<PAGE> 1
ANNUAL REPORT / JULY 31 2000
AIM SMALL CAP OPPORTUNITIES FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
THE INDEPENDENCE DAY PARADE BY JANE WOOSTER SCOTT
JUST AS SMALL BUSINESSES ARE A KEY COMPONENT OF THIS FESTIVE
PAINTING, SMALL COMPANIES ARE AN IMPORTANT PART OF THE U.S.
ECONOMIC LANDSCAPE. IN AIM SMALL CAP OPPORTUNITIES FUND, WE
ENDEAVOR TO OWN THE STOCKS OF SMALLER COMPANIES THAT WE
BELIEVE HAVE EXCITING POTENTIAL.
-------------------------------------
AIM Small Cap Opportunities Fund is for shareholders who seek long-term growth
of capital by investing in a portfolio consisting primarily of small-company
stocks which management believes involve "special opportunities."
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Small 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 Effective 11/4/99, the fund was closed to new investors.
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 the potential for greater 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 Small-Cap Growth Fund Index represents an average of
the performance of the 30 largest small-capitalization growth funds tracked
by Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged Russell 2000 Growth Index measures the performance of Russell
2000 companies with higher price/book ratios and higher forecasted growth
values.
o The unmanaged Russell 2000 Index represents the performance of the stocks of
small-capitalization companies.
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 shareholders or to persons
who have received a current prospectus of the fund.
AIM SMALL 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
Graham growth. You are the main reason for our success, and I want
APPEARS HERE] you to 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 AIM 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, AIM Advisors, Inc.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ACHIEVES OUTSTANDING RESULTS IN TROUBLED MARKET
MARKET TURBULENCE HAS BEEN IN THE NEWS A LOT THIS YEAR. HOW HAS AIM SMALL CAP
OPPORTUNITIES FUND PERFORMED?
The fund turned in an exceptional performance for the year ended July 31, 2000.
Our fund managers can take pride in the fund's total returns of 81.64% for Class
A shares, 80.26% for Class B shares and 80.15% for Class C shares. These figures
are calculated at net asset value, that is, excluding sales charges. These
results far outstripped those of the fund's benchmark, the Russell 2000 Growth
Index, which returned 21.13%. The S&P 500, widely considered to be
representative of the stock market as a whole, produced a return of 8.97%. That
means the fund returned nearly four times as much as its benchmark, and more
than nine times the return of the stock market in general. Of course, as always,
we must remind our shareholders that past performance cannot guarantee
comparable future results.
WHAT WERE THE KEY TRENDS IN THE STOCK MARKET?
Markets were extremely volatile during this fiscal year. During the first three
months of 2000, several key market indexes rose to new record levels.
High-flying technology stocks helped propel these advances. Toward the end of
March, however, investors became concerned that technology-oriented stocks might
be overvalued, sparking a sharp sell-off in this sector. In April, a federal
court ruling against software giant Microsoft (not a fund holding) further shook
investor confidence in technology stocks, and their prices plunged. Especially
hard-hit were the stocks of Internet companies with no earnings.
Investors were also concerned that the Federal Reserve Board (the Fed) might
continue to raise interest rates to slow torrid economic growth and to contain
inflation. On May 16, 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%. Interest-rate concerns before and after
the Fed's action prompted a sell-off that affected nearly every stock-market
sector, causing markets to be extremely volatile.
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. At its June 28 meeting, the Fed left
interest rates unchanged.
The rally continued until mid-July, when it was announced that gross domestic
product had risen 5.2% in the second quarter, indicating that the economy might
not be slowing as much as anticipated. That raised the specter of another
possible Fed rate hike, sending markets downward.
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 small-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 are taking advantage of positive or negative changes in
competitive outlook for a company or an industry. Special opportunities can also
arise from changes in economic or political circumstances, or even from
important management changes within the company itself.
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 199 long positions. Technology stocks made up
43% 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
FUND PERFORMANCE
TOTAL RETURNS OF CLASS A, B & C SHARES VS. INDEXES
Year ended 7/31/00
================================================================================
FUND CLASS A SHARES 81.64%
FUND CLASS B SHARES 80.26%
FUND CLASS C SHARES 80.15%
RUSSELL 2000 GROWTH 21.13%
S&P 500 8.97%
================================================================================
See important fund and index disclosures inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
with the parts of the sector that were most vulnerable to the spring sell-off.
Energy stocks were the next-largest segment at 10%, with consumer cyclicals
third at 8%. 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
consumer- cyclical sectors.
WHAT WERE A FEW OF THE TECH STOCKS IN THE PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
o Elantec Semiconductor produces digital integrated circuits, chiefly for the
video/multimedia, data-processing and communications markets.
o Tollgrade Communications makes network assurance equipment for the
telecommunications and CATV industries, primarily for testing systems that
are migrating from copper to fiber.
o Exar develops specialized integrated circuits that convert analog signals to
digital. Its customers are mostly in communications, video and imaging.
o Veeco Instruments manufactures metrology tools, ion-beam etching and
deposition equipment, and X-ray fluorescence systems used in fabricating
microelectronic components.
o Polycom produces broadband communications equipment (such as its
market-leading conference phones) that helps professionals use voice, video
and data together in corporate conference rooms and other premises.
o Digex provides Web and application hosting solutions for e-businesses.
o SanDisk produces flash-memory data-storage products used in electronic
equipment manufactured by some of the world's best-known companies.
WHAT OTHER STOCKS PERFORMED WELL FOR THE FUND?
o Lamar Advertising is a specialist in outdoor advertising such as billboards
and the interstate logos that direct motorists to gas, food, lodging and so
on.
o Cal Dive International is a provider of subsea construction, maintenance and
abandonment services to the oil and gas industry.
o Newport operates the Port of Newcastle, one of Australia's major shipping
ports for bulk export shipments, especially coal and metals.
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 in August, 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 HOLDINGS TOP 10 INDUSTRIES
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Elantec Semiconductor, Inc. 1.97% 1. Computers (Software & Services) 12.03%
2. Tollgrade Communications, Inc. 1.92 2. Electronics (Semiconductors) 8.00
3. Exar Corp. 1.81 3. Oil & Gas (Drilling & Equipment) 7.10
4. Veeco Instruments Inc. 1.70 4. Electronics (Instrumentation) 6.42
5. Lamar Advertising Co. 1.67 5. Investments 5.30
6. Cal Dive International, Inc. 1.65 6. Communications Equipment 5.21
7. Polycom, Inc. 1.50 7. Electrical Equipment 3.92
8. Newport Corp. 1.48 8. Equipment (Semiconductor) 3.14
9. Digex, Inc. 1.44 9. Retail (Specialty-Apparel) 2.64
10. SanDisk Corp. 1.43 10. Computers (Peripherals) 2.59
<CAPTION>
TOP 10 SHORT POSITIONS
<S> <C>
1. 1-800 CONTACTS, Inc. 1.04%
2. UnitedHealth Group Inc. 1.03
3. Stryker Corp. 0.98
4. Orthodontic Centers of America, Inc. 0.92
5. Express Scripts, Inc.-Class A 0.89
6. Newell Rubbermaid Inc. 0.74
7. Silicon Storage Technology, Inc. 0.73
8. Whole Foods Market, Inc. 0.68
9. Oxford Health Plans, Inc. 0.58
10. Metris Cos. Inc. 0.58
The fund's portfolio composition 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.
AIM SMALL CAP OPPORTUNITIES FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM SMALL CAP OPPORTUNITIES FUND, CLASS A SHARES, VS. BENCHMARK INDEXES
6/29/98-7/31/00
in thousands
================================================================================
AIM Small Cap
Opportunities Fund Russell 2000 Russell 2000
Date Class A Shares Growth Index Index
--------------------------------------------------------------------------------
6/29/98 9225 10000 10000
10/31/98 8781 8168.98 8311.07
1/31/99 11511 10031.1 9411.18
4/30/99 12088 10271.5 9571.06
7/31/99 14055 10494.8 9871.51
10/31/99 15966 10560.9 9546.75
1/31/00 19953 13607.8 11081
4/30/00 24600 13495.1 11334
7/31/00 25530 12713 11231
Past performance is no guarantee of 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 6/29/98-7/31/00. (The data for the indexes are for the
period 6/30/98-7/31/00.) 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 Russell 2000 Index or the Russell 2000
Growth Index 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.
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/00, including sales charges
================================================================================
CLASS A SHARES
Inception (6/29/98) 56.67%
1 year 71.70*
* 81.64%, excluding sales charges
CLASS B SHARES
Inception (7/13/98) 59.80%
1 year 75.26*
* 80.26%, excluding CDSC
CLASS C SHARES
Inception (12/30/98) 70.58%
1 year 79.15*
* 80.15%, excluding CDSC
================================================================================
The fund's average annual total returns as of the close of the reporting period
are shown in the table above. In addition, industry regulations require us to
provide average annual total returns (including sales charges) as of 6/30/00,
the most recent calendar quarter-end, which were as follows. Class A shares, one
year, 92.95%; inception (6/29/98), 65.12%. Class B shares, one year, 97.63%;
inception (7/13/98), 68.55%. Class C shares, one year, 101.56%; inception
(12/30/98), 83.98%.
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 expenses.
For fund performance calculations and descriptions of the indexes cited on this
page, please see the inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-81.58%
BANKS (REGIONAL)-0.49%
Greater Bay Bancorp 75,000 $ 4,035,937
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.70%
Pegasus Communications Corp.(a) 136,400 5,762,900
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.52%
Allen Group, Inc.(a) 16,000 280,000
--------------------------------------------------------------
Allied Riser Communications Corp.(a) 500,000 5,125,000
--------------------------------------------------------------
Polycom, Inc.(a) 129,900 12,322,233
--------------------------------------------------------------
Tollgrade Communications, Inc.(a) 150,000 15,747,656
--------------------------------------------------------------
Westell Technologies, Inc.-Class A(a) 150,000 3,609,375
--------------------------------------------------------------
37,084,264
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.59%
InFocus Corp.(a) 209,800 7,343,000
--------------------------------------------------------------
Media 100 Inc.(a) 200,000 2,212,500
--------------------------------------------------------------
SanDisk Corp.(a) 183,600 11,704,500
--------------------------------------------------------------
21,260,000
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-11.63%
Allaire Corp.(a) 150,000 4,628,906
--------------------------------------------------------------
Commtouch Software Ltd. (Israel)(a) 100,000 2,056,250
--------------------------------------------------------------
Digex, Inc.(a) 187,600 11,830,525
--------------------------------------------------------------
i2 Technologies, Inc.(a) 71,500 9,277,125
--------------------------------------------------------------
Macromedia, Inc.(a) 81,300 6,219,450
--------------------------------------------------------------
Macrovision Corp.(a) 146,900 11,090,950
--------------------------------------------------------------
Mercury Interactive Corp.(a) 92,000 9,132,437
--------------------------------------------------------------
Natural MicroSystems Corp.(a) 90,000 10,029,375
--------------------------------------------------------------
Orbotech, Ltd. (Israel)(a) 80,000 6,590,000
--------------------------------------------------------------
Quest Software, Inc.(a) 125,000 5,906,250
--------------------------------------------------------------
Rational Software Corp.(a) 104,900 10,673,575
--------------------------------------------------------------
Verity, Inc.(a) 93,700 3,414,194
--------------------------------------------------------------
WebTrends Corp.(a) 150,000 4,509,375
--------------------------------------------------------------
95,358,412
--------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.64%
Bindley Western Industries, Inc. 200,000 5,262,500
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.92%
CommScope, Inc.(a) 109,400 3,658,062
--------------------------------------------------------------
Electro Scientific Industries, Inc.(a) 147,500 6,702,031
--------------------------------------------------------------
Plexus Corp.(a) 35,000 3,948,437
--------------------------------------------------------------
Veeco Instruments Inc.(a) 177,400 13,970,250
--------------------------------------------------------------
Viasystems Group, Inc.(a) 234,600 $ 3,856,237
--------------------------------------------------------------
32,135,017
--------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-2.05%
Kent Electronics Corp.(a) 262,300 8,164,087
--------------------------------------------------------------
Power-One, Inc.(a) 73,500 8,677,594
--------------------------------------------------------------
16,841,681
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-1.74%
Aeroflex Inc.(a) 117,775 3,371,309
--------------------------------------------------------------
Anaren Microwave, Inc.(a) 150,000 10,884,375
--------------------------------------------------------------
14,255,684
--------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-6.42%
Alpha Industries, Inc.(a) 162,600 5,538,562
--------------------------------------------------------------
Coherent, Inc.(a) 65,200 3,903,850
--------------------------------------------------------------
Keithley Instruments, Inc. 80,000 3,875,000
--------------------------------------------------------------
Methode Electronics, Inc.-Class A 150,000 6,815,625
--------------------------------------------------------------
Newport Corp. 124,300 12,165,862
--------------------------------------------------------------
Photon Dynamics, Inc.(a) 94,400 5,097,600
--------------------------------------------------------------
Trimble Navigation Ltd.(a) 110,000 4,757,500
--------------------------------------------------------------
Varian Inc.(a) 250,000 10,531,250
--------------------------------------------------------------
52,685,249
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-7.79%
Cirrus Logic, Inc.(a) 325,000 6,296,875
--------------------------------------------------------------
Dense-Pac Microsystems, Inc.(a) 500,000 5,406,250
--------------------------------------------------------------
Elantec Semiconductor, Inc.(a) 222,100 16,171,656
--------------------------------------------------------------
Exar Corp.(a) 160,000 14,850,000
--------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 85,000 3,963,125
--------------------------------------------------------------
TranSwitch Corp.(a) 104,900 8,378,888
--------------------------------------------------------------
Zoran Corp.(a) 200,000 8,825,000
--------------------------------------------------------------
63,891,794
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-3.14%
Advanced Energy Industries, Inc.(a) 125,000 5,625,000
--------------------------------------------------------------
Credence Systems Corp.(a) 70,000 2,992,500
--------------------------------------------------------------
Cymer, Inc.(a) 190,000 8,621,250
--------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 175,000 8,498,438
--------------------------------------------------------------
25,737,188
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.07%
SEI Investments Co. 159,600 8,738,100
--------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.63%
Isle of Capri Casinos, Inc.(a) 419,600 $ 5,192,550
--------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.86%
Alpharma Inc.-Class A 150,400 9,851,200
--------------------------------------------------------------
Jones Pharma Inc. 107,900 3,526,981
--------------------------------------------------------------
Pain Therapeutics, Inc.(a) 99,300 1,837,050
--------------------------------------------------------------
15,215,231
--------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.86%
First Health Group Corp.(a) 230,200 7,049,875
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.84%
ArthroCare Corp.(a) 113,600 4,125,100
--------------------------------------------------------------
Coopers Cos., Inc. 125,000 4,390,625
--------------------------------------------------------------
Intuitive Surgical, Inc.(a) 250,000 4,718,750
--------------------------------------------------------------
Zoll Medical Corp.(a) 45,000 1,828,125
--------------------------------------------------------------
15,062,600
--------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.18%
Priority Healthcare Corp.-Class B(a) 125,000 6,703,125
--------------------------------------------------------------
Techne Corp.(a) 30,000 2,996,250
--------------------------------------------------------------
9,699,375
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.76%
Raymond James Financial, Inc. 250,000 6,250,000
--------------------------------------------------------------
INVESTMENT MANAGEMENT-0.63%
Federated Investors, Inc.-Class B 196,650 5,149,772
--------------------------------------------------------------
INVESTMENTS-1.09%
Nasdaq 100 Shares(a) 100,000 8,950,000
--------------------------------------------------------------
IRON & STEEL-0.96%
NS Group, Inc.(a) 550,000 7,906,250
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.02%
Oakley, Inc.(a) 575,000 8,337,500
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.82%
Dril-Quip, Inc.(a) 167,800 6,701,513
--------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-7.10%
Cal Dive International, Inc.(a) 280,900 13,553,425
--------------------------------------------------------------
Grey Wolf, Inc.(a) 1,500,000 6,937,500
--------------------------------------------------------------
Marine Drilling Cos., Inc.(a) 400,000 8,700,000
--------------------------------------------------------------
National-Oilwell, Inc.(a) 283,900 9,368,700
--------------------------------------------------------------
Patterson Energy, Inc.(a) 262,300 6,541,106
--------------------------------------------------------------
Precision Drilling Corp.
(Canada)(a) 209,800 7,159,425
--------------------------------------------------------------
UTI Energy Corp.(a) 188,800 5,947,200
--------------------------------------------------------------
58,207,356
--------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.22%
Comstock Resources, Inc.(a) 500,000 $ 3,468,750
--------------------------------------------------------------
Cross Timbers Oil Co. 165,000 2,712,188
--------------------------------------------------------------
Evergreen Resources, Inc.(a) 150,000 4,106,250
--------------------------------------------------------------
Spinnaker Exploration Co.(a) 175,000 4,364,063
--------------------------------------------------------------
Startech Energy, Inc. (Canada)(a) 671,600 3,525,900
--------------------------------------------------------------
18,177,151
--------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.42%
Valero Energy Corp.-$1.94 Conv.
Pfd. 150,000 3,468,750
--------------------------------------------------------------
RESTAURANTS-1.68%
Jack in the Box Inc.(a) 157,400 3,374,263
--------------------------------------------------------------
Sonic Corp.(a) 340,900 10,376,144
--------------------------------------------------------------
13,750,407
--------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-2.15%
Tweeter Home Entertainment Group,
Inc.(a) 314,700 11,368,538
--------------------------------------------------------------
Ultimate Electronics, Inc.(a) 254,800 6,274,450
--------------------------------------------------------------
17,642,988
--------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.89%
Fred's, Inc. 350,000 7,262,500
--------------------------------------------------------------
RETAIL (SPECIALTY)-0.96%
Linens 'n Things, Inc.(a) 262,300 7,852,606
--------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.64%
Chico's FAS, Inc.(a) 200,000 5,900,000
--------------------------------------------------------------
Christopher & Banks Corp.(a) 262,500 5,971,875
--------------------------------------------------------------
Factory 2-U Stores Inc.(a) 150,000 6,225,000
--------------------------------------------------------------
Too Inc.(a) 157,400 3,531,663
--------------------------------------------------------------
21,628,538
--------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.67%
Lamar Advertising Co.(a) 300,000 13,687,500
--------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.53%
Championship Auto Racing Teams,
Inc.(a) 175,000 4,364,063
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.67%
Insight Enterprises, Inc.(a) 131,100 6,063,375
--------------------------------------------------------------
Investment Technology Group, Inc.(a) 157,400 7,653,575
--------------------------------------------------------------
13,716,950
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.55%
Learning Tree International, Inc.(a) 100,000 4,512,500
--------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.63%
Powerwave Technologies, Inc.(a) 150,000 5,203,125
--------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.12%
Corvis Corp.(a) 12,180 $ 1,002,757
--------------------------------------------------------------
Total Common Stocks & Other Equity
Interests (Cost $462,695,099) 669,040,583
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE NOTES-0.69%
COMMUNICATIONS EQUIPMENT-0.69%
Kestrel Solutions, Conv. Notes,
5.50%, 07/15/05 (Acquired
07/20/00; Cost $5,250,000)(b) $5,250,000 5,670,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-5.04%
CALLS-0.33%
Micron Technology,
Inc. (Electronics-
Semiconductors) 2,650 $ 85 Aug-00 1,159,375
-----------------------------------------------------------------------
NS Group, Inc. (Iron
& Steel) 2,000 18 Oct-00 287,500
-----------------------------------------------------------------------
Philadelphia Oil
Service Sector
Index (Oil & Gas-
Exploration &
Production) 2,974 140 Sep-00 613,388
-----------------------------------------------------------------------
Philadelphia
Semiconductor Index
(Electronics-
Semiconductors) 290 1,100 Aug-00 551,000
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 1,395 1,550 Aug-00 74,109
-----------------------------------------------------------------------
2,685,372
-----------------------------------------------------------------------
PUTS-4.71%
AMEX Pharmaceutical
Index (Health
Care-Drugs- Major
Pharmaceuticals) 795 370 Oct-00 765,187
-----------------------------------------------------------------------
Morgan Stanley
Internet Index
(Computers-
Software &
Services) 3,386 70 Dec-00 3,301,350
-----------------------------------------------------------------------
Nasdaq 100 Index
(Investments) 301 3,300 Sep-00 3,758,738
-----------------------------------------------------------------------
183 3,600 Dec-00 6,949,425
-----------------------------------------------------------------------
Pegasus
Communications
Corp.
(Broadcasting-
Television, Radio &
Cable) 1,300 32 Sep-00 186,875
-----------------------------------------------------------------------
Russell 2000 Index
(Investments) 3,246 500 Sep-00 5,883,375
-----------------------------------------------------------------------
1,483 510 Dec-00 5,227,575
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 1,338 $1,420 Aug-00 $2,826,525
-----------------------------------------------------------------------
761 1,450 Aug-00 2,549,350
-----------------------------------------------------------------------
700 1,400 Sep-00 1,671,250
-----------------------------------------------------------------------
1,195 1,400 Dec-00 5,556,750
-----------------------------------------------------------------------
38,676,400
-----------------------------------------------------------------------
Total Options
Purchased (Cost
$50,745,528) 41,361,772
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-10.54%
STIC Liquid Assets Portfolio(c) 43,223,960 43,223,960
--------------------------------------------------------------
STIC Prime Portfolio(c) 43,223,960 43,223,960
--------------------------------------------------------------
Total Money Market Funds
(Cost $86,447,920) 86,447,920
--------------------------------------------------------------
TOTAL INVESTMENTS-97.85%
(Cost $605,138,547) 802,520,275
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.15% 17,651,660
--------------------------------------------------------------
NET ASSETS-100.00% $820,171,935
==============================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)
Administaff, Inc. 75,000 $ 3,993,750
--------------------------------------------------------------
Advanced Micro Devices, Inc. 40,000 2,877,500
--------------------------------------------------------------
Amazon.com, Inc. 132,400 3,988,550
--------------------------------------------------------------
Amkor Technology, Inc. 100,000 2,750,000
--------------------------------------------------------------
ANTEC Corp. 63,000 2,382,187
--------------------------------------------------------------
ARM Holdings PLC-ADR (United Kingdom) 92,500 3,173,906
--------------------------------------------------------------
Atmel Corp. 126,500 3,787,094
--------------------------------------------------------------
Audiovox Corp.-Class A 84,600 1,311,300
--------------------------------------------------------------
BroadVision, Inc. 94,000 3,401,625
--------------------------------------------------------------
Brooktrout Inc. 150,000 4,537,500
--------------------------------------------------------------
CacheFlow Inc. 45,000 3,060,000
--------------------------------------------------------------
Carrier Access Corp. 53,700 3,215,288
--------------------------------------------------------------
Certicom Corp. (Canada) 170,000 4,505,000
--------------------------------------------------------------
Costco Wholesale Corp. 125,000 4,070,313
--------------------------------------------------------------
CVS Corp. 97,300 3,837,269
--------------------------------------------------------------
Cysive, Inc. 100,000 2,400,000
--------------------------------------------------------------
Digital Island, Inc. 100,000 2,868,750
--------------------------------------------------------------
DoubleClick Inc. 62,400 2,242,500
--------------------------------------------------------------
Echelon Corp. 100,000 3,712,500
--------------------------------------------------------------
Express Scripts, Inc.-Class A 113,200 7,273,100
--------------------------------------------------------------
Globalstar Telecommunications Ltd. 142,000 1,100,500
--------------------------------------------------------------
Hewlett-Packard Co. 15,000 1,637,813
--------------------------------------------------------------
Lernout & Hauspie Speech Products N.V.
(Belgium) 50,000 1,556,250
--------------------------------------------------------------
Magna International, Inc. (Canada) 79,000 3,935,188
--------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Metris Cos. Inc. 162,500 $ 4,763,281
--------------------------------------------------------------
Newell Rubbermaid Inc. 225,000 6,060,938
--------------------------------------------------------------
1-800 CONTACTS, INC. 150,000 8,550,000
--------------------------------------------------------------
Orthodontic Centers of America, Inc. 290,600 7,519,275
--------------------------------------------------------------
Oxford Health Plans, Inc. 200,000 4,787,500
--------------------------------------------------------------
PolyMedica Corp. 95,000 3,595,156
--------------------------------------------------------------
Qlogic Corp. 40,400 3,009,800
--------------------------------------------------------------
QLT Inc. (Canada) 56,200 3,702,175
--------------------------------------------------------------
QUALCOMM Inc. 66,100 4,292,369
--------------------------------------------------------------
Scient Corp. 42,500 1,981,562
--------------------------------------------------------------
Silicon Storage Technology, Inc. 95,000 6,002,812
--------------------------------------------------------------
Starbucks Corp. 105,000 3,937,500
--------------------------------------------------------------
Stryker Corp. 187,200 8,037,900
--------------------------------------------------------------
Sunoco, Inc. 135,000 3,290,625
--------------------------------------------------------------
TMP Worldwide Inc. 28,300 2,037,600
--------------------------------------------------------------
UnitedHealth Group Inc. 103,700 8,483,956
--------------------------------------------------------------
Vicinity Corp. 42,500 844,687
--------------------------------------------------------------
Vignette Corp. 65,600 2,222,200
--------------------------------------------------------------
Whole Foods Market, Inc. 125,000 5,585,937
--------------------------------------------------------------
$166,323,156
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) 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 market
value at 07/31/00 represented 0.69% of the Fund's net assets.
(c) The money market fund has the same investment advisor as the Fund.
(d) Collateral on short sales was segregated by the Fund in the amount of
$181,928,530 which represents 110.62% of market value of the 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
$605,138,547) $802,520,275
------------------------------------------------------------
Cash 5,928,740
------------------------------------------------------------
Receivables for:
Investments sold 14,395,037
------------------------------------------------------------
Fund shares sold 743,527
------------------------------------------------------------
Dividends and interest 593,022
------------------------------------------------------------
Investments sold short 164,181,124
------------------------------------------------------------
Short positions covered 3,304,824
------------------------------------------------------------
Short stock rebates 883,081
------------------------------------------------------------
Investment for deferred compensation plan 12,994
------------------------------------------------------------
Total assets 992,562,624
------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,834,291
------------------------------------------------------------
Fund shares reacquired 1,324,557
------------------------------------------------------------
Options written (premiums received
$1,816,355) 421,800
------------------------------------------------------------
Short stock account interest 38,919
------------------------------------------------------------
Deferred compensation plan 12,994
------------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $164,181,124) 166,323,156
------------------------------------------------------------
Accrued advisory fees 730,364
------------------------------------------------------------
Accrued administrative services fees 11,187
------------------------------------------------------------
Accrued distribution fees 492,873
------------------------------------------------------------
Accrued transfer agent fees 57,624
------------------------------------------------------------
Accrued operating expenses 142,924
------------------------------------------------------------
Total liabilities 172,390,689
------------------------------------------------------------
Net assets applicable to shares outstanding $820,171,935
============================================================
NET ASSETS:
Class A $449,043,670
============================================================
Class B $326,570,806
============================================================
Class C $ 44,557,459
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 17,410,901
============================================================
Class B 12,853,519
============================================================
Class C 1,752,179
============================================================
Class A:
Net asset value and redemption price per
share $ 25.79
------------------------------------------------------------
Offering price per share:
(Net asset value of $25.79 divided by
94.50%) $ 27.29
============================================================
Class B:
Net asset value and offering price per share $ 25.41
============================================================
Class C:
Net asset value and offering price per share $ 25.43
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Short stock rebates $ 5,100,917
------------------------------------------------------------
Dividends -- affiliated issuers 1,778,327
------------------------------------------------------------
Dividends 395,709
------------------------------------------------------------
Interest 291,637
------------------------------------------------------------
Total investment income 7,566,590
------------------------------------------------------------
EXPENSES:
Advisory fees 6,847,355
------------------------------------------------------------
Administrative services fee 126,377
------------------------------------------------------------
Custodian fees 99,433
------------------------------------------------------------
Distribution fees -- Class A 1,322,447
------------------------------------------------------------
Distribution fees -- Class B 2,762,425
------------------------------------------------------------
Distribution fees -- Class C 306,511
------------------------------------------------------------
Interest 1,399,665
------------------------------------------------------------
Transfer agent fees -- Class A 247,830
------------------------------------------------------------
Transfer agent fees -- Class B 232,766
------------------------------------------------------------
Transfer agent fees -- Class C 25,821
------------------------------------------------------------
Trustee's fees 8,629
------------------------------------------------------------
Dividends on short sales 401,666
------------------------------------------------------------
Other 714,423
------------------------------------------------------------
Total expenses 14,495,348
------------------------------------------------------------
Less: Fees waived (314,784)
------------------------------------------------------------
Expenses paid indirectly (16,795)
------------------------------------------------------------
Net expenses 14,163,769
------------------------------------------------------------
Net investment income (loss) (6,597,179)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS
Net realized gain (loss) from:
Investment securities 281,397,793
------------------------------------------------------------
Futures contracts (897,367)
------------------------------------------------------------
Option contracts 18,473,981
------------------------------------------------------------
Securities sold short (12,793,600)
------------------------------------------------------------
286,180,807
------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 92,319,494
------------------------------------------------------------
Option contracts 1,652,600
------------------------------------------------------------
Securities sold short (3,440,914)
------------------------------------------------------------
90,531,180
------------------------------------------------------------
Net gain on investment securities, securities
sold short, futures and option contracts 376,711,987
------------------------------------------------------------
Net increase in net assets resulting from
operations $370,114,808
============================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the years ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,597,179) $ (4,494,793)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 286,180,807 8,988,418
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 90,531,180 113,395,076
------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 370,114,808 117,888,701
------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (15,796,321) (102,881)
------------------------------------------------------------------------------------------
Class B (11,509,981) (48,732)
------------------------------------------------------------------------------------------
Class C (1,189,843) --
------------------------------------------------------------------------------------------
Share transactions-net:
Class A 52,117,173 30,818,297
------------------------------------------------------------------------------------------
Class B 35,576,046 19,845,339
------------------------------------------------------------------------------------------
Class C 25,368,723 5,266,423
------------------------------------------------------------------------------------------
Net increase in net assets 454,680,605 173,667,147
------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 365,491,330 191,824,183
------------------------------------------------------------------------------------------
End of year $820,171,935 $365,491,330
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $366,807,012 $253,662,739
------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (83,038) (97,371)
------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 256,813,710 5,822,891
------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 196,634,251 106,103,071
------------------------------------------------------------------------------------------
$820,171,935 $365,491,330
==========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Small 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 consist 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 was closed to new investors as of November 4,
1999. 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 increased by $82,331,
undistributed net investment income was increased by $6,611,512 and
undistributed net realized gains was decreased by $6,693,843 as a result of
reclassifications of a net operating loss, equalization credits 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 buyer on behalf of the Fund. The short stock
rebate presented in the statement of operations represents income earned on
11
<PAGE> 14
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
1.00% 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
0.15%, 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 Russell 2000 Index, or (ii) downward
at the rate of 0.15%, on a pro rata basis, for each percentage point the
12-month rolling investment record of the Russell 2000 Index less 2.00% exceeds
the 12-month rolling investment performance of the Class A shares.
12
<PAGE> 15
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
$126,377 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
$206,416 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 $1,007,663, $2,762,425 and
$306,511, respectively, as compensation under the Plans. During the year ended
July 31, 2000, AIM Distributors waived fees of $314,784 for Class A shares.
AIM Distributors received commissions of $280,701, 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 $38,002 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 $3,722 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. 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 $7,599 and reductions in custodian
fees of $9,196 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $16,795.
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 $15,109,290 with a weighted average interest rate of
6.14%.
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
$1,260,650,596 and $1,402,401,764, 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 $232,723,060
----------------------------------------------------------------
Securities sold short 14,314,078
----------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (35,640,214)
----------------------------------------------------------------
Securities sold short (16,456,111)
----------------------------------------------------------------
Net unrealized appreciation of investment
securities $194,940,813
================================================================
</TABLE>
Cost of investments for tax purposes is $605,437,429.
Proceeds from securities sold short for tax purposes is $164,181,124.
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 14,857 31,123,327
-------------------------------------------------------------
Closed (14,355) (30,942,864)
-------------------------------------------------------------
Expired (502) (180,463)
-------------------------------------------------------------
End of year -- $ --
=============================================================
</TABLE>
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 1,683 $ 1,266,630
-------------------------------------------------------------
Purchased 11,302 8,023,393
-------------------------------------------------------------
Closed (11,738) (6,201,656)
-------------------------------------------------------------
Expired (1,019) (1,272,012)
-------------------------------------------------------------
End of year 228 $ 1,816,355
=============================================================
</TABLE>
Open put option contracts written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
JULY 31,
NUMBER 2000
CONTRACT STRIKE OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
----- -------- ------ --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq 100 Index Sep-00 $2,600 228 $1,816,355 $421,800 $1,394,555
==========================================================================================
</TABLE>
13
<PAGE> 16
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2000 and 1999 were
as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 6,753,064 $125,825,634 9,086,718 $99,751,555
---------------------------------------------------------------------------------------------------------------------
Class B 4,029,763 72,063,849 4,403,590 48,831,913
---------------------------------------------------------------------------------------------------------------------
Class C 1,535,334 29,503,687 463,451 5,940,023
---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 778,251 14,945,789 8,677 96,302
---------------------------------------------------------------------------------------------------------------------
Class B 531,984 10,113,306 3,755 41,572
---------------------------------------------------------------------------------------------------------------------
Class C 57,775 1,099,467 -- --
---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (3,968,990) (88,654,250) (6,264,993) (69,029,559)
---------------------------------------------------------------------------------------------------------------------
Class B (2,136,331) (46,601,109) (2,617,703) (29,028,148)
---------------------------------------------------------------------------------------------------------------------
Class C (245,494) (5,234,431) (58,887) (673,599)
---------------------------------------------------------------------------------------------------------------------
7,335,356 $113,061,942 5,024,608 $55,930,059
=====================================================================================================================
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the period indicated.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------
JUNE 29, 1998
(DATE OPERATIONS
YEAR ENDED JULY 31, COMMENCED) TO
---------------------- JULY 31,
2000(a) 1999(a) 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.86 $ 9.76 $ 10.00
------------------------------------------------------------ -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.14) (0.09) 0.02
------------------------------------------------------------ -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 11.97 5.20 (0.26)
------------------------------------------------------------ -------- -------- --------
Total from investment operations 11.83 5.11 (0.24)
------------------------------------------------------------ -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- --------
Distributions from net realized gains (0.90) -- --
------------------------------------------------------------ -------- -------- --------
Net asset value, end of period $ 25.79 $ 14.86 $ 9.76
============================================================ ======== ======== ========
Total return(b) 81.64% 52.36% (2.40)%
============================================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $449,044 $205,721 $107,540
============================================================ ======== ======== ========
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 1.73%(c) 2.35% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.81%(c) 2.35% 1.59%(d)
============================================================ ======== ======== ========
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 1.47%(c) 1.74% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.55%(c) 1.74% 1.59%(d)
============================================================ ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.63)%(c) (1.44)% 2.00%(d)
============================================================ ======== ======== ========
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
============================================================ ======== ======== ========
Portfolio turnover rate 198% 220% 13%
============================================================ ======== ======== ========
</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 $377,841,908.
(d) Annualized.
14
<PAGE> 17
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
JULY 13, 1998
(DATE SALES
YEAR ENDED JULY 31, COMMENCED) TO
---------------------- JULY 31,
2000(a) 1999(a) 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.75 $ 9.76 $ 10.07
------------------------------------------------------------ -------- -------- -------
Income from investment operations:
Net investment income (loss) (0.30) (0.17) 0.01
------------------------------------------------------------ -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) 11.86 5.17 (0.32)
------------------------------------------------------------ -------- -------- -------
Total from investment operations 11.56 5.00 (0.31)
------------------------------------------------------------ -------- -------- -------
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- -------
Distributions from net realized gains (0.90) -- --
------------------------------------------------------------ -------- -------- -------
Net asset value, end of period $ 25.41 $ 14.75 $ 9.76
============================================================ ======== ======== =======
Total return(b) 80.38% 51.30% (3.08)%
============================================================ ======== ======== =======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $326,571 $153,793 $84,285
============================================================ ======== ======== =======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03% 2.30%(d)
============================================================ ======== ======== =======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42% 2.30%(d)
============================================================ ======== ======== =======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)% 1.29%(d)
============================================================ ======== ======== =======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
============================================================ ======== ======== =======
Portfolio turnover rate 198% 220% 13%
============================================================ ======== ======== =======
</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 based on average net assets of $276,242,462.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS C
-------------------------------
DECEMBER 30, 1999
(DATE SALES
YEAR ENDED COMMENCED) TO
JULY 31, JULY 31,
2000(a) 1999(a)
---------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 14.78 $11.70
------------------------------------------------------------ ------- ------
Income from investment operations:
Net investment income (loss) (0.32) (0.11)
------------------------------------------------------------ ------- ------
Net gains on securities (both realized and unrealized) 11.87 3.19
------------------------------------------------------------ ------- ------
Total from investment operations 11.55 3.08
------------------------------------------------------------ ------- ------
Less distributions from net realized gains (0.90) --
------------------------------------------------------------ ------- ------
Net asset value, end of period $ 25.43 $14.78
============================================================ ======== ======
Total return(b) 80.15% 29.31%
============================================================ ======== ======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $44,557 $5,977
============================================================ ======== ======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03%(d)
============================================================ ======== ======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42%(d)
============================================================ ======== ======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)%(d)
============================================================ ======== ======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61%(d)
============================================================ ======== ======
Portfolio turnover rate 198% 220%
============================================================ ======== ======
</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 based on average net assets of $30,651,089.
(d) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Small Cap Opportunities Fund:
We have audited the accompanying statement of assets and liabilities of the AIM
Small 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 statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the two-year period then ended and
for the period June 29, 1998 (date operations commenced) through July 31, 1998.
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 audit.
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
Small Cap Opportunities Fund as of July 31, 2000, the results of its operations
for the year then ended, the statements of changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the two-year period then ended and for the period June 29,
1998 (date operations commenced) through July 31, 1998, 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 Chief Executive Officer Nancy L. Martin
A I M Management Group Inc. Assistant Secretary DISTRIBUTOR
Prema Mathai-Davis Ofelia M. Mayo A I M Distributors, Inc.
Formerly, Chief Executive Officer, Assistant Secretary 11 Greenway Plaza
YWCA of the U.S.A. Suite 100
Lisa A. Moss Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney AUDITORS
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President, 700 Louisiana
Development and Operations, Houston, TX 77002
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, 0.06% is eligible for the dividends received deduction for
corporations.
17
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<CAPTION>
EQUITY FUNDS
<S> <C> <C>
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has provided
leadership in the mutual fund industry
MORE AGGRESSIVE MORE AGGRESSIVE since 1976 and managed approximately
AIM Small Cap Opportunities(1) AIM Latin American Growth $176 billion in assets for more than
AIM Mid Cap Opportunities(2) AIM Developing Markets 8 million shareholders, including
AIM Large Cap Opportunities(6) AIM European Small Company individual investors, corporate clients
AIM Emerging Growth AIM Asian Growth and financial institutions, as of
AIM Small Cap Growth(3) AIM Japan Growth June 30, 2000.
AIM Aggressive Growth AIM International Emerging Growth The AIM Family of Funds--Registered
AIM Mid Cap Growth AIM European Development Trademark-- is distributed nationwide,
AIM Small Cap Equity AIM Euroland Growth and AIM today is the eighth-largest
AIM Capital Development AIM Global Aggressive Growth mutual fund complex in the United States
AIM Constellation(4) AIM International Equity in assets under management, according to
AIM Dent Demographic Trends AIM Advisor International Value Strategic Insight, an independent mutual
AIM Select Growth AIM Global Trends fund monitor.
AIM Large Cap Growth AIM Global Growth AIM is a subsidiary of AMVESCAP PLC,
AIM Weingarten one of the world's largest independent
AIM Mid Cap Equity MORE CONSERVATIVE financial services companies with $389
AIM Value II billion in assets under management as of
AIM Charter SECTOR EQUITY FUNDS June 30, 2000.
AIM Value
AIM Blue Chip
AIM Basic Value MORE AGGRESSIVE
AIM Large Cap Basic Value AIM New Technology
AIM Balanced AIM Global Telecommunications and Technology
AIM Advisor Flex AIM Global Resources
AIM Global Financial Services
MORE CONSERVATIVE AIM Global Health Care
AIM Global Consumer Products and Services
AIM Global Infrastructure
AIM Advisor Real Estate
AIM Global Utilities
MORE CONSERVATIVE
FIXED-INCOME FUNDS
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE
AIM Strategic Income AIM High Income Municipal
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)
AIM Intermediate Government MORE CONSERVATIVE
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 Fund's 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] [AIM LOGO APPEARS HERE]
--Registered Trademark--
INVEST WITH DISCIPLINE
--Registered Trademark--
A I M Distributors, Inc. SCO-AR-1
