256,250
-------------------------------------------------------------
CVS Corp. 81,800 3,225,987
-------------------------------------------------------------
Digital Island Inc. 80,000 2,295,000
-------------------------------------------------------------
DoubleClick Inc. 51,600 1,854,375
-------------------------------------------------------------
Echelon Corp. 80,000 2,970,000
-------------------------------------------------------------
Express Scripts, Inc.-Class A 93,000 5,975,250
-------------------------------------------------------------
Fastenal Co. 92,000 5,681,000
-------------------------------------------------------------
Globalstar Telecommunications Ltd. 88,000 682,000
-------------------------------------------------------------
Hewlett-Packard Co. 12,500 1,364,844
-------------------------------------------------------------
Knight Trading Group, Inc. 52,500 1,394,531
-------------------------------------------------------------
Magna International Inc.-Class A
(Canada) 68,000 3,387,250
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(e)-(CONTINUED)
Metris Companies Inc. 132,500 $ 3,883,906
-------------------------------------------------------------
Newell Rubbermaid Inc. 185,000 4,983,437
-------------------------------------------------------------
Orthodontic Centers of America, Inc. 239,700 6,202,237
-------------------------------------------------------------
Oxford Health Plans, Inc. 150,000 3,590,625
-------------------------------------------------------------
QLogic Corp. 32,500 2,421,250
-------------------------------------------------------------
QLT Inc. (Canada) 45,600 3,003,900
-------------------------------------------------------------
QUALCOMM Inc. 56,700 3,681,956
-------------------------------------------------------------
Scient Corp. 36,000 1,678,500
-------------------------------------------------------------
Sigma-Aldrich Corp. 110,000 2,997,500
-------------------------------------------------------------
Silicon Storage Technology, Inc. 79,000 4,991,813
-------------------------------------------------------------
Starbucks Corp. 85,000 3,187,500
-------------------------------------------------------------
Stryker Corp. 158,000 6,784,125
-------------------------------------------------------------
Sunoco, Inc. 125,000 3,046,875
-------------------------------------------------------------
Symbol Technologies, Inc. 87,500 3,489,063
-------------------------------------------------------------
TMP Worldwide, Inc. 23,800 1,713,600
-------------------------------------------------------------
UnitedHealth Group Inc. 84,600 6,921,338
-------------------------------------------------------------
Vignette Corp. 53,300 1,805,538
-------------------------------------------------------------
Whole Foods Market, Inc. 75,000 3,351,563
-------------------------------------------------------------
Yahoo! Inc. 42,500 5,469,219
-------------------------------------------------------------
$130,885,781
=============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 07/31/00 was $13,609,150 which
represented 1.97% of the Fund's net assets.
(d) The money market fund has the same investment advisor as the Fund.
(e) Collateral on short sales was segregated by the fund in the amount of
$149,532,385 which represents 115.97% of market value of securities sold
short.
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$645,657,197) $682,993,411
------------------------------------------------------------
Cash 3,358,811
------------------------------------------------------------
Receivables for:
Investments sold 9,613,808
------------------------------------------------------------
Fund shares sold 529,249
------------------------------------------------------------
Dividends and interest 508,950
------------------------------------------------------------
Investments sold short 133,456,563
------------------------------------------------------------
Short positions 2,687,658
------------------------------------------------------------
Short stock rebates 767,223
------------------------------------------------------------
Investment for deferred compensation plan 8,763
------------------------------------------------------------
Other assets 6,853
------------------------------------------------------------
Total assets 833,931,289
------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 7,701,274
------------------------------------------------------------
Fund shares reacquired 1,120,964
------------------------------------------------------------
Options written (premiums received
$1,696,536) 438,781
------------------------------------------------------------
Short stock account interest 16,198
------------------------------------------------------------
Deferred compensation plan 8,763
------------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $133,456,563) 130,885,781
------------------------------------------------------------
Accrued advisory fees 951,444
------------------------------------------------------------
Accrued administrative services fees 14,199
------------------------------------------------------------
Accrued distribution fees 413,166
------------------------------------------------------------
Accrued trustees' fees 617
------------------------------------------------------------
Accrued transfer agent fees 130,411
------------------------------------------------------------
Accrued operating expenses 155,534
------------------------------------------------------------
Total liabilities 141,837,132
------------------------------------------------------------
Net assets applicable to shares outstanding $692,094,157
============================================================
NET ASSETS:
Class A $336,203,260
============================================================
Class B $255,438,870
============================================================
Class C $100,452,027
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 14,234,752
============================================================
Class B 10,865,522
============================================================
Class C 4,273,607
============================================================
Class A:
Net asset value and redemption price per
share $ 23.62
------------------------------------------------------------
Offering price per share:
(Net asset value of $23.62 divided by
94.50%) $ 24.99
============================================================
Class B:
Net asset value and offering price per share $ 23.51
============================================================
Class C:
Net asset value and offering price per share $ 23.51
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Short stock rebate $ 2,762,008
------------------------------------------------------------
Dividends -- Affiliated issuers 1,454,901
------------------------------------------------------------
Dividends 534,381
------------------------------------------------------------
Interest 527,559
------------------------------------------------------------
Total investment income 5,278,849
------------------------------------------------------------
EXPENSES:
Advisory fees 5,153,525
------------------------------------------------------------
Administrative services fee 86,581
------------------------------------------------------------
Custodian fees 67,327
------------------------------------------------------------
Distribution fees -- Class A 596,038
------------------------------------------------------------
Distribution fees -- Class B 1,287,873
------------------------------------------------------------
Distribution fees -- Class C 485,856
------------------------------------------------------------
Interest 576,971
------------------------------------------------------------
Transfer agent fees -- Class A 178,964
------------------------------------------------------------
Transfer agent fees -- Class B 175,188
------------------------------------------------------------
Transfer agent fees -- Class C 66,085
------------------------------------------------------------
Trustees' fees 7,449
------------------------------------------------------------
Dividends on short sales 297,343
------------------------------------------------------------
Other 568,905
------------------------------------------------------------
Total expenses 9,548,105
------------------------------------------------------------
Less: Fees waived (123,065)
------------------------------------------------------------
Expenses paid indirectly (27,311)
------------------------------------------------------------
Net expenses 9,397,729
------------------------------------------------------------
Net investment income (loss) (4,118,880)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS
Net realized gain (loss) from:
Investment securities (59,472,683)
------------------------------------------------------------
Futures contracts (608,808)
------------------------------------------------------------
Option contracts 15,389,246
------------------------------------------------------------
Securities sold short 8,185,246
------------------------------------------------------------
(36,506,999)
------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 36,515,950
------------------------------------------------------------
Option contracts 1,261,674
------------------------------------------------------------
Securities sold short 2,568,948
------------------------------------------------------------
40,346,572
------------------------------------------------------------
Net gain on investment securities, securities
sold short, futures and option contracts 3,839,573
------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (279,307)
============================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the year ended July 31, 2000 and the period December 30, 1998 (date
operations commenced) through July 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,118,880) $ (12,670)
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
securities sold short, futures and option contracts (36,506,999) 454,839
----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 40,346,572 818,178
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (279,307) 1,260,347
----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (50,980) --
----------------------------------------------------------------------------------------
Class B (21,216) --
----------------------------------------------------------------------------------------
Class C (6,678) --
----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (685,956) --
----------------------------------------------------------------------------------------
Class B (9,194) --
----------------------------------------------------------------------------------------
Class C (2,917) --
----------------------------------------------------------------------------------------
Share transactions-net:
Class A 329,734,266 3,529,528
----------------------------------------------------------------------------------------
Class B 255,671,637 --
----------------------------------------------------------------------------------------
Class C 102,954,627 --
----------------------------------------------------------------------------------------
Net increase in net assets 687,304,282 4,789,875
----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 4,789,875 --
----------------------------------------------------------------------------------------
End of year $692,094,157 $4,789,875
========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $687,714,752 $3,529,528
----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (31,466) --
----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, securities sold short, futures and option
contracts (36,753,879) 442,169
----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
securities sold short, futures and option contracts 41,164,750 818,178
----------------------------------------------------------------------------------------
$692,094,157 $4,789,875
========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Opportunities Fund (the "Fund") is a series portfolio of AIM Special
Opportunities Funds (the "Trust"). The Trust is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of three
separate portfolios, each having an unlimited number of shares of beneficial
interest. The Fund consists of 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
contingent deferred sales charge. The Fund is closed to new investors as of
March 21, 2000. 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.
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 -- 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 reported on the NASDAQ
National Market System is valued at the last sales price as of the close of
the customary trading session on the valuation date or absent a last sales
price, 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 yield, type of issue, coupon rate and maturity date. 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 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").
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 such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined 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 events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value 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 and short stock rebate income are recorded on the accrual
basis. Dividend income and dividend expense on short sales are recorded on
the ex-dividend date.
On July 31, 2000 additional paid-in capital was decreased by $4,175,306,
undistributed net investment income was increased by $4,166,288 and
undistributed net realized gains was increased by $9,018 as a result of
reclassifications of a net operating loss and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions -- Distributions from income and 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 gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Securities Sold Short -- The Fund may enter into short sales of securities
which it concurrently holds (against the box) or for which it holds no
corresponding position (naked). Securities sold short represent a liability
of the Fund to acquire specific securities at prevailing market prices at a
future date in order to satisfy the obligation to deliver the securities
sold. The liability is recorded on the books of the Fund at the market value
of the common stock determined each day in accordance with the procedures for
security valuations disclosed in "A" above. The Fund will incur a loss if the
price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund realizes a
gain if the price of the security declines between those dates.
The Fund is required to segregate cash or securities as collateral in
margin accounts at a level that is equal to the obligation to the broker who
delivered such securities to the
11
<PAGE> 14
buyer on behalf of the Fund. The short stock rebate presented in the
statement of operations represents income earned on short sale proceeds held
on deposit with the broker. The Fund may also earn or incur margin interest
on short sales transactions. Margin interest is the income earned (expense
incurred) as a result of the market value of securities sold short being less
than (greater than) the proceeds received from the short sales.
F. Put Options -- The Fund may purchase and write put options including
securities index 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, securities
index, or a futures contract. Put options may be used by a 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 hedge. The Fund may write put options to earn
additional income in the form of option premiums if it expects the price of
the underlying securities to remain stable or rise during the option period
so that the option will not be exercised. The risk in this strategy is that
the price of the underlying securities may decline by an amount greater than
the premium received.
G. Call Options -- The Fund may write and buy call options, including securities
index options. Options written by the Fund normally will have expiration
dates between three and nine months from the date written. The exercise price
of a call option may be below, equal to, or above the current market value of
the underlying security at the time the option is written. When the Fund
writes a call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
An option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying stock index on
the exercise date, multiplied by a fixed "index multiplier." A securities
index fluctuates with changes in the market values of the securities included
in the index. In the purchase of securities index options the principal risk
is that the premium and transaction costs paid by the Fund in purchasing an
option will be lost if the changes in the level of the index do not exceed
the cost of the option. In writing securities index options, the principal
risk is that the Fund could bear a loss on the options that would be only
partially offset (or not offset at all) by the increased value or reduced
cost of hedged securities. Moreover, in the event the Fund were unable to
close an option it had written, it might be unable to sell the securities
used as cover.
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
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
operations. All other expenses which are attributable to more than one class
are allocated among the classes.
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 master investment advisory
agreement, the Fund pays a base management fee calculated at the annual rate of
1.50% of the Fund's average daily net assets. The base management fee will be
adjusted, on a monthly basis starting January 1, 2001, (i) upward at the rate of
0.20%, on a pro rata basis, for each percentage point the 12-month rolling
investment performance of the Class A shares exceeds the sum of 2.00% and the
12-month rolling investment record of the S&P MidCap 400 Index, or (ii) downward
at the rate of 0.20%, on a pro rata basis, for each percentage point the
12-month rolling investment record of the S&P MidCap 400 Index
12
<PAGE> 15
less 2.00% exceeds the 12-month rolling investment performance of the Class A
shares.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended July 31, 2000, AIM was paid
$86,581 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. For the year ended July 31, 2000, AFS was paid
$176,151 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and 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. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. Upon the Fund closing to new
investors AIM Distributors agreed to waive 0.10% of the Fund's average daily net
assets of Class A distribution fees. For the year ended July 31, 2000, the Class
A, Class B and Class C shares paid AIM Distributors $472,973, $1,287,873 and
$485,856, respectively, as compensation under the Plans. During the year ended
July 31, 2000, AIM Distributors waived fees of $123,065 for Class A shares.
AIM Distributors received commissions of $894,229, from sales of the Class A
shares of the Fund during the year ended July 31, 2000. Such commissions are not
an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended July 31, 2000, AIM
Distributors received $28,018 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended July 31, 2000, the Fund paid legal fees of $3,273 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended July 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $3,615 and reductions in custodian
fees of $23,696 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $27,311.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, in mutual fund shares in accordance with a deferred compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $240,000,000 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 may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.10% on the
unused balance of the committed line.
During the year ended July 31, 2000, the average outstanding daily balance of
bank loans for the Fund was $7,131,148 with a weighted average interest rate of
6.98%.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended July 31, 2000 was
$1,215,360,162 and $610,462,548, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of July 31, 2000 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $ 93,859,060
------------------------------------------------------------
Securities sold short 12,641,968
------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (57,823,117)
------------------------------------------------------------
Securities sold short (10,071,186)
------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 38,606,725
============================================================
Cost of investments for tax purposes is $646,957,468.
Proceeds from securities sold short for tax purposes is
$133,456,563.
</TABLE>
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended July 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year -- $ --
------------------------------------------------------------
Written 13,350 27,110,355
------------------------------------------------------------
Closed (12,737) (26,863,020)
------------------------------------------------------------
Expired (458) (164,645)
------------------------------------------------------------
End of year 155 $ 82,690
============================================================
</TABLE>
Open call options written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER JULY 31,
CONTRACT STRIKE OF PREMIUMS 2000 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
--------------------- -------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sanmina Corp. Sep-00 $105 155 $82,690 $68,781 $13,909
=============================================================================================
</TABLE>
13
<PAGE> 16
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options contracts written during the year ended July 31,
2000 are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year 21 $ 19,586
-------------------------------------------------------------------------------------
Purchased 6,291 5,398,859
-------------------------------------------------------------------------------------
Closed (5,185) (2,624,326)
-------------------------------------------------------------------------------------
Expired (927) (1,180,273)
-------------------------------------------------------------------------------------
End of year 200 $ 1,613,846
=====================================================================================
</TABLE>
Open put option contracts written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
JULY 31,
2000
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
---------------- -------- ------ --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq 100 Index Sep-00 $260 200 $1,613,846 $370,000 $ 1,243,846
=======================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2000 and the
period December 30, 1998 (date operations commenced) through July 31, 1999 were
as follows:
<TABLE>
<CAPTION>
JULY 31, 2000 JULY 31, 1999
-------------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 15,903,016 $376,526,177 331,198 $3,867,041
------------------------------------------------------------------------------------------------------------------
Class B 11,676,896 275,160,286 -- --
------------------------------------------------------------------------------------------------------------------
Class C 4,564,213 109,937,385 -- --
------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 39,350 706,157 -- --
------------------------------------------------------------------------------------------------------------------
Class B 1,107 21,560 -- --
------------------------------------------------------------------------------------------------------------------
Class C 511 9,927 -- --
------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (2,011,095) (47,498,068) (27,717) (337,513)
------------------------------------------------------------------------------------------------------------------
Class B (812,481) (19,510,209) -- --
------------------------------------------------------------------------------------------------------------------
Class C (291,117) (6,992,685) -- --
------------------------------------------------------------------------------------------------------------------
29,070,400 $688,360,530 303,481 $3,529,528
==================================================================================================================
</TABLE>
14
<PAGE> 17
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 30, 1998
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
JULY 31, 2000(a) JULY 31, 1999
---------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 15.78 $10.00
------------------------------------------------------------ -------- ------
Income from investment operations:
Net investment income (loss) (0.18) (0.04)
------------------------------------------------------------ -------- ------
Net gains on securities (both realized and unrealized) 9.92 5.82
------------------------------------------------------------ -------- ------
Total from investment operations 9.74 5.78
------------------------------------------------------------ -------- ------
Less distributions:
Dividends from net investment income (0.02) --
------------------------------------------------------------ -------- ------
Distributions from net realized gains (1.88) --
------------------------------------------------------------ -------- ------
Total distributions (1.90) --
------------------------------------------------------------ -------- ------
Net asset value, end of period $ 23.62 $15.78
============================================================ ======== ======
Total return(b) 65.58% 57.80%
============================================================ ======== ======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $336,203 $4,790
============================================================ ======== ======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 2.33%(c) 2.28%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.40%(c) 7.55%(d)
============================================================ ======== ======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 2.08%(c) 2.19%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.15%(c) 7.46%(d)
============================================================ ======== ======
Ratio of net investment income (loss) to average net assets (0.80)%(c) (0.79)%(d)
============================================================ ======== ======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.09%(d)
============================================================ ======== ======
Portfolio turnover rate 196% 135%
============================================================ ======== ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $170,296,714.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------- -----------------
NOVEMBER 12, 1999 NOVEMBER 12, 1999
(DATE SALES (DATE SALES
COMMENCED) TO COMMENCED) TO
JULY 31, 2000(a) JULY 31, 2000(a)
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 17.83 $ 17.83
------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income (loss) (0.28) (0.28)
------------------------------------------------------------ -------- --------
Net gains on securities (both realized and unrealized) 5.97 5.97
------------------------------------------------------------ -------- --------
Total from investment operations 5.69 5.69
------------------------------------------------------------ -------- --------
Less distributions:
Dividends from net investment income (0.01) (0.01)
------------------------------------------------------------ -------- --------
Total distributions (0.01) (0.01)
------------------------------------------------------------ -------- --------
Net asset value, end of period $ 23.51 $ 23.51
============================================================ ======== =======
Total return(b) 31.95% 31.95%
============================================================ ======== =======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $255,439 $100,452
============================================================ ======== =======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense) 3.08%(c) 3.08%(c)
------------------------------------------------------------ -------- --------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense) 2.83%(c) 2.83%(c)
============================================================ ======== =======
Ratio of net investment income (loss) to average net assets (1.55)%(c) (1.55)%(c)
============================================================ ======== =======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.25%(c)
============================================================ ======== =======
Portfolio turnover rate 196% 196%
============================================================ ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $179,224,846 and
$67,613,477 for Class B and Class C, respectively.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Mid Cap Opportunities Fund:
We have audited the accompanying statement of assets and liabilities of AIM Mid
Cap Opportunities Fund (a series of AIM Special Opportunities Funds) including
the schedule of investments, as of July 31, 2000, and the related statement of
operations for the year then ended, the statement of changes in net assets and
financial highlights for the year then ended and for the period December 30,
1998 (dated operations commenced) through July 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Mid Cap Opportunities Fund as of July 31, 2000, the results of its operations
for the year then ended, the changes in its net assets and financial highlights
for the year then ended and for the period December 30, 1998 (date operations
commenced) through July 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
September 11, 2000
Houston, Texas
16
<PAGE> 19
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Director and Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Edgar M. Larsen
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Treasurer
Formerly Vice Chairman, President and CUSTODIAN
Chief Operating Officer, Melville B. Cox
Mercantile-Safe Deposit & Trust Co.; and Vice President State Street Bank and Trust Company
President, Mercantile Bankshares 225 Franklin Street
Mary J. Benson Boston, MA 02110
Jack Fields Assistant Vice President and
Chief Executive Officer Assistant Treasurer COUNSEL TO THE FUND
Texana Global, Inc.
and Twenty First Sheri Morris Ballard Spahr
Century Group, Inc.; Assistant Vice President and Andrews & Ingersoll, LLP
Formerly Member Assistant Treasurer 1735 Market Street
of the U.S. House of Representatives Philadelphia, PA 19103
Renee A. Friedli
Carl Frischling Assistant Secretary COUNSEL TO THE TRUSTEES
Partner
Kramer, Levin, Naftalis & Frankel LLP P. Michelle Grace Kramer Levin Naftalis & Frankel LLP
Assistant Secretary 919 Third Avenue
Robert H. Graham New York, NY 10022
Director, President and Nancy L. Martin
Chief Executive Officer Assistant Secretary DISTRIBUTOR
A I M Management Group Inc.
Ofelia M. Mayo A I M Distributors, Inc.
Prema Mathai-Davis Assistant Secretary 11 Greenway Plaza
Formerly, Chief Executive Officer, Suite 100
YWCA of the U.S.A. Lisa A. Moss Houston, TX 77046
Assistant Secretary
Lewis F. Pennock AUDITORS
Attorney Kathleen J. Pflueger
Assistant Secretary KPMG LLP
Louis S. Sklar 700 Louisiana
Executive Vice President, Houston, TX 77002
Development and Operations,
Hines Interests
Limited Partnership
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended July
31, 2000, 0% is eligible for the dividends received deduction for corporations.
The Fund distributed long-term capital gains of $35,441 for the Fund's tax year
ended July 31, 2000. Of long-term capital gains distributed, 100% is 20% rate
gain.
REQUIRED STATE INCOME TAX INFORMATION
Of the ordinary dividends paid, 0.01% was derived from U.S. Treasury
Obligations.
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
EQUITY FUNDS
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has provided
MORE AGGRESSIVE MORE AGGRESSIVE leadership in the mutual fund industry
AIM Small Cap Opportunities(1) AIM Latin American Growth since 1976 and managed approximately
AIM Mid Cap Opportunities(2) AIM Developing Markets $176 billion in assets for more than
AIM Large Cap Opportunities(6) AIM European Small Company 8 million shareholders, including
AIM Emerging Growth AIM Asian Growth individual investors, corporate clients
AIM Small Cap Growth(3) AIM Japan Growth and financial institutions, as of
AIM Aggressive Growth AIM International Emerging Growth June 30, 2000.
AIM Mid Cap Growth AIM European Development The AIM Family of Funds--Registered
AIM Small Cap Equity AIM Euroland Growth Trademark-- is distributed nationwide,
AIM Capital Development AIM Global Aggressive Growth and AIM today is the eighth-largest
AIM Constellation(4) AIM International Equity mutual fund complex in the United States
AIM Dent Demographic Trends AIM Advisor International Value in assets under management, according to
AIM Select Growth AIM Global Trends Strategic Insight, an independent mutual
AIM Large Cap Growth AIM Global Growth fund monitor.
AIM Weingarten MORE CONSERVATIVE AIM is a subsidiary of AMVESCAP PLC,
AIM Mid Cap Equity one of the world's largest independent
AIM Value II SECTOR EQUITY FUNDS financial services companies with $389
AIM Charter MORE AGGRESSIVE billion in assets under management as of
AIM Value AIM New Technology June 30, 2000.
AIM Blue Chip AIM Global Telecommunications and Technology
AIM Basic Value AIM Global Resources
AIM Large Cap Basic Value AIM Global Financial Services
AIM Balanced AIM Global Health Care
AIM Advisor Flex AIM Global Consumer Products and Services
MORE CONSERVATIVE AIM Global Infrastructure
AIM Advisor Real Estate
AIM Global Utilities
MORE CONSERVATIVE
FIXED-INCOME FUNDS [AIM LOGO APPEARS HERE]
--Registered Trademark--
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE INVEST WITH DISCIPLINE
AIM Strategic Income AIM High Income Municipal --Registered Trademark--
AIM High Yield II AIM Tax-Exempt Bond of Connecticut
AIM High Yield AIM Municipal Bond
AIM Income AIM Tax-Free Intermediate
AIM Global Income AIM Tax-Exempt Cash
AIM Floating Rate(5) MORE CONSERVATIVE
AIM Intermediate Government
AIM Limited Maturity Treasury
AIM Money Market
MORE CONSERVATIVE
</TABLE>
The AIM Risk Spectrum illustrates equity and fixed-income funds from more
aggressive to more conservative. When assessing the degree of risk, three
factors were considered: the funds' portfolio holdings, volatility patterns
over time and diversification permitted within the fund. Fund rankings are
relative to one another within The AIM Family of Funds--Registered Trademark--
and should not be compared with other investments. There is no guarantee that
any one AIM fund will be less volatile than any other (1) AIM Small Cap
Opportunities Fund closed to new investors Nov. 4, 1999. (2) AIM Mid Cap
Opportunities Fund closed to new investors March 21, 2000. (3) AIM Small Cap
Growth Fund closed to new investors Nov. 8, 1999. (4) AIM Constellation Funds'
investment strategy broadened to allow investments across all market
capitalizations Dec. 1, 1999. (5) AIM Floating Rate Fund was restructured to
offer multiple share classes April 3, 2000. Existing shares were converted to
Class B shares, and Class C shares commenced offering. (6) AIM Large Cap
Opportunities Fund will close to new investors Sept. 29, 2000, or when the fund
reaches a total net asset value of $750 million, whichever occurs first.
FOR MORE COMPLETE INFORMATION ABOUT ANY AIM FUND, INCLUDING SALES CHARGES
AND EXPENSES, OBTAIN THE APPROPRIATE PROSPECTUS(ES) FROM YOUR FINANCIAL ADVISOR.
PLEASE READ THE PROSPECTUS(ES) CAREFULLY BEFORE YOU INVEST OR SEND MONEY. This
report is not authorized for distribution to prospective investors unless
preceded or accompanied by a currently effective fund prospectus. If used as
sales material after Oct. 20, 2000, this report must be accompanied by a fund
Performance & Commentary or by an AIM Quarterly Review of Performance for the
most recent quarter end.
[DALBAR LOGO APPEARS HERE]
A I M Distributors, Inc.
MCO-AR-1
