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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-06463
--------------------------------------------------------------------------
AIM International Mutual Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Robert H. Graham 11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 626-1919
-----------------------------
Date of fiscal year end: 10/31
-------------------
Date of reporting period: 10/31/05
------------------
Item 1. Schedule of Investments.
AIM ASIA PACIFIC GROWTH FUND
Annual Report to Shareholders o October 31,2005
[COVER IMAGE]
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
AIM ASIA PACIFIC GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October
31, 2005, and is based on total net assets.
<Table>
ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
o Class B shares are not available as an o The unmanaged MSCI Europe, Australasia o The returns shown in management's
investment for retirement plans maintained and the Far East Index (the MSCI EAFE discussion of Fund performance are based
pursuant to Section 401 of the Internal --Registered Trademark-- INDEX) is a group on net asset values calculated for
Revenue Code, including 401(k) plans, of foreign securities tracked by Morgan shareholder transactions. Generally
money purchase pension plans and profit Stanley Capital International. accepted accounting principles require
sharing plans. Plans that had existing adjustments to be made to the net assets
accounts invested in Class B shares prior o The MSCI ALL COUNTRY (AC) ASIA PACIFIC of the Fund at period end for financial
to September 30, 2003, will continue to be EX-JAPAN INDEX is a group of developed and reporting purposes, and as such, the net
allowed to make additional purchases. emerging Asian and Asia-Pacific markets asset values for shareholder transactions
(except Japan) covered by Morgan Stanley and the returns based on those net asset
PRINCIPAL RISKS OF INVESTING IN THE FUND Capital International. The index values may differ from the net asset
represents investable opportunities for values and returns reported in the
o Investing in emerging markets involves global investors, taking into account the Financial Highlights.
greater risk and potential reward than local market restrictions on share
investing in more established markets. ownership by foreign investors. o Industry classifications used in this
report are generally according to the
o International investing presents certain o The unmanaged LIPPER PACIFIC EX-JAPAN Global Industry Classification Standard,
risks not associated with investing solely FUND INDEX represents an average of the which was developed by and is the
in the United States. These include risks largest Pacific ex-Japan funds tracked by exclusive property and a service mark of
relating to fluctuations in the value of Lipper, Inc., an independent mutual fund Morgan Stanley Capital International Inc.
the U.S. dollar relative to the values of performance monitor, and is considered and Standard & Poor's.
other currencies, the custody arrangements representative of Pacific ex-Japan stocks.
made for the Fund's foreign holdings, The Fund provides a complete list of its
differences in accounting, political risks o The unmanaged Standard & Poor's holdings four times in each fiscal year,
and the lesser degree of public Composite Index of 500 Stocks (the S&P 500 at the quarter-ends. For the second and
information required to be provided by --Registered Trademark-- INDEX) is an fourth quarters, the lists appear in the
non-U.S. companies. index of common stocks frequently used as Fund's semiannual and annual reports to
a general measure of U.S. stock market shareholders. For the first and third
o Investing in a single-sector or performance. quarters, the Fund files the lists with
single-region mutual fund involves greater the Securities and Exchange Commission
risk and potential reward than investing o The unmanaged MSCI WORLD INDEX is a (SEC) on Form N-Q. The most recent list of
in a more diversified fund. group of global securities tracked by portfolio holdings is available at
Morgan Stanley Capital International. AIMinvestments.com. From our home page,
o Investing in smaller companies involves click on Products & Performance, then
greater risk than investing in more o The Fund is not managed to track the Mutual Funds, then Fund Overview. Select
established companies, such as business performance of any particular index, your Fund from the drop-down menu and
risk, significant stock price fluctuations including the indexes defined here, and click on Complete Quarterly Holdings.
and illiquidity. consequently, the performance of the Fund Shareholders can also look up the Fund's
may deviate significantly from the Forms N-Q on the SEC's Web site at
o Although the fund's return during performance of the indexes. sec.gov. And copies of the Fund's Forms
certain periods was positively impacted by N-Q may be reviewed and copied at the
its investments in initial public o A direct investment cannot be made in an SEC's Public Reference Room at 450 Fifth
offerings (IPOs), there can be no index. Unless otherwise indicated, index Street,N.W., Washington, D.C. 20549-0102.
assurance that the fund will have results include reinvested dividends, and You can obtain information on the
favorable IPO investment opportunities in they do not reflect sales charges. operation of the Public Reference Room,
the future. Performance of an index of funds reflects including information about duplicating
fund expenses; performance of a market fee charges, by calling 202-942-8090 or
index does not. 800-732-0330, or by electronic request at
the following e-mail address:
publicinfo@sec.gov. The SEC file numbers
for the Fund are 811-06463 and 33-44611.
Continued on Page 7
==========================================
FUND NASDAQ SYMBOLS
Class A Shares ASIAX
Class B Shares ASIBX
Class C Shares ASICX
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS,
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.
=======================================================================================
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMINVESTMENTS.COM
AIM ASIA PACIFIC GROWTH FUND
DEAR FELLOW AIM FUNDS SHAREHOLDERS:
The fiscal year covered by this report was quite good to
equity investors. Domestically, the broad-based S&P 500
Index returned 8.72%. Globally, Morgan Stanley's MSCI World
[GRAHAM Index rose 13.27%. Much of this good performance, though,
PHOTO] was attained early in the fiscal year as virtually every
equity index declined during October of 2005. Concern about
the inflationary potential of rising energy costs was
frequently cited as a major cause of market weakness.
Within the indexes, there was considerable variability in
the performance of different sectors and markets.
Domestically, energy sector performance far outpaced that of
ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising
oil and gas prices. Overseas, emerging markets produced more
attractive results than did developed markets, at least in
part because emerging markets tend to be more closely tied
to the performance of natural resources and commodities.
One could make a strong argument for global
diversification of a stock portfolio using the performance
data for the fiscal year ended October 31, 2005. Of course,
your financial advisor is the person most qualified to help
you decide whether such diversification is appropriate for
you.
For a discussion of the specific market conditions that
[WILLIAMSON affected your Fund and how your Fund was managed during the
PHOTO] fiscal year, please turn to Page 3.
NEW INFORMATION IN THIS REPORT
We would like to call your attention to two new elements in
this report. First, on Page 2, is a message from Bruce
Crockett, the independent Chair of the Board of Trustees of
the AIM Funds. We first introduced you to Mr. Crockett in
MARK H. WILLIAMSON the annual report on your Fund dated October 31, 2004. Mr.
Crockett has been on our Funds' Board since 1992; he assumed
his responsibilities as Chair in October 2004.
Mr. Crockett plans to keep AIM shareholders informed of
the work of the Board regularly via letters in the Fund
reports. We certainly think this is a valuable addition to
the reports. The Board is charged with looking out for the
interests of shareholders, and Mr. Crockett's letter
provides insight into some of the many issues the Board
addresses in governing your Fund.
One of the most important decisions the Board makes each
year is whether to approve the advisory agreement your Fund
has with AIM. Essentially, this agreement hires AIM to
manage the assets in your Fund. A discussion of the factors
the Board considered in reviewing the agreement is the
second new element in the report, and we encourage you to
read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and
investing in general is always available on our widely
acclaimed Web site, AIMinvestments.com. We invite you to
visit it frequently.
We at AIM remain committed to building solutions to help
you meet your investment goals. We thank you for your
continued participation in AIM Investments--Registered
Trademark--. If you have any questions, please contact our
award-winning Client Service representatives at
800-959-4246. We are happy to be of help.
Sincerely,
/S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, President, A I M Advisors, Inc.
AIM Funds
December 15, 2005
AIM Investments is a registered service mark of A I M Management Group Inc. A I
M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors.
A I M Distributors, Inc. is the distributor for the retail funds represented by
AIM Investments.
1
AIM ASIA PACIFIC GROWTH FUND
DEAR AIM FUNDS SHAREHOLDERS:
As independent Chair of the Board of Trustees of the AIM
[CROCKETT Funds, I'm writing to report on the work being done by your
PHOTO] Board.
At our most recent meeting in June 2005, your Board
approved voluntary fee reductions from A I M Advisors, Inc.
(AIM) that save shareholders approximately $20.8 million
annually, based on asset levels as of March 31, 2005. The
majority of these expense reductions, which took effect July
1, 2005, will be achieved by a permanent reduction to 0.25%
BRUCE L. CROCKETT of the Rule 12b-1 fees on Class A and Class A3 shares of
those AIM Funds that previously charged these fees at a
higher rate.
Our June meeting, which was the culmination of more than
two and one-half months of review and discussions, took
place over a three-day period. The meeting included your
Board's annual comprehensive evaluation of each fund's
advisory agreement with AIM. After this evaluation, in which
questions about fees, performance and operations were
addressed by AIM, your Board approved all advisory
agreements for the year beginning July 1, 2005. You can find
information on the factors considered and conclusions
reached by your Board in its evaluation of each fund's
advisory agreement at AIMinvestments.com. (Go to "Products &
Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your
Fund is also included in this annual report on Pages 8 and
9. I encourage you to review it.
Together with monitoring fund expenses, fund performance
is your Board's priority. Our initial goal is to work with
AIM to bring about improvement in every AIM Fund that has
been underperforming its category.
Your Board has a well-defined process and structure for
monitoring all funds and identifying and assisting AIM in
improving underperforming funds. Our Investments
Committee--which functions along with Audit, Governance,
Valuation and Compliance Committees--is the only one of
these five standing committees to include all 14 independent
Board members. Further, our Investments Committee is divided
into three underlying subcommittees, each responsible for,
among other things, reviewing the performance, fees and
expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the
performance of every AIM Fund is evaluated. If a fund has
underperformed its peer group for a meaningful period, we
work closely with AIM to discover the causes and help
develop the right responses. In some cases, AIM may
determine that a change in portfolio management strategy or
portfolio managers is required. In other cases, where a fund
no longer seems viable, it may be merged with a similar
fund, being careful to consider the needs of all
shareholders affected by the decision. Following AIM's
recommendation and your Board's approval, eight funds were
recently merged.
Be assured that your Board is working closely with the
management of AIM to help you reach your investment goals.
Should you or your advisor have questions or comments about
the governance of AIM Funds, I invite you to write to me at
AIM Investments, AIM Investments Tower, 11 Greenway Plaza,
Suite 100, Houston, TX 77046. Your Board looks forward to
keeping you informed about the governance of your funds.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
December 15, 2005
2
AIM ASIA PACIFIC GROWTH FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
<Table>
We seek to minimize stock-specific risk
by building a diversified portfolio with
the top 10 holdings making up about 25% of
======================================================================================= total net assets.
PERFORMANCE SUMMARY ========================================== We believe disciplined sell decisions
are a key determinant of successful
During the fiscal year, international FUND VS. INDEXES investing. We consider selling a stock for
stocks outperformed U.S. equities with any one of the following reasons:
emerging market equities the best Total returns,10/31/04-10/31/05,excluding
performers worldwide. applicable sales charges. If sales charges o a company's fundamentals deteriorate or
were included, returns would be lower. it posts disappointing earnings
As the table indicates, we are pleased
to once again reward our shareholders with Class A Shares 19.53% o a stock's price seems overvalued
positive returns for the fiscal year. Turn Class B Shares 18.72
to Pages 6 and 7 for long-term Class C Shares 18.79 o a more attractive opportunity is
performance. The strength of emerging MSCI EAFE Index presented
Asian equities enabled us to outperform (Broad Market Index) 18.09
our broad market index which is composed MSCI AC Asia Pacific ex-Japan MARKET CONDITIONS AND YOUR FUND
of stocks from developed nations. We Index (Style-specific Index) 21.69
modestly underperformed our style-specific Lipper Pacific ex-Japan Fund Index Asian markets moved higher during the
benchmark due to our relative underweight (Peer Group Index) 27.33 fiscal year with all Pacific Rim
position to the countries-- represented by the MSCI All
SOURCE: LIPPER, INC. Country Asia Pacific ex Japan
Index--posting positive returns both in
========================================== local and U.S. dollar terms. Returns
varied, however, by country.
outperforming Australian market and
materials sector. In India, markets were buoyed by
exports. Korean markets have been aided by
======================================================================================= the country's low interest rates, which
have helped lift domestic consumption by
HOW WE INVEST o high return on invested capital reducing household debt. In China, GDP
growth continued to exceed expectations.
We believe that earnings drive stock o reasonable prices with low valuations Recently, China allowed its currency to
prices and that companies generating float in a narrow band against a basket of
substantial, repeatable, above average We use a systematic, stock-by stock currencies. Although unlikely to prevent
earnings growth should provide long-term approach, focusing on strengths of further growth in China's trade surplus,
growth of capital. individual companies, rather than sector the decision improved political pressures
or country trends. Our goal is a from the country's trading partners.
Therefore, when selecting stocks for well-diversified, reasonably priced, Meanwhile, Australian markets moved higher
your Fund we look for companies in the quality portfolio. We adhere to our on the back of rising energy prices
Asia Pacific region (excluding Japan) with investment process regardless of the (Australia is a net oil exporter) and its
the following attributes: macroeconomic environment. buoyant mining industry.
o accelerating earnings and revenues We do not hedge currencies because we
believe currency exposure increases the
o strong cash flow generation (dividends, diversification benefit of international
share buybacks) investing. (continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. South Korea 20.4% 1. Esprit Holdings Ltd. (Hong Kong) 2.5%
2. Hong Kong 19.9 2. Samsung Electronics Co., Ltd.
[PIE CHART] 3. Australia 13.0 (South Korea) 2.3
4. India 8.5 3. Hyundai Department Store Co., Ltd.
Consumer Discretionary 20.5% 5. China 8.3 (South Korea) 2.3
Information Technology 17.1% 4. BHP Billiton Ltd. (Australia) 2.2
Industrials 10.9% TOTAL NET ASSETS $218.6 MILLION 5. Philippine Long Distance
Consumer Staples 9.6% Telephone Co. (Philippines) 2.2
Energy 1.8% TOTAL NUMBER OF HOLDINGS* 101 6. Cheung Kong (Holdings) Ltd.
Telecommunications Services 3.8% (Hong Kong) 2.1
Health Care 3.4% 7. Infosys Technologies Ltd. (India) 2.0
Materials 2.8% 8. CSL Ltd. (Australia) 2.0
Money Market Funds Plus 9. Keppel Corp. Ltd. (Singapore) 1.6
Other Assets Less Liabilities 7.5% 10. Computershare Ltd. (Australia) 1.6
Financials 22.6%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
</Table>
3
AIM ASIA PACIFIC GROWTH FUND
<Table>
Fund performance was broadly based position in a few sectors hurt comparative SHUXIN CAO, Chartered
across countries. SHANGHAI ELECTRIC GROUP, results. We had less exposure to materials [CAO Financial Analyst,
sometimes referred to as the "The G.E. of and energy--two sectors that did well PHOTO] portfolio manager is
China" was a top contributor. The company, given rising commodity prices--as some of co-manager of AIM Asia
a manufacturer of power generation the stocks in these sectors did not fit Pacific Growth Fund.
equipment, is well positioned to benefit our investment criteria. He joined AIM in 1997. Mr. Cao graduated
from strong power demand being witnessed from Tianjin Foreign Language Institute
in China. We believe stable sales from Given our performance during the fiscal with a B.A. in English. He also received
four years of pre-placed orders and year, we had few stocks that detracted an M.B.A. from Texas A&M University and is
sophisticated technological capabilities from performance. One stock that proved a a Certified Public Accountant.
provide the company with a strong outlook. drag on performance was Korea-based
KIRYUNG ELECTRONIC CO. Ltd., a BARRETT K. SIDES,
Indian stocks were also top manufacturer and supplier of satellite [SIDES senior portfolio
contributors. Long-time Fund holding radio systems to a large U.S. satellite PHOTO] manager, is co-
INFOSYS TECHNOLOGIES LTD., a top radio company. During the fiscal year, manager of AIM Asia
outsourcing company continued to post Kiryung's stock declined amid increased Pacific Growth Fund.
strong results, as did HOTEL LEELAVENTURE competition from Taiwanese competitors He joined AIM in 1990. Mr. Sides graduated
LTD., a hotel group based in India. Rising which led to disappointing earnings. with a B.S. in economics from Bucknell
tourism in India coupled with increased Despite a rebound in the stock, the University. He also received a master's in
occupancy rates has given Hotel increased competitive atmosphere international business from the University
Leelaventure more pricing power for their surrounding the company led us to trim the of St. Thomas.
rooms. position.
Assisted by Asia Pacific/Latin America
Despite an underperforming Taiwanese IN CLOSING Team
market, our bottom-up stock selection
process which focuses on the strengths of Asian economies have made considerable
individual companies and not country strides in the years since the Asian
macroeconomic conditions, allowed us to Crisis by improving economic fundamentals.
produce double-digit gains in Taiwan. One In general, interest rates across the
standout holding was CATCHER TECHNOLOGY region are relatively low and what were
CO. Ltd, a small-cap tech firm in Taiwan once trade deficits for most countries
that specializes in making alloy-based have turned into surpluses. In addition,
casings for notebook computers and inflation for the most part is benign and
handsets. Robust sales have led to economies are striving toward capitalism.
extremely strong top- and bottom-line Also, the sheer size of the consumer pool
growth. Technological expertise and a in Asia--nearly 50% of the world's
competitive cost base have earned this population live in China and India--make a
company the business of several key global compelling case for Asian investments. We
wireless companies. Taking profits, we are pleased to report these trends to you
trimmed the position somewhat during the and thank you for your continued
fiscal year, but continue to own it given participation in AIM Asia Pacific Growth
its strong current fundamentals. Fund.
Our underweight position to an The views and opinions expressed in
outperforming Australian market hurt management's discussion of Fund
comparative performance, although we performance are those of A I M Advisors,
actually produced a higher return in Inc. These views and opinions are subject
Australia than our benchmark. to change at any time based on factors
such as market and economic conditions.
On a sector basis, every sector we These views and opinions may not be relied
invested in during the fiscal year upon as investment advice or
produced double-digit returns. We recommendations, or as an offer for a
continued to overweight the consumer particular security. The information is
sectors due to demographic trends and we not a complete analysis of every aspect of
have found stocks here which have higher any market, country, industry, security or
growth profiles. Also, many consumer the Fund. Statements of fact are from
stocks are smaller-cap companies and are sources considered reliable, but A I M
often overlooked by the market and Advisors, Inc. makes no representation or
international investors. warranty as to their completeness or
accuracy. Although historical performance
Although performance was strong in all is no guarantee of future results, these
sectors on an absolute basis, our insights may help you understand our
underweight investment management philosophy.
See important Fund and index
disclosures inside front cover.
</Table>
[RIGHT ARROW GRAPHIC]
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE PAGES 6
AND 7.
4
AIM ASIA PACIFIC GROWTH FUND
CALCULATING YOUR ONGOING FUND EXPENSES
<Table>
EXAMPLE to estimate the expenses that you paid The hypothetical account values and
over the period. Simply divide your expenses may not be used to estimate the
As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or expenses
two types of costs: (1) transaction costs, $8,600 account value divided by $1,000 = you paid for the period. You may use this
which may include sales charges (loads) on 8.6), then multiply the result by the information to compare the ongoing costs
purchase payments; contingent deferred number in the table under the heading of investing in the Fund and other funds.
sales charges on redemptions; and entitled "Actual Expenses Paid During To do so, compare this 5% hypothetical
redemption fees, if any; and (2) ongoing Period" to estimate the expenses you paid example with the 5% hypothetical examples
costs, including management fees; on your account during this period. that appear in the shareholder reports of
distribution and/or service fees (12b-1); the other funds.
and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR
intended to help you understand your COMPARISON PURPOSES Please note that the expenses shown in
ongoing costs (in dollars) of investing in the table are meant to highlight your
the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any
ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges
funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent
investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and
beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the
entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in
31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not
net asset value after expenses for the six help you determine the relative total
ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In
the table "Cumulative Total Returns" on addition, if these transactional costs
The table below provides information about Page 7. were included, your costs would have been
actual account values and actual expenses. higher.
You may use the information in this table,
together with the amount you invested,
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO
A $1,000.00 $1,064.90 $10.15 $1,015.38 $9.91 1.95%
B 1,000.00 1,061.20 13.87 1,011.75 13.54 2.67
C 1,000.00 1,061.40 13.87 1,011.75 13.54 2.67
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31,
2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value
after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Return" on Page 7.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half-year. Effective on July 1, 2005, the distributor
contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if the
agreement had been in effect throughout the entire most recent half year is 1.92% for the Class A shares.
(3) The actual expenses paid restated as if the change discussed above had been in effect throughout the most recent fiscal half
year are $9.99 for the Class A shares.
(4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the most recent fiscal
year are $9.75 for the Class A shares.
====================================================================================================================================
</Table>
[ARROW
BUTTON For More Information Visit
IMAGE] AIMINVESTMENTS.COM
5
AIM ASIA PACIFIC GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
<Table>
RESULTS OF A $10,000 INVESTMENT
Fund data from 11/3/97, index data from 10/31/97
[MOUNTAIN CHART]
====================================================================================================================================
DATE AIM ASIA PACIFIC AIM ASIA PACIFIC AIM ASIA PACIFIC LIPPER PACIFIC
GROWTH FUND- GROWTH FUND- GROWTH FUND- EX-JAPAN MSCI EAFE
CLASS A SHARES CLASS B SHARES CLASS C SHARES FUND INDEX INDEX
10/31/97 $ 9450 $10000 $10000 $10000 $10000
11/97 8401 8890 8890 9650 9898
12/97 8174 8650 8650 9400 9984
1/98 7834 8280 8290 8511 10441
2/98 9346 9879 9880 9823 11111
3/98 9167 9690 9690 9751 11453
4/98 8713 9199 9200 9170 11544
5/98 7759 8189 8190 8065 11488
6/98 6814 7189 7180 7196 11575
7/98 6682 7039 7030 7014 11692
8/98 5633 5939 5920 6164 10244
9/98 6474 6809 6800 6787 9929
10/98 7267 7629 7610 7760 10965
11/98 7475 7848 7820 8133 11526
12/98 7477 7848 7820 8185 11981
1/99 7305 7668 7640 7981 11946
2/99 7201 7558 7540 7790 11661
3/99 7714 8078 8061 8516 12148
4/99 9138 9580 9553 9786 12640
5/99 9395 9841 9813 9562 11989
6/99 10867 11372 11345 11093 12456
7/99 10459 10932 10914 11082 12827
8/99 10440 10902 10884 11339 12873
9/99 9946 10371 10353 10767 13003
10/99 10232 10662 10642 11026 13490
11/99 11628 12114 12085 12606 13959
12/99 12560 13074 13045 14314 15212
1/00 12085 12574 12544 14151 14245
2/00 13282 13815 13786 14382 14628
3/00 15126 15707 15689 14927 15196
4/00 13502 14016 14007 13032 14396
5/00 12447 12914 12906 12199 14044
6/00 13321 13805 13798 13150 14594
7/00 12456 12915 12906 12397 13982
8/00 12419 12864 12856 12459 14103
9/00 11183 11573 11564 11173 13416
10/00 10167 10511 10502 10169 13099
11/00 9872 10211 10202 9678 12608
12/00 9743 10065 10065 9617 13056
1/01 10810 11160 11160 10806 13050
2/01 10201 10527 10528 10249 12071
3/01 9123 9402 9402 9082 11267
4/01 9685 9985 9985 9401 12050
5/01 9772 10076 10066 9401 11624
6/01 9600 9885 9885 9206 11149
7/01 9285 9554 9554 8850 10946
8/01 8731 8982 8981 8553 10669
9/01 7797 8017 8017 7334 9588
10/01 8188 8419 8409 7669 9834
11/01 8712 8951 8951 8605 10196
12/01 9179 9422 9413 9174 10257
1/02 9407 9653 9645 9537 9712
2/02 9465 9713 9695 9645 9780
3/02 9931 10185 10167 10286 10356
4/02 9969 10225 10208 10359 10377
5/02 9921 10165 10147 10308 10509
6/02 9502 9733 9715 9790 10090
7/02 9092 9311 9294 9352 9094
8/02 8882 9080 9062 9127 9074
9/02 8044 8227 8208 8124 8099
10/02 8130 8307 8289 8344 8534
11/02 8454 8629 8611 8887 8922
12/02 8187 8358 8339 8377 8622
1/03 8339 8508 8490 8437 8262
2/03 8177 8337 8320 8091 8072
3/03 7796 7945 7928 7714 7914
4/03 8063 8216 8199 8117 8689
5/03 8654 8819 8792 8842 9216
6/03 9178 9341 9304 9389 9439
7/03 9712 9883 9847 10064 9667
8/03 10493 10667 10640 10776 9900
9/03 10646 10828 10791 10912 10206
10/03 11513 11692 11656 11793 10842
11/03 11522 11703 11666 11701 11083
12/03 12266 12446 12409 12571 11949
1/04 12627 12808 12761 13080 12118
2/04 13066 13250 13202 13489 12397
3/04 12913 13079 13041 13228 12467
4/04 12236 12396 12358 12622 12185
5/04 12112 12266 12217 12390 12211
6/04 11807 11945 11905 12276 12494
7/04 11655 11784 11745 12003 12088
8/04 12207 12336 12297 12503 12142
9/04 12731 12858 12809 13012 12459
10/04 13074 13200 13151 13201 12884
11/04 14036 14165 14106 14339 13764
12/04 14493 14617 14569 14826 14368
1/05 14550 14667 14620 14904 14104
2/05 15321 15440 15383 15702 14714
3/05 14749 14847 14800 15051 14344
4/05 14673 14766 14720 14930 14007
5/05 14768 14857 14801 15403 14014
6/05 15226 15308 15263 15738 14200
7/05 15960 16041 15986 16837 14635
8/05 16046 16112 16056 16743 15005
9/05 16723 16786 16729 17792 15673
10/05 $15634 $15672 $15622 $16809 $15215
====================================================================================================================================
SOURCE: LIPPER, INC.
The data shown in the chart include This chart, which is a logarithmic
reinvested distributions, applicable sales chart, presents the fluctuations in the
charges, Fund expenses and management value of the Fund and its indexes. We
fees. Results for Class B shares are believe that a logarithmic chart is more
calculated as if a hypothetical effective than other types of charts in
shareholder had liquidated his entire illustrating changes in value during the
investment in the Fund at the close of the early years shown in the chart. The
reporting period and paid the applicable vertical axis, the one that indicates the
contingent deferred sales charges. Index dollar value of an investment, is
results include reinvested dividends, but constructed with each segment representing
they do not reflect sales charges. a percent change in the value of the
Performance of an index of funds reflects investment. In this chart, each segment
fund expenses and management fees; represents a doubling, or 100% change, in
performance of a market index does not. the value of the investment. In other
Performance shown in the chart and words, the space between $5,000 and
table(s) does not reflect deduction of $10,000 is the same size as the space
taxes a shareholder would pay on Fund between $10,000 and $20,000.
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
</Table>
6
AIM ASIA PACIFIC GROWTH FUND
<Table>
========================================== ========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding
charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 6.49%
Inception (11/3/97) 5.75% CLASS A SHARES Class B Shares 6.12
5 Years 7.77 Inception (11/3/97) 6.73% Class C Shares 6.14
1 Year 12.95 5 Years 7.16
1 Year 24.12 ==========================================
CLASS B SHARES
Inception (11/3/97) 5.78% CLASS B SHARES
5 Years 8.02 Inception (11/3/97) 6.77%
1 Year 13.72 5 Years 7.42
1 Year 25.55
CLASS C SHARES
Inception (11/3/97) 5.74% CLASS C SHARES
5 Years 8.26 Inception (11/3/97) 6.72%
1 Year 17.79 5 Years 7.66
1 Year 29.59
========================================== ==========================================
THE PERFORMANCE DATA QUOTED REPRESENT PAST CLASS A SHARE PERFORMANCE REFLECTS THE A REDEMPTION FEE OF 2% WILL BE IMPOSED
PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS THE THE FUND WITHIN 30 DAYS OF PURCHASE.
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE APPLICABLE CONTINGENT DEFERRED SALES EXCEPTIONS TO THE REDEMPTION FEE ARE
VISIT AIMINVESTMENTS.COM FOR THE MOST CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE LISTED IN THE FUND'S PROSPECTUS.
RECENT MONTH-END PERFORMANCE. PERFORMANCE CDSC ON CLASS B SHARES DECLINES FROM 5%
FIGURES REFLECT REINVESTED DISTRIBUTIONS, BEGINNING AT THE TIME OF PURCHASE TO 0% AT HAD THE ADVISOR NOT WAIVED FEES AND/OR
CHANGES IN NET ASSET VALUE AND THE EFFECT THE BEGINNING OF THE SEVENTH YEAR. THE REIMBURSED EXPENSES IN THE PAST,
OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS C SHARES IS 1% FOR THE FIRST PERFORMANCE WOULD HAVE BEEN LOWER.
OTHERWISE STATED. INVESTMENT RETURN AND YEAR AFTER PURCHASE.
PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE PERFORMANCE OF THE FUND'S SHARE
SHARES. CLASSES WILL DIFFER DUE TO DIFFERENT SALES
CHARGE STRUCTURES AND CLASS EXPENSES.
Continued from inside front cover
procedures that the Fund uses to Information regarding how the Fund voted
determine how to vote proxies relating proxies related to its portfolioA
to portfolio securities is available description of the policies and
without charge, upon request, from our securities during the 12 months ended
Client Services department at June 30, 2005, is available at our Web
800-959-4246 or on the AIM Web site, site. Go to AIMinvestments.com, access
AIMinvestments.com. On the home page, the About Us tab, click on Required
scroll down and click on AIM Funds Proxy Notices and then click on Proxy Voting
Policy. The information is also Activity. Next, select the Fund from the
available on the Securities and Exchange drop-down menu. The information is also
Commission's Web site, sec.gov. available on the Securities and Exchange
Commission's Web site, sec.gov.
</Table>
AIM ASIA PACIFIC GROWTH FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
<Table>
The Board of Trustees of AIM International o The quality of services to be provided o Fees relative to those of comparable
Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials funds with other advisors. The Board
management of AIM Asia Pacific Growth Fund and experience of the officers and reviewed the advisory fee rate for the
(the "Fund") and, as required by law, employees of AIM who will provide Fund under the Advisory Agreement. The
determines annually whether to approve the investment advisory services to the Fund. Board compared effective contractual
continuance of the Fund's advisory In reviewing the qualifications of AIM to advisory fee rates at a common asset level
agreement with A I M Advisors, Inc. provide investment advisory services, the and noted that the Fund's rate was below
("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's the median rate of the funds advised by
the Investments Committee of the Board, investment personnel and considered such other advisors with investment strategies
which is comprised solely of independent issues as AIM's portfolio and product comparable to those of the Fund that the
trustees, at a meeting held on June 30, review process, various back office Board reviewed. The Board noted that AIM
2005, the Board, including all of the support functions provided by AIM and has agreed to waive advisory fees of the
independent trustees, approved the AIM's equity and fixed income trading Fund and to limit the Fund's total
continuance of the advisory agreement (the operations. Based on the review of these operating expenses, as discussed below.
"Advisory Agreement") between the Fund and and other factors, the Board concluded Based on this review, the Board concluded
AIM for another year, effective July 1, that the quality of services to be that the advisory fee rate for the Fund
2005. provided by AIM was appropriate and that under the Advisory Agreement was fair and
AIM currently is providing satisfactory reasonable.
The Board considered the factors services in accordance with the terms of
discussed below in evaluating the fairness the Advisory Agreement. o Expense limitations and fee waivers. The
and reasonableness of the Advisory Board noted that AIM has contractually
Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to agreed to waive advisory fees of the Fund
and as part of the Board's ongoing comparable funds. The Board reviewed the through June 30, 2006 to the extent
oversight of the Fund. In their performance of the Fund during the past necessary so that the advisory fees
deliberations, the Board and the one, three and five calendar years against payable by the Fund do not exceed a
independent trustees did not identify any the performance of funds advised by other specified maximum advisory fee rate, which
particular factor that was controlling, advisors with investment strategies maximum rate includes breakpoints and is
and each trustee attributed different comparable to those of the Fund. The Board based on net asset levels. The Board
weights to the various factors. noted that the Fund's performance in such considered the contractual nature of this
periods was at or above the median fee waiver and noted that it remains in
One of the responsibilities of the performance of such comparable funds. effect until June 30, 2006. The Board also
Senior of the Fund, who is independent of Based on this review, the Board concluded noted that AIM has voluntarily agreed to
AIM and AIM's affiliates, is to manage the that no changes should be made to the Fund waive fees and/or limit expenses of the
process by which the Fund's proposed and that it was not necessary to change Fund in an amount necessary to limit total
management fees are negotiated to ensure the Fund's portfolio management team at annual operating expenses to a specified
that they are negotiated in a manner which this time. percentage of average daily net assets for
is at arm's length and reasonable. To that each class of the Fund. The Board
end, the Senior Officer must either o The performance of the Fund relative to considered the voluntary nature of this
supervise a competitive bidding process or indices. The Board reviewed the fee waiver/expense limitation and noted
prepare an independent written evaluation. performance of the Fund during the past that it can be terminated at any time by
The Senior Officer has recommended an one, three and five calendar years against AIM without further notice to investors.
independent written evaluation in lieu of the performance of the Lipper Pacific-Ex The Board considered the effect these fee
a competitive bidding process and, upon Japan Fund Index. The Board noted that the waivers/expense limitations would have on
the direction of the Board, has prepared Fund's performance for the one and three the Fund's estimated expenses and
such an independent written evaluation. year periods was comparable to the Index concluded that the levels of fee
Such written evaluation also considered performance and above such Index for the waivers/expense limitations for the Fund
certain of the factors discussed below. In five year period. Based on this review, were fair and reasonable.
addition, as discussed below, the Senior the Board concluded that no changes should
Officer made certain recommendations to be made to the Fund and that it was not o Breakpoints and economies of scale. The
the Board in connection with such written necessary to change the Fund's portfolio Board reviewed the structure of the Fund's
evaluation. management team at this time. advisory fee under the Advisory Agreement,
noting that it includes one breakpoint.
The discussion below serves as a o Meeting with the Fund's portfolio The Board reviewed the level of the Fund's
summary of the Senior Officer's managers and investment personnel. With advisory fees, and noted that such fees,
independent written evaluation and respect to the Fund, the Board is meeting as a percentage of the Fund's net
recommendations to the Board in connection periodically with such Fund's portfolio assets, would decrease as net assets
therewith, as well as a discussion of managers and/or other investment personnel increase because the Advisory Agreement
the material factors and the conclusions and believes that such individuals are includes a breakpoint. The Board noted
with respect thereto that formed the basis competent and able to continue to carry that, due to the Fund's current asset
for the Board's approval of the Advisory out their responsibilities under the levels and the way in which the advisory
Agreement. After consideration of all of Advisory Agreement. fee breakpoints have been structured, the
the factors below and based on its Fund has yet to benefit from the
informed business judgment, the Board o Overall performance of AIM. The Board breakpoint. The Board noted that AIM has
determined that the Advisory Agreement is considered the overall performance of AIM contractually agreed to waive advisory
in the best interests of the Fund and its in providing investment advisory and fees of the Fund through June 30, 2006 to
shareholders and that the compensation to portfolio administrative services to the the extent necessary so that the advisory
AIM under the Advisory Agreement is fair Fund and concluded that such performance fees payable by the Fund do not exceed a
and reasonable and would have been was satisfactory. specified maximum advisory fee rate, which
obtained through arm's length maximum rate includes breakpoints and is
negotiations. o Fees relative to those of clients of AIM based on net asset levels. The Board
with comparable investment strategies. The concluded that the Fund's fee levels under
o The nature and extent of the advisory Board noted that AIM does not serve as an the Advisory Agreement therefore would
services to be provided by AIM. The Board advisor to other mutual funds or other reflect economies of scale at higher asset
reviewed the services to be provided by clients with investment strategies levels and that it was not necessary to
AIM under the Advisory Agreement. Based on comparable to those of the Fund. change the advisory fee breakpoints in
such review, the Board concluded that the the Fund's advisory fee schedule.
range of services to be provided by AIM
under the Advisory Agreement was
appropriate and that AIM currently is
providing services in accordance with the
terms of the Advisory Agreement. (continued)
</Table>
8
AIM ASIA PACIFIC GROWTH FUND
<Table>
o Investments in affiliated money market o Benefits of soft dollars to AIM. The
funds. The Board also took into account Board considered the benefits realized by
the fact that uninvested cash and cash AIM as a result of brokerage
collateral from securities lending transactions executed through "soft
arrangements (collectively, "cash dollar" arrangements. Under these
balances") of the Fund may be invested in arrangements, brokerage commissions paid
money market funds advised by AIM pursuant by the Fund and/or other funds advised by
to the terms of an SEC exemptive order. AIM are used to pay for research and
The Board found that the Fund may realize execution services. This research is used
certain benefits upon investing cash by AIM in making investment decisions for
balances in AIM advised money market the Fund. The Board concluded that such
funds, including a higher net return, arrangements were appropriate.
increased liquidity, increased
diversification or decreased transaction o AIM's financial soundness in light of
costs. The Board also found that the Fund the Fund's needs. The Board considered
will not receive reduced services if it whether AIM is financially sound and has
invests its cash balances in such money the resources necessary to perform its
market funds. The Board noted that, to the obligations under the Advisory Agreement,
extent the Fund invests in affiliated and concluded that AIM has the financial
money market funds, AIM has voluntarily resources necessary to fulfill its
agreed to waive a portion of the advisory obligations under the Advisory Agreement.
fees it receives from the Fund
attributable to such investment. The Board o Historical relationship between the Fund
further determined that the proposed and AIM. In determining whether to
securities lending program and related continue the Advisory Agreement for the
procedures with respect to the lending Fund, the Board also considered the prior
Fund is in the best interests of the relationship between AIM and the Fund, as
lending Fund and its respective well as the Board's knowledge of AIM's
shareholders. The Board therefore operations, and concluded that it was
concluded that the investment of cash beneficial to maintain the current
collateral received in connection with the relationship, in part, because of such
securities lending program in the money knowledge. The Board also reviewed the
market funds according to the procedures general nature of the non-investment
is in the best interests of the lending advisory services currently performed by
Fund and its respective shareholders. AIM and its affiliates, such as
administrative, transfer agency and
o Independent written evaluation and distribution services, and the fees
recommendations of the Fund's Senior received by AIM and its affiliates for
Officer. The Board noted that, upon their performing such services. In addition to
direction, the Senior Officer of the Fund, reviewing such services, the trustees also
who is independent of AIM and AIM's considered the organizational structure
affiliates, had prepared an independent employed by AIM and its affiliates to
written evaluation in order to assist the provide those services. Based on the
Board in determining the reasonableness of review of these and other factors, the
the proposed management fees of the AIM Board concluded that AIM and its
Funds, including the Fund. The Board noted affiliates were qualified to continue to
that the Senior Officer's written provide non-investment advisory services
evaluation had been relied upon by the to the Fund, including administrative,
Board in this regard in lieu of a transfer agency and distribution services,
competitive bidding process. In and that AIM and its affiliates currently
determining whether to continue the are providing satisfactory non-investment
Advisory Agreement for the Fund, the Board advisory services.
considered the Senior Officer's written
evaluation and the recommendation made by o Other factors and current trends. In
the Senior Officer to the Board that the determining whether to continue the
Board consider implementing a process to Advisory Agreement for the Fund, the Board
assist them in more closely monitoring the considered the fact that AIM, along with
performance of the AIM Funds. The Board others in the mutual fund industry, is
concluded that it would be advisable to subject to regulatory inquiries and
implement such a process as soon as litigation related to a wide range of
reasonably practicable. issues. The Board also considered the
governance and compliance reforms being
o Profitability of AIM and its affiliates. undertaken by AIM and its affiliates,
The Board reviewed information concerning including maintaining an internal controls
the profitability of AIM's (and its committee and retaining an independent
affiliates') investment advisory and other compliance consultant, and the fact that
activities and its financial condition. AIM has undertaken to cause the Fund to
The Board considered the overall operate in accordance with certain
profitability of AIM, as well as the governance policies and practices. The
profitability of AIM in connection with Board concluded that these actions
managing the Fund. The Board noted that indicated a good faith effort on the part
AIM's operations remain profitable, of AIM to adhere to the highest ethical
although increased expenses in recent standards, and determined that the current
years have reduced AIM's profitability. regulatory and litigation environment to
Based on the review of the profitability which AIM is subject should not prevent
of AIM's and its affiliates' investment the Board from continuing the Advisory
advisory and other activities and its Agreement for the Fund.
financial condition, the Board concluded
that the compensation to be paid by the
Fund to AIM under its Advisory Agreement
was not excessive.
</Table>
9
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-92.53%
AUSTRALIA-13.01%
BHP Billiton Ltd. (Diversified Metals &
Mining)(a) 315,700 $ 4,899,180
- ------------------------------------------------------------------------
Brambles Industries Ltd. (Diversified
Commercial & Professional Services)(a)(b) 452,000 2,864,864
- ------------------------------------------------------------------------
Coca-Cola Amatil Ltd. (Soft Drinks)(a) 231,000 1,321,846
- ------------------------------------------------------------------------
Commonwealth Bank of Australia (Diversified
Banks)(a) 42,500 1,237,392
- ------------------------------------------------------------------------
Computershare Ltd. (Data Processing &
Outsourced Services) 714,600 3,499,941
- ------------------------------------------------------------------------
CSL Ltd. (Biotechnology)(a)(b) 155,100 4,361,578
- ------------------------------------------------------------------------
QBE Insurance Group Ltd. (Property & Casualty
Insurance)(a)(b) 175,000 2,337,468
- ------------------------------------------------------------------------
Ramsay Health Care Ltd. (Health Care
Facilities)(a)(b) 338,700 2,239,103
- ------------------------------------------------------------------------
St. George Bank Ltd. (Diversified Banks)(a) 47,100 962,243
- ------------------------------------------------------------------------
Toll Holdings Ltd. (Trucking)(a) 302,300 2,832,862
- ------------------------------------------------------------------------
Woolworths Ltd. (Food Retail)(a)(b) 154,000 1,882,724
========================================================================
28,439,201
========================================================================
CHINA-8.32%
China Mengniu Dairy Co. Ltd. (Packaged Foods
& Meats)(a) 2,474,000 1,949,797
- ------------------------------------------------------------------------
China Petroleum and Chemical Corp. (Sinopec)-
Class H (Integrated Oil & Gas)(a) 4,016,000 1,613,233
- ------------------------------------------------------------------------
Focus Media Holding Ltd.-ADR (Advertising)(c) 45,500 1,194,830
- ------------------------------------------------------------------------
FU JI Food & Catering Services
(Restaurants)(a) 625,000 711,630
- ------------------------------------------------------------------------
Global Bio-chem Technology Group Co. Ltd.
(Agricultural Products)(a) 2,538,000 1,009,501
- ------------------------------------------------------------------------
Norstar Founders Group Ltd. (Auto Parts &
Equipment)(a) 6,164,000 1,674,391
- ------------------------------------------------------------------------
Ping An Insurance (Group) Co. of China, Ltd.-
Class H (Life & Health Insurance)(a) 1,942,000 3,150,965
- ------------------------------------------------------------------------
Shanghai Electric Group Co. Ltd.-Class H
(Heavy Electrical Equipment) (Acquired
04/22/05; Cost $1,654,441)(a)(c)(d) 7,514,000 2,378,068
- ------------------------------------------------------------------------
Shanghai Forte Land Co. Ltd.-Class H (Real
Estate Management & Development)(a) 4,262,000 1,310,686
- ------------------------------------------------------------------------
Weiqiao Textile Co. Ltd.-Class H
(Textiles)(a) 958,000 1,162,248
- ------------------------------------------------------------------------
Wumart Stores, Inc.-Class H (Hypermarkets &
Super Centers)(a) 707,000 1,461,942
- ------------------------------------------------------------------------
Yantai North Andre Juice Co. Ltd.-Class H
(Packaged Foods & Meats)(a) 9,565,000 575,549
========================================================================
18,192,840
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
HONG KONG-19.87%
AAC Acoustic Technology Holdings Inc.
(Communications Equipment) (Acquired
08/03/05-08/26/05; Cost $736,168)(c)(d) 1,949,400 $ 980,723
- ------------------------------------------------------------------------
ASM Pacific Technology Ltd. (Semiconductor
Equipment)(a) 207,000 960,676
- ------------------------------------------------------------------------
Cheung Kong (Holdings) Ltd. (Real Estate
Management & Development)(a) 433,000 4,517,634
- ------------------------------------------------------------------------
China Construction Bank-Class H (Diversified
Banks)(c) 5,205,000 1,577,863
- ------------------------------------------------------------------------
China Yurun Food Group Ltd. (Agricultural
Products) (Acquired 09/23/05; Cost
$1,047,054)(c)(d) 2,174,181 960,587
- ------------------------------------------------------------------------
CNOOC Ltd.-ADR (Oil & Gas Exploration &
Production) 16,100 1,057,770
- ------------------------------------------------------------------------
COFCO International Ltd. (Packaged Foods &
Meats)(a) 3,357,000 1,247,550
- ------------------------------------------------------------------------
Dickson Concepts (International) Ltd.
(Trading Companies & Distributors)(a) 1,051,000 1,373,019
- ------------------------------------------------------------------------
Dynasty Fine Wines Group Ltd. (Distillers &
Vintners)(a) 1,022,000 357,109
- ------------------------------------------------------------------------
Esprit Holdings Ltd. (Apparel Retail)(a) 782,000 5,522,890
- ------------------------------------------------------------------------
Hengan International Group Co. Ltd. (Personal
Products)(a) 2,570,000 2,390,382
- ------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Industrial
Conglomerates)(a) 337,000 3,198,612
- ------------------------------------------------------------------------
Joyce Boutique Holdings Ltd. (Apparel
Retail)(a) 8,606,000 501,260
- ------------------------------------------------------------------------
Luen Thai Holdings Ltd. (Footwear)(a) 1,974,000 523,214
- ------------------------------------------------------------------------
Li & Fung Ltd. (Distributors)(a) 1,080,000 2,311,591
- ------------------------------------------------------------------------
Midland Holdings Ltd. (Real Estate Management
& Development)(a) 2,780,000 1,351,143
- ------------------------------------------------------------------------
Paliburg Holdings Ltd. (Hotels, Resorts &
Cruise Lines)(a)(c) 37,586,000 773,062
- ------------------------------------------------------------------------
Regal Hotels International Holdings Ltd.
(Hotels, Resorts & Cruise Lines)(a) 31,418,000 2,115,528
- ------------------------------------------------------------------------
Solomon Systech International Ltd.
(Semiconductors)(a) 6,926,000 2,552,198
- ------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate
Management & Development)(a) 300,000 2,843,748
- ------------------------------------------------------------------------
Techtronic Industries Co. Ltd. (Household
Appliances)(a) 1,069,500 2,638,779
- ------------------------------------------------------------------------
Top Form International Ltd. (Apparel,
Accessories & Luxury Goods)(a) 2,996,000 668,230
- ------------------------------------------------------------------------
Wing Hang Bank Ltd. (Diversified Banks)(a) 391,000 2,673,785
- ------------------------------------------------------------------------
Xinyi Glass Holding Co. Ltd. (Auto Parts &
Equipment)(a) 1,422,000 335,824
========================================================================
43,433,177
========================================================================
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INDIA-8.47%
Bharat Forge Ltd. (Auto Parts & Equipment) 370,125 $ 2,648,032
- ------------------------------------------------------------------------
HDFC Bank Ltd. (Diversified Banks)(a) 196,400 2,648,338
- ------------------------------------------------------------------------
HDFC Bank Ltd.-ADR (Diversified Banks) 17,500 773,325
- ------------------------------------------------------------------------
Hotel Leelaventure Ltd. (Hotels, Resorts &
Cruise Lines) 319,000 1,669,318
- ------------------------------------------------------------------------
Housing Development Finance Corp. Ltd.
(Thrifts & Mortgage Finance)(a) 99,300 2,137,681
- ------------------------------------------------------------------------
Infosys Technologies Ltd. (IT Consulting &
Other Services)(a) 79,528 4,459,999
- ------------------------------------------------------------------------
Maruti Udyog Ltd. (Automobile Manufacturers) 203,000 2,475,906
- ------------------------------------------------------------------------
Tata Motors Ltd. (Construction & Farm
Machinery & Heavy Trucks)(a) 76,000 798,705
- ------------------------------------------------------------------------
Wockhardt Ltd. (Pharmaceuticals)(a) 106,000 916,116
========================================================================
18,527,420
========================================================================
INDONESIA-0.92%
PT Telekomunikasi Indonesia-Series B
(Integrated Telecommunication Services)(a) 4,016,000 2,011,444
========================================================================
MALAYSIA-2.31%
IOI Corp. Berhad (Agricultural Products)(a) 695,000 2,409,779
- ------------------------------------------------------------------------
Public Bank Berhad (Diversified Banks)(a) 598,000 1,044,785
- ------------------------------------------------------------------------
SP Setia Berhad (Real Estate Management &
Development)(a) 1,647,000 1,606,652
========================================================================
5,061,216
========================================================================
PHILIPPINES-2.64%
Philippine Long Distance Telephone Co.
(Integrated Telecommunication Services)(a) 161,000 4,891,837
- ------------------------------------------------------------------------
SM Prime Holdings (Real Estate Management &
Development) 6,078,900 874,423
========================================================================
5,766,260
========================================================================
SINGAPORE-5.05%
Citiraya Industries Ltd. (Environmental &
Facilities Services)(c)(e)(f) 2,178,000 0
- ------------------------------------------------------------------------
DBS Group Holdings Ltd. (Diversified
Banks)(a) 335,000 3,031,264
- ------------------------------------------------------------------------
Keppel Corp. Ltd. (Industrial
Conglomerates)(a) 510,000 3,502,222
- ------------------------------------------------------------------------
Keppel Land Ltd. (Real Estate Management &
Development)(a) 681,000 1,539,689
- ------------------------------------------------------------------------
Singapore Airlines Ltd. (Airlines)(a) 317,000 2,103,781
- ------------------------------------------------------------------------
United Overseas Bank Ltd. (Diversified
Banks)(a) 103,000 841,511
- ------------------------------------------------------------------------
United Overseas Land Ltd. (Real Estate
Management & Development)(a) 10,300 14,250
========================================================================
11,032,717
========================================================================
SOUTH KOREA-20.43%
Cheil Communications Inc. (Advertising)(a) 11,170 2,063,577
- ------------------------------------------------------------------------
CJ Corp. (Packaged Foods & Meats)(a) 33,230 2,359,297
- ------------------------------------------------------------------------
Core Logic Inc. (Semiconductors)(a) 19,090 671,713
- ------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
SOUTH KOREA-(CONTINUED)
Daekyo Co., Ltd. (Publishing)(a) 10,800 $ 809,719
- ------------------------------------------------------------------------
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. (Construction & Farm Machinery & Heavy
Trucks)(a) 68,000 1,365,416
- ------------------------------------------------------------------------
DS LCD Co., Ltd. (Semiconductor Equipment)(a) 140,000 1,252,176
- ------------------------------------------------------------------------
Gravity Co. Ltd.-ADR (Home Entertainment
Software)(c) 320,063 2,259,645
- ------------------------------------------------------------------------
Hana Bank (Diversified Banks)(a) 88,780 3,231,098
- ------------------------------------------------------------------------
Hankook Tire Co. Ltd. (Tires & Rubber)(a) 147,100 1,770,565
- ------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.
(Department Stores)(a) 74,400 4,965,967
- ------------------------------------------------------------------------
Hyundai Mipo Dockyard Co., Ltd. (Construction
& Farm Machinery & Heavy Trucks)(a) 30,940 1,923,822
- ------------------------------------------------------------------------
Hyundai Motor Co. (Automobile
Manufacturers)(a) 27,530 2,034,676
- ------------------------------------------------------------------------
Kookmin Bank (Diversified Banks)(a) 35,030 2,013,745
- ------------------------------------------------------------------------
KT Freetel Co., Ltd. (Wireless
Telecommunication Services)(a) 62,200 1,342,165
- ------------------------------------------------------------------------
LG.Philips LCD Co., Ltd.-ADR (Electronic
Equipment Manufacturers)(b)(c) 109,100 2,073,991
- ------------------------------------------------------------------------
NHN Corp. (Internet Software &
Services)(a)(c) 9,000 1,505,217
- ------------------------------------------------------------------------
Nong Shim Holdings Co., Ltd. (Packaged Foods
& Meats)(a) 18,200 1,529,511
- ------------------------------------------------------------------------
Samsung Electronics Co., Ltd. (Electric
Equipment Manufacturers)(a) 9,350 4,994,665
- ------------------------------------------------------------------------
Shinsegae Co., Ltd. (Hypermarkets & Super
Centers)(a) 4,100 1,475,275
- ------------------------------------------------------------------------
STX Shipbuilding Co., Ltd. (Construction &
Farm Machinery & Heavy Trucks)(a) 81,130 1,434,889
- ------------------------------------------------------------------------
Techno Semichem Co., Ltd. (Commodity
Chemicals)(a) 107,505 1,160,871
- ------------------------------------------------------------------------
Woongjin Coway Co., Ltd. (Housewares &
Specialties)(a) 138,900 2,417,453
========================================================================
44,655,453
========================================================================
TAIWAN-8.05%
Asia Optical Co., Inc. (Photographic
Products)(a) 486,922 2,817,604
- ------------------------------------------------------------------------
Catcher Technology Co., Ltd. (Computer
Storage & Peripherals)(a) 575,819 3,439,733
- ------------------------------------------------------------------------
Chinatrust Financial Holding Co. Ltd.
(Diversified Banks)(a) 1,824,040 1,419,602
- ------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services)(a) 768,734 3,335,627
- ------------------------------------------------------------------------
Hotai Motor Co. Ltd. (Automobile
Manufacturers)(a) 454,000 1,125,792
- ------------------------------------------------------------------------
Novatek Microelectronics Corp., Ltd.
(Semiconductors)(a) 460,818 2,021,082
- ------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(a) 2,204,238 3,447,788
========================================================================
17,607,228
========================================================================
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
THAILAND-3.46%
Kasikornbank PCL (Diversified Banks)(a) 2,063,000 $ 3,192,979
- ------------------------------------------------------------------------
Siam Commercial Bank PCL (Diversified
Banks)(a) 2,667,000 3,093,344
- ------------------------------------------------------------------------
Thai Oil PCL (Oil & Gas Refining &
Marketing)(a) 738,000 1,269,263
========================================================================
7,555,586
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $145,988,199) 202,282,542
========================================================================
MONEY MARKET FUNDS-6.26%
Liquid Assets Portfolio-Institutional
Class(g) 6,845,216 6,845,216
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(g) 6,845,216 6,845,216
========================================================================
Total Money Market Funds (Cost
$13,690,432) 13,690,432
========================================================================
TOTAL INVESTMENTS-98.79% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $159,678,631) 215,972,974
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.73%
Liquid Assets Portfolio-Institutional
Class(g)(h) 4,073,251 $ 4,073,251
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(g)(h) 4,073,250 4,073,250
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $8,146,501) 8,146,501
========================================================================
TOTAL INVESTMENTS-102.52% (Cost $167,825,132) 224,119,475
========================================================================
OTHER ASSETS LESS LIABILITIES-(2.52%) (5,514,516)
========================================================================
NET ASSETS-100.00% $218,604,959
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2005 was $180,236,188,
which represented 82.45% of the Fund's Net Assets. See Note 1A.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
(c) Non-income producing security.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2005 was $4,319,378,
which represented 1.98% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The market value
of this security considered illiquid at October 31, 2005 represented 0% of
the Fund's Net Assets.
(f) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at October
31, 2005 represented 0% of the Fund's Net Assets. See Note 1A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(h) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
<Table>
ASSETS:
Investments, at value (cost $145,988,199)* $202,282,542
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $21,836,933) 21,836,933
===========================================================
Total investments (cost $167,825,132) 224,119,475
===========================================================
Foreign currencies, at value (cost
$3,324,474) 3,199,562
- -----------------------------------------------------------
Receivables for:
Fund shares sold 1,464,041
- -----------------------------------------------------------
Dividends 124,214
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 32,183
- -----------------------------------------------------------
Other assets 31,665
===========================================================
Total assets 228,971,140
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,211,076
- -----------------------------------------------------------
Fund shares reacquired 509,312
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 39,095
- -----------------------------------------------------------
Collateral upon return of securities loaned 8,146,501
- -----------------------------------------------------------
Accrued distribution fees 85,285
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,647
- -----------------------------------------------------------
Accrued transfer agent fees 73,339
- -----------------------------------------------------------
Accrued operating expenses 299,926
===========================================================
Total liabilities 10,366,181
===========================================================
Net assets applicable to shares outstanding $218,604,959
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $190,594,910
- -----------------------------------------------------------
Undistributed net investment income 1,277,076
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (29,437,063)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 56,170,036
===========================================================
$218,604,959
___________________________________________________________
===========================================================
NET ASSETS:
Class A $156,379,486
___________________________________________________________
===========================================================
Class B $ 35,599,625
___________________________________________________________
===========================================================
Class C $ 26,625,848
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 9,532,170
___________________________________________________________
===========================================================
Class B 2,281,271
___________________________________________________________
===========================================================
Class C 1,712,579
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 16.41
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $16.41 divided by
94.50%) $ 17.37
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 15.61
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.55
___________________________________________________________
===========================================================
</Table>
* At October 31, 2005, securities with an aggregate value of $7,800,808 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $481,221) $ 5,065,976
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $40,568, after compensation
to counterparties of $152,773) 270,891
- -------------------------------------------------------------------------
Interest 6,890
=========================================================================
Total investment income 5,343,757
=========================================================================
EXPENSES:
Advisory fees 1,774,292
- -------------------------------------------------------------------------
Administrative services fees 50,000
- -------------------------------------------------------------------------
Custodian fees 442,469
- -------------------------------------------------------------------------
Distribution fees:
Class A 416,769
- -------------------------------------------------------------------------
Class B 334,662
- -------------------------------------------------------------------------
Class C 197,114
- -------------------------------------------------------------------------
Transfer agent fees 678,109
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 20,942
- -------------------------------------------------------------------------
Other 231,223
=========================================================================
Total expenses 4,145,580
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (38,835)
=========================================================================
Net expenses 4,106,745
=========================================================================
Net investment income 1,237,012
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (Net of tax on the sale of foreign
investments of $37,321 -- Note 1H) 13,801,231
- -------------------------------------------------------------------------
Foreign currencies 111,129
=========================================================================
13,912,360
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (Net of change in estimated tax on
foreign investments held of $(68,589) -- Note 1H) 13,667,752
- -------------------------------------------------------------------------
Foreign currencies (185,737)
=========================================================================
13,482,015
=========================================================================
Net gain from investment securities and foreign currencies 27,394,375
=========================================================================
Net increase in net assets resulting from operations $28,631,387
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
<Table>
<Caption>
2005 2004
==========================================================================================
OPERATIONS:
Net investment income (loss) $ 1,237,012 $ (389,741)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 13,912,360 11,337,475
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 13,482,015 5,453,611
==========================================================================================
Net increase in net assets resulting from operations 28,631,387 16,401,345
==========================================================================================
Share transactions-net:
Class A 29,437,413 (3,558,053)
- ------------------------------------------------------------------------------------------
Class B 1,071,326 1,546,688
- ------------------------------------------------------------------------------------------
Class C 12,941,688 1,579,175
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 43,450,427 (432,190)
==========================================================================================
Net increase in net assets 72,081,814 15,969,155
==========================================================================================
NET ASSETS:
Beginning of year 146,523,145 130,553,990
==========================================================================================
End of year (including undistributed net investment income
(loss) of $1,277,076 and $(35,257), respectively) $218,604,959 $146,523,145
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Asia Pacific Growth Fund (the "Fund") is a series portfolio of AIM
International Mutual Funds (the "Trust"). The Trust is a Delaware statutory
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of six
separate portfolios, each authorized to issue an unlimited number of shares of
beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
is valued on the basis of prices furnished by independent pricing services,
which may be considered fair valued, or market makers. Each security
reported on the NASDAQ National Market System is valued at the NASDAQ
Official Closing Price ("NOCP") as of the close of the customary trading
session on the valuation date or absent a NOCP, at the closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices.
For purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not
ordinarily be reflected in the computation of the Fund's net asset value.
If the event is likely to have affected the closing price of the security,
the security will be valued at fair value in good faith using procedures
approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent
pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the
NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the
indication of fair value from the independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to
sector indices, ADRs and domestic and foreign index futures.
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of
F-7
brokers and information providers and other market data may be reviewed in
the course of making a good faith determination of a security's fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is accounted for as an
addition to shares of beneficial interest by the Fund and is allocated
among the share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F-8
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $500 million 0.95%
- -------------------------------------------------------------------
Over $500 million 0.90%
__________________________________________________________________
===================================================================
</Table>
Effective January 1, 2005 through June 30, 2006, AIM has contractually
agreed to waive advisory fees to the extent necessary so that the advisory fees
payable by the Fund (based on the Fund's average daily net assets) do not exceed
the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
- --------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses
to the extent necessary to limit total annual operating expenses (excluding
certain items discussed below) of Class A, Class B and Class C shares to 2.15%,
2.90% and 2.90% of average daily net assets, respectively. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the total annual
fund operating expenses to exceed the numbers reflected above: (i) interest;
(ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the expense offset arrangements from which the Fund may benefit are
in the form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. Those
credits are used to pay certain expenses incurred by the Fund. AIM did not waive
fees and/or reimburse expenses during the period under this expense limitation.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the fund). AIM is also voluntarily waiving
a portion of the advisory fee payable by the Fund equal to the difference
between the income earned from investing in the affiliated money market fund and
the hypothetical income earned from investing in an appropriate comparative
benchmark. Voluntary fee waivers or reimbursements may be modified or
discontinued at any time upon consultation with the Board of Trustees without
further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $25,386.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement, are included in the Statement of Operations. For the year ended
October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of
$7,998.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $50,000.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. For the year ended October 31, 2005, the
Fund paid AISI $678,109.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of Class B and Class
C shares. Prior to July 1, 2005, the Fund paid ADI 0.35% of the average daily
net assets of Class A shares. Of these amounts, up to 0.25% of the average daily
net assets of the Class A, Class B or Class C shares may be paid to furnish
continuing personal shareholder services to customers who purchase and own
shares of such classes. Any amounts not paid as a service fee under the Plans
would constitute an asset-based sales charge. National Association of Securities
Dealers ("NASD") Rules also impose a cap on the total sales charges, including
asset-based sales charges that may be paid by any class of shares of the Fund.
Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B
and Class C shares paid $416,769, $334,662 and $197,114, respectively.
F-9
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2005, ADI advised the Fund that it retained $93,321 in
front-end sales commissions from the sale of Class A shares and $1,029, $19,476
and $4,297 from Class A, Class B shares and Class C shares, respectively, for
CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market funds below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in affiliated money market
funds for the year ended October 31, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME
- -----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $1,749,008 $ 36,326,406 $ (31,230,198) $ -- $ 6,845,216 $114,858
- -----------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 1,749,008 36,326,406 (31,230,198) -- 6,845,216 115,465
=======================================================================================================================
Subtotal $3,498,016 $ 72,652,812 $ (62,460,396) $ -- $13,690,432 $230,323
=======================================================================================================================
<Caption>
REALIZED
FUND GAIN (LOSS)
- ---------------------------------------
Liquid Assets Portfolio-
Institutional Class $ --
- ---------------------------------------
STIC Prime Portfolio-
Institutional Class --
=======================================
Subtotal $ --
=======================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME*
- -----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $2,664,115 $ 34,652,429 $ (33,243,293) $ -- $ 4,073,251 $20,229
- -----------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 2,664,115 34,845,557 (33,436,422) -- 4,073,250 20,339
=======================================================================================================================
Subtotal $5,328,230 $ 69,497,986 $ (66,679,715) $ -- $ 8,146,501 $40,568
=======================================================================================================================
Total $8,826,246 $142,150,798 $(129,140,111) $ -- $21,836,933 $270,891
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
REALIZED
FUND GAIN (LOSS)
- ---------------------------------------
Liquid Assets Portfolio-
Institutional Class $ --
- ---------------------------------------
STIC Prime Portfolio-
Institutional Class --
=======================================
Subtotal $ --
=======================================
Total $ --
_______________________________________
=======================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, during the year ended October 31, 2005, the Fund
engaged in securities purchases of $555,300 and sales of $0, which resulted in
net realized gains (losses) of $0.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2005, the
Fund received credits from this arrangement, which resulted in the reduction of
the Fund's total expenses of $5,451.
F-10
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $3,337
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to a loss on
the collateral invested.
At October 31, 2005, securities with an aggregate value of $7,800,808 were
on loan to brokers. The loans were secured by cash collateral of $8,146,501
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $40,568 for securities lending transactions, which are net of
compensation to counterparties.
F-11
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There were no ordinary income or long-term capital gain distributions paid
during the years ended October 31, 2005 and 2004.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2005, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2005
- --------------------------------------------------------------------------
Undistributed ordinary income $ 1,312,180
- --------------------------------------------------------------------------
Unrealized appreciation -- investments 55,668,462
- --------------------------------------------------------------------------
Temporary book/tax differences (35,104)
- --------------------------------------------------------------------------
Capital loss carryforward (28,935,489)
- --------------------------------------------------------------------------
Shares of beneficial interest 190,594,910
==========================================================================
Total net assets $218,604,959
__________________________________________________________________________
==========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis unrealized appreciation on investments amount includes appreciation
(depreciation) on foreign currencies of $(124,307).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund utilized $13,641,659 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2005 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2009 $27,317,937
- -----------------------------------------------------------------------------
October 31, 2010 1,617,552
=============================================================================
Total capital loss carryforward $28,935,489
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $99,339,017 and $63,782,220, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $62,036,248
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,243,479)
===============================================================================
Net unrealized appreciation of investment securities $55,792,769
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $168,326,706.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of capital loss
carryforward limitations and foreign currencies, on October 31, 2005,
undistributed net investment income was increased by $75,321, undistributed net
realized gain (loss) was increased by $17,623,546 and shares of beneficial
interest decreased by $17,698,867. This reclassification had no effect on the
net assets of the Fund.
F-12
NOTE 12--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with CDSC. Under
certain circumstances, Class A shares are subject to CDSC. Generally, Class B
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2005(A) 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,405,997 $ 70,360,970 3,833,128 $ 49,414,797
- ----------------------------------------------------------------------------------------------------------------------
Class B 754,546 11,491,560 980,158 12,296,597
- ----------------------------------------------------------------------------------------------------------------------
Class C 1,693,546 25,384,096 1,722,011 21,531,254
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 187,193 2,986,955 184,570 2,390,898
- ----------------------------------------------------------------------------------------------------------------------
Class B (196,169) (2,986,955) (192,392) (2,390,898)
======================================================================================================================
Reacquired:(b)
Class A (2,798,484) (43,910,512) (4,329,566) (55,363,748)
- ----------------------------------------------------------------------------------------------------------------------
Class B (497,986) (7,433,279) (680,316) (8,359,011)
- ----------------------------------------------------------------------------------------------------------------------
Class C (838,123) (12,442,408) (1,620,319) (19,952,079)
======================================================================================================================
2,710,520 $ 43,450,427 (102,726) $ (432,190)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 15% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(b) Amount is net of redemption fees of $21,867, $5,526 and $3,201 for Class
A, Class B and Class C shares, respectively, for the year ended October
31, 2005 and $7,403, $2,065 and $805 for Class A, Class B and Class C
shares, respectively, for the year ended October 31, 2004.
F-13
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.72 $ 12.07 $ 8.53 $ 8.59 $ 10.70
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.14(a) (0.01)(a) (0.01)(a) (0.04)(a) (0.01)(a)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.55 1.66 3.55 (0.02) (2.06)
===============================================================================================================================
Total from investment operations 2.69 1.65 3.54 (0.06) (2.07)
===============================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
===============================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
===============================================================================================================================
Net asset value, end of period $ 16.41 $ 13.72 $ 12.07 $ 8.53 $ 8.59
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 19.61% 13.67% 41.50% (0.70)% (19.46)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $156,379 $106,129 $97,192 $62,806 $61,729
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.01%(c) 2.23% 2.26% 2.25% 2.02%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.03%(c) 2.25% 2.41% 2.49% 2.37%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.85%(c) (0.09)% (0.11)% (0.41)% (0.06)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 36% 68% 100% 114% 73%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $133,589,952.
F-14
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.14 $ 11.64 $ 8.27 $ 8.38 $ 10.50
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.44 1.59 3.44 (0.01) (2.01)
=============================================================================================================================
Total from investment operations 2.47 1.50 3.37 (0.11) (2.08)
=============================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
=============================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
=============================================================================================================================
Net asset value, end of period $ 15.61 $ 13.14 $ 11.64 $ 8.27 $ 8.38
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 18.80% 12.89% 40.75% (1.31)% (19.92)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $35,600 $29,174 $24,599 $19,916 $25,479
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.69%(c) 2.88% 2.91% 2.90% 2.67%
- -----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.71%(c) 2.90% 3.06% 3.14% 3.02%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.17%(c) (0.74)% (0.76)% (1.06)% (0.72)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 36% 68% 100% 114% 73%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $33,466,222.
<Table>
<Caption>
CLASS C
-------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.09 $ 11.60 $ 8.25 $ 8.37 $ 10.49
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.43 1.58 3.42 (0.02) (2.01)
===============================================================================================================
Total from investment operations 2.46 1.49 3.35 (0.12) (2.08)
===============================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
===============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
===============================================================================================================
Net asset value, end of period $ 15.55 $ 13.09 $11.60 $ 8.25 $ 8.37
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 18.79% 12.84% 40.61% (1.43)% (19.94)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,626 $11,220 $8,763 $6,019 $ 4,692
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.69%(c) 2.88% 2.91% 2.90% 2.67%
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.71%(c) 2.90% 3.06% 3.14% 3.02%
===============================================================================================================
Ratio of net investment income (loss) to average net assets 0.17%(c) (0.74)% (0.76)% (1.06)% (0.72)%
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 36% 68% 100% 114% 73%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and the returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $19,711,405.
F-15
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. As the methodology is unknown at the present time, management
of AIM and the Fund are unable to estimate the impact, if any, that the
distribution of these two fair funds may have on the Fund or whether such
distribution will have an impact on the Fund's financial statements in the
future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue sharing
and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to Section
529 college savings plans and procedures for locating lost securityholders. IFG,
AIM and ADI are providing full cooperation with respect to these inquiries. As
described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities
and individuals are defendants in numerous civil lawsuits related to one or more
of these issues. Regulatory actions and/or additional civil lawsuits related to
these or other issues may be filed against the AIM Funds, IFG, AIM and/or
related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated
mutual fund complexes and financial institutions. None of the AIM Funds has been
named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit
Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in
substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or
deceptive trade practices by failing to disclose in the prospectuses for the AIM
Funds, including those formerly advised by IFG, that they had entered into
certain arrangements permitting market timing of such Funds. As a result of the
foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq.
(the West Virginia Consumer Credit and Protection Act). The WVAG complaint is
seeking, among other things, injunctive relief, civil monetary penalties and a
writ of quo warranto against the defendants. If AIM is unsuccessful in its
defense of the WVAG lawsuit, it could be barred from serving as an investment
advisor for any investment company registered under the Investment Company Act
of 1940, as amended (a "registered investment company"). Such results could
affect the ability of AIM or any other investment advisor directly or indirectly
owned by AMVESCAP, from serving as an investment advisor to any registered
investment company, including the Fund. The Fund has been informed by AIM that,
if these results occur, AIM will seek exemptive relief from the SEC to permit it
to continue to serve as the Fund's investment advisor. There is no assurance
that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings
of fact that essentially mirror the WVAG's allegations mentioned above and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. AIM and ADI have the right to contest the WVASC's findings and
conclusions, which they intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans;
F-16
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
- that the defendants breached their fiduciary duties by charging
distribution fees while AIM Funds and/or specific share classes were
closed generally to new investors and/or while other share classes of the
same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure
that the AIM Funds participated in class action settlements in which they
were eligible to participate (this lawsuit was dismissed by the Court on
August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the common
issues of law presented in defendants' motions to dismiss the shareholder class
and derivative complaints. These rulings were issued in the context of the Janus
lawsuits, but the Court's legal determinations apply at the omnibus level to all
cases within his track, including the AIM and IFG cases. The Court dismissed for
failure to make pre-suit demand on the fund board all derivative causes of
action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"), as to which the demand requirement does
not apply. The Court dismissed all claims asserted in the class complaint but
two: (i) the securities fraud claims under Section 10(b) of the Securities
Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of
the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on
the 36(b) claim to fees attributable to timing assets, as opposed to all fees on
funds in which any timing occurred. The question whether the duplicative Section
36(b) claim properly belongs in the derivative complaint or in the class action
complaint will be decided at a later date. The Court will subsequently issue an
order applying his legal rulings to the allegations in the AIM and IFG
complaints.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds and Shareholders of
AIM Asia Pacific Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Asia Pacific Growth Fund (one
of the funds constituting AIM International Mutual Funds, hereafter referred to
as the "Fund") at October 31, 2005, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/S/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-18
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Group Inc. (financial services holding
Principal Executive Officer company); Director and Vice Chairman,
and President AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC -- Managed Products
- -------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice Officer, A I M Management Group Inc.
President (financial services holding company);
Director and President, A I M Advisors,
Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor) and
A I M Distributors, Inc. (registered
broker dealer); Director and Chairman,
AIM Investment Services, Inc.
(registered transfer agent), Fund
Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -- AIM
Division (parent of AIM and a global
investment management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO Distributors,
Inc.; Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and Chairman,
AIM Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None
Trustee & Bunch Ltd., (investment banking firm);
and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); and CompuDyne Corporation
(provider of products and services to
the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and director of various
affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, 2005 Retired None
Jr.(3) -- 1944
Trustee
Formerly: Partner, Deloitte & Touche
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Group Inc. (financial services holding
Chief Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc. and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and General Counsel, A I M
Secretary and Chief Legal Management Group Inc. and A I M
Officer Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President,
A I M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; Senior Vice President
and General Counsel, Liberty Funds
Group, LLC; Vice President, A I M
Distributors, Inc.; and Director and
General Counsel, Fund Management Company
- -------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.
Financial Officer and
Treasurer Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, and Senior
Investment Officer, A I M Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
</Table>
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets are not subject to the U.S. estate tax for
the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and
October 31, 2005 are 99.66%, 99.84%, 99.57% and 99.58%, respectively.
<Table>
DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS
AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund
AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2)
AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund
AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund
AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation
AIM Charter Fund AIM Gold & Precious Metals Fund Fund
AIM Constellation Fund AIM Leisure Fund
AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS
AIM Dynamics Fund AIM Real Estate Fund(1)
AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund
AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund1 FIXED INCOME
AIM Mid Cap Growth Fund
AIM Opportunities I Fund TAXABLE
AIM Opportunities II Fund
AIM Opportunities III Fund AIM Floating Rate Fund
AIM Premier Equity Fund AIM High Yield Fund
AIM S&P 500 Index Fund AIM Income Fund
AIM Select Equity Fund AIM Intermediate Government Fund
AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund
AIM Small Cap Growth Fund(1) AIM Money Market Fund
AIM Small Company Growth Fund AIM Short Term Bond Fund
AIM Summit Fund AIM Total Return Bond Fund
AIM Trimark Endeavor Fund Premier Portfolio
AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio
AIM Weingarten Fund
TAX-FREE
INTERNATIONAL/GLOBAL EQUITY
AIM High Income Municipal Fund(1)
AIM Asia Pacific Growth Fund AIM Municipal Bond Fund
AIM Developing Markets Fund AIM Tax-Exempt Cash Fund
AIM European Growth Fund AIM Tax-Free Intermediate Fund
AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio
AIM Global Aggressive Growth Fund
AIM Global Equity Fund =======================================================================================
AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS
AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR
AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING.
AIM International Growth Fund =======================================================================================
AIM International Small Company Fund(1)
AIM Trimark Fund
</Table>
*Domestic equity and income fund
(1) This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
(2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of
AMVESCAP PLC, one of the world's largest independent financial services
companies with $381 billion in assets under management. Data as of September 30,
2005.
AIMinvestments.com APG-AR-1 A I M Distributors, Inc.
<Table>
YOUR GOALS. OUR SOLUTIONS. --Registered Trademark--
- ---------------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE]
Funds Products Savings Managed Products Management --Registered Trademark--
Plans Accounts
- ---------------------------------------------------------------------------------------
</Table>
AIM EUROPEAN GROWTH FUND
Annual Report to Shareholders o October 31,2005
[COVER IMAGE]
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
AIM EUROPEAN GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October
31, 2005, and is based on total net assets.
<Table>
ABOUT SHARE CLASSES Capital International. net asset values for shareholder
transactions and the returns based on
o Class B shares are not available as an o The unmanaged MSCI EUROPE INDEX is a those net asset values may differ from the
investment for retirement plans maintained group of European securities tracked by net asset values and returns reported in
pursuant to Section 401 of the Internal Morgan Stanley Capital International. the Financial Highlights.
Revenue Code, including 401(k) plans,
money purchase pension plans and profit o The unmanaged MSCI EUROPE GROWTH INDEX o Industry classifications used in this
sharing plans. Plans that had existing is a subset of the unmanaged MSCI Europe report are generally according to the
accounts invested in Class B shares prior Index. The growth portion measures Global Industry Classification Standard,
to September 30, 2003, will continue to be performance of companies with higher which was developed by and is the
allowed to make additional purchases. price/earnings ratios and higher exclusive property and a service mark of
forecasted growth values. Morgan Stanley Capital International Inc.
o Class R shares are available only to and Standard & Poor's.
certain retirement plans. Please see the o The unmanaged LIPPER EUROPEAN FUND INDEX
prospectus for more information. represents an average of the 30 largest The Fund provides a complete list of its
European funds tracked by Lipper, Inc., an holdings four times in each fiscal year,
o Investor Class shares are closed to most independent mutual fund performance at the quarter-ends. For the second and
investors. For more information on who may monitor. fourth quarters, the lists appear in the
continue to invest in the Investor Class Fund's semiannual and annual reports to
shares, please see the prospectus. o The unmanaged Standard & Poor's shareholders. For the first and third
Composite Index of 500 Stocks (the S&P 500 quarters, the Fund files the lists with
PRINCIPAL RISKS OF INVESTING IN THE FUND --Registered Trademark-- INDEX) is an index the Securities and Exchange Commission
of common stocks frequently used as a (SEC) on Form N-Q. The most recent list of
o International investing presents certain general measure of U.S. stock market portfolio holdings is available at
risks not associated with investing solely performance. AIMinvestments.com. From our home page,
in the United States. These include risks click on Products & Performance, then
relating to fluctuations in the value of o The unmanaged MSCI WORLD INDEX is a Mutual Funds, then Fund Overview. Select
the U.S. dollar relative to the values of group of global securities tracked by your Fund from the drop-down menu and
other currencies, the custody arrangements Morgan Stanley Capital International. click on Complete Quarterly Holdings.
made for the Fund's foreign holdings, Shareholders can also look up the Fund's
differences in accounting, political risks o The Fund is not managed to track the Forms N-Q on the SEC's Web site at
and the lesser degree of public performance of any particular index, sec.gov. And copies of the Fund's Forms
information required to be provided by including the indexes defined here, and N-Q may be reviewed and copied at the
non U.S. companies. consequently, the performance of the Fund SEC's Public Reference Room at 450 Fifth
may deviate significantly from the Street, N.W., Washington, D.C. 20549-0102.
o Investing in a single-sector or performance of the indexes. You can obtain information on the
single-region mutual fund involves greater operation of the Public Reference
risk and potential reward than investing o A direct investment cannot be made in an Room, including information about
in a more diversified fund. index. Unless otherwise indicated, index duplicating fee charges, by calling
results include reinvested dividends, and 202-942-8090 or 800-732-0330, or by
o Although the fund's return during they do not reflect sales charges. electronic request at the following e-mail
certain periods was positively impacted by Performance of an index of funds reflects address: publicinfo@sec.gov. The SEC file
its investments in initial public fund expenses; performance of market index numbers for the Fund are 811-06463 and
offerings (IPO's), there can be no does not. 33-44611.
assurance that the fund will have
favorable IPO investment opportunities in OTHER INFORMATION A description of the policies and
the future. procedures that the Fund uses to determine
o The returns shown in management's how to vote proxies relating to portfolio
ABOUT INDEXES USED IN THIS REPORT discussion of Fund performance are based securities is available without charge,
on net asset values calculated for upon request, from our Client Services
o The unmanaged MSCI Europe, Australasia shareholder transactions. Generally department at 800-959-4246 or on the AIM
and the Far East Index (the MSCI EAFE accepted accounting principles require Web site, AIMinvestments.com. On the home
- --Registered Trademark-- INDEX) is a group adjustments to be made to the net assets page, scroll down and click on AIM Funds
of foreign securities tracked by Morgan of the Fund at period end for financial Proxy Policy. The information is also
Stanley reporting purposes, and as such, the available on the Securities and Exchange
Commission's Web site, sec.gov.
Information regarding how the Fund voted
proxies related to its portfolio
securities during the 12 months ended June
30, 2005, is available at our Web site. Go
to AIMinvestments.com, access the About Us
tab, click on Required Notices and then
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu.
The information is also available on the
Securities and Exchange Commission's Web
site, sec.gov.
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, Fund NASDAQ Symbols
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AEDAX
Class B Shares AEDBX
======================================================================================= Class C Shares AEDCX
Class R Shares AEDRX
Investor Class Shares EGINX
==========================================
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
AIM EUROPEAN GROWTH FUND
DEAR FELLOW AIM FUNDS SHAREHOLDERS:
The fiscal year covered by this report was quite good to
equity investors. Domestically, the broad-based S&P 500
Index returned 8.72%. Globally, Morgan Stanley's MSCI World
Index rose 13.27%. Much of this good performance, though,
[GRAHAM was attained early in the fiscal year as virtually every
PHOTO] equity index declined during October of 2005. Concern about
the inflationary potential of rising energy costs was
frequently cited as a major cause of market weakness.
Within the indexes, there was considerable variability in
the performance of different sectors and markets.
Domestically, energy sector performance far outpaced that of
ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising
oil and gas prices. Overseas, emerging markets produced more
attractive results than did developed markets, at least in
part because emerging markets tend to be more closely tied
to the performance of natural resources and commodities.
One could make a strong argument for global
diversification of a stock portfolio using the performance
data for the fiscal year ended October 31, 2005. Of course,
your financial advisor is the person most qualified to help
you decide whether such diversification is appropriate for
you.
For a discussion of the specific market conditions that
[WILLIAMSON affected your Fund and how your Fund was managed during the
PHOTO] fiscal year, please turn to Page 3.
NEW INFORMATION IN THIS REPORT
We would like to call your attention to two new elements in
this report. First, on Page 2, is a message from Bruce
Crockett, the independent Chair of the Board of Trustees of
MARK H. WILLIAMSON the AIM Funds. We first introduced you to Mr. Crockett in
the annual report on your Fund dated October 31, 2004. Mr.
Crockett has been on our Funds' Board since 1992; he assumed
his responsibilities as Chair in October 2004.
Mr. Crockett plans to keep AIM shareholders informed of
the work of the Board regularly via letters in the Fund
reports. We certainly think this is a valuable addition to
the reports. The Board is charged with looking out for the
interests of shareholders, and Mr. Crockett's letter
provides insight into some of the many issues the Board
addresses in governing your Fund.
One of the most important decisions the Board makes each
year is whether to approve the advisory agreement your Fund
has with AIM. Essentially, this agreement hires AIM to
manage the assets in your Fund. A discussion of the factors
the Board considered in reviewing the agreement is the
second new element in the report, and we encourage you to
read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and
investing in general is always available on our widely
acclaimed Web site, AIMinvestments.com. We invite you to
visit it frequently.
We at AIM remain committed to building solutions to help
you meet your investment goals. We thank you for your
continued participation in AIM Investments --Registered
Trademark--. If you have any questions, please contact our
award-winning Client Service representatives at
800-959-4246. We are happy to be of help.
Sincerely,
/S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, President, A I M Advisors, Inc.
AIM Funds
December 15, 2005
AIM Investments is a registered service mark of A I M
Management Group Inc. A I M Advisors, Inc. and A I M Capital
Management, Inc. are the investment advisors. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
1
AIM EUROPEAN GROWTH FUND
Dear AIM Funds Shareholders:
As independent Chair of the Board of Trustees of the AIM
Funds, I'm writing to report on the work being done by your
Board.
At our most recent meeting in June 2005, your Board
approved voluntary fee reductions from A I M Advisors, Inc.
[CROCKETT (AIM) that save shareholders approximately $20.8 million
PHOTO] annually, based on asset levels as of March 31, 2005. The
majority of these expense reductions, which took effect July
1, 2005, will be achieved by a permanent reduction to 0.25%
of the Rule 12b-1 fees on Class A and Class A3 shares of
those AIM Funds that previously charged these fees at a
higher rate.
Our June meeting, which was the culmination of more than
two and one-half months of review and discussions, took
place over a three-day period. The meeting included your
BRUCE L. CROCKETT Board's annual comprehensive evaluation of each fund's
advisory agreement with AIM. After this evaluation, in which
questions about fees, performance and operations were
addressed by AIM, your Board approved all advisory
agreements for the year beginning July 1, 2005. You can find
information on the factors considered and conclusions
reached by your Board in its evaluation of each fund's
advisory agreement at AIMinvestments.com. (Go to "Products &
Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your
Fund is also included in this annual report on Pages 8 and
9. I encourage you to review it.
Together with monitoring fund expenses, fund performance
is your Board's priority. Our initial goal is to work with
AIM to bring about improvement in every AIM Fund that has
been underperforming its category.
Your Board has a well-defined process and structure for
monitoring all funds and identifying and assisting AIM in
improving underperforming funds. Our Investments
Committee--which functions along with Audit, Governance,
Valuation and Compliance Committees--is the only one of
these five standing committees to include all 14 independent
Board members. Further, our Investments Committee is divided
into three underlying subcommittees, each responsible for,
among other things, reviewing the performance, fees and
expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the
performance of every AIM Fund is evaluated. If a fund has
underperformed its peer group for a meaningful period, we
work closely with AIM to discover the causes and help
develop the right responses. In some cases, AIM may
determine that a change in portfolio management strategy or
portfolio managers is required. In other cases, where a fund
no longer seems viable, it may be merged with a similar
fund, being careful to consider the needs of all
shareholders affected by the decision. Following AIM's
recommendation and your Board's approval, eight funds were
recently merged.
Be assured that your Board is working closely with the
management of AIM to help you reach your investment goals.
Should you or your advisor have questions or comments about
the governance of AIM Funds, I invite you to write to me at
AIM Investments, AIM Investments Tower, 11 Greenway Plaza,
Suite 100, Houston, TX 77046. Your Board looks forward to
keeping you informed about the governance of your funds.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
December 15, 2005
2
AIM EUROPEAN GROWTH FUND
<Table>
MANAGEMENT'S DISCUSSION investment process regardless of the
OF FUND PERFORMANCE macroeconomic environment.
======================================================================================= We do not hedge currencies because we
believe currency exposure increases the
PERFORMANCE SUMMARY ========================================== diversification benefit of international
investing.
Despite higher oil prices, most world FUND VS. INDEXES
equity markets posted positive returns for We seek to minimize stock-specific risk
the fiscal year. European markets rallied Total returns, 10/31/04-10/31/05, excluding by building a portfolio that holds a
amid a low interest rate environment in applicable sales charges. If sales charges variety of companies.
the euro zone and increased corporate were included, returns would be lower.
profits buoyed by restructuring and cost We believe disciplined sell decisions
cutting measures. Class A Shares 18.74% are a key determinant of successful
Class B Shares 17.93 investing. We consider selling a stock for
As indicated in the table, we are Class C Shares 17.92 any one of the following reasons:
pleased to once again reward our Class R Shares 18.56
shareholders with double-digit Fund Investor Class Shares 18.82 o a company's fundamentals deteriorate or
performance. Turn to Pages 6 and 7 for MSCI EAFE Index it posts disappointing earnings
long-term Fund performance. During the (Broad Market Index) 18.09
fiscal year, we tracked the performance of MSCI Europe Growth Index o a stock's price seems overvalued
our broad market index, while we (Style-specific Index) 14.98
significantly outperformed our Lipper European Fund Index o a more attractive opportunity is
style-specific index. We attribute our (Peer Group Index) 19.99 presented
comparative success to strong stock
selection and our sizeable position in Source: Lipper,Inc. MARKET CONDITIONS AND YOUR FUND
small- and
========================================== During the fiscal year, European equities
continued to underscore the importance of
mid-cap European stocks which outperformed diversification by once again
during the fiscal year. significantly outperforming U.S. equities.
Although returns varied, all countries
======================================================================================= represented in the MSCI Europe
Index--considered representative of
HOW WE INVEST o strong cash flow generation (dividends, European stocks--posted gains for the
share buybacks) fiscal year in local currencies.
We believe that earnings drive stock
prices and that companies generating o high return on invested capital Norway, an oil exporting country, was
substantial, repeatable, above average one of the best performing European
earnings growth should provide long-term o reasonable prices with low valuations markets driven by higher energy prices.
growth of capital. Despite an indecisive election result,
We use a systematic, stock-by stock German markets posted positive returns as
Therefore, when selecting stocks for approach, focusing on strengths of German companies have become more
your Fund we look for European companies individual companies, rather than sector aggressive in their restructuring efforts
with the following attributes: or country trends. Our goal is a and negotiations with labor unions.
well-diversified, reasonably priced,
o accelerating earnings and revenues quality portfolio. We adhere to our (continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector
1. United Kingdom 20.6% 1. Anglo Irish Bank Corp. PLC
[PIE CHART] 2. France 16.3 (Ireland) 2.7%
3. Germany 8.4 2. OTP Bank Rt. (Hungary) 2.3
Financials 18.7% 4. Switzerland 7.8 3. Puma A.G. Rudolf Dassler Sport
Industrials 15.6% 5. Spain 6.0 (Germany) 2.2
Consumer Staples 11.0% 4. Eni S.p.A. (Italy) 2.1
Energy 10.0% TOTAL NET ASSETS $911.4 million 5. Total S.A. (France) 2.0
Health Care 7.1% 6. Imperial Tobacco Group PLC
Materials 4.1% TOTAL NUMBER OF HOLDINGS* 94 (United Kingdom) 2.0
Utilities 3.7% 7. Enterprise Inns PLC
Telecommunication Services 2.0% (United Kingdom) 1.9
Information Technology 1.1% 8. Roche Holding A.G. (Switzerland) 1.8
Money Market Funds Plus 9. BNP Paribas S.A. (France) 1.7
Other Assets Less Liabilities 5.1% 10. Grupo Ferrovial,S.A. (Spain) 1.7
Consumer Discretionary 21.6%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
</Table>
3
AIM EUROPEAN GROWTH FUND
<Table>
Economic growth remained muted outperformed large-cap stocks during the JASON T. HOLZER,
throughout the region. The European fiscal year. Approximately 65% of our [HOLZER Chartered Financial
Central Bank (ECB) kept overnight interest portfolio was in small- and mid-cap stocks PHOTO] Analyst, senior
rates at 2.0%. Meanwhile the Bank of as of the close of the reporting period. portfolio manager, is
England which raised rates in 2004, cut lead manager of AIM
rates by 25 basis points (100 basis points Given strong Fund performance we have European Growth Fund with respect to the
= 1 percent) in August citing subdued few detractors to report. Although overall Fund's small and mid-cap investments. Mr.
consumer spending and investment growth. Fund holdings in the U.K. produced Holzer joined AIM in 1996. He received a
Both the euro and British pound positive returns, NEXT PLC, a long-time B.A. in quantitative economics and an M.S.
depreciated against the U.S. dollar during Fund holding, proved a detractor. The in engineering-economic systems from
the fiscal year--good news for European stock declined due to slower retail growth Stanford University.
exporters but a detriment to U.S.-based in the U.K. as consumers responded to rate
investors whose stock returns were reduced hikes by the Bank of England last year. CLAS G. OLSSON, senior
when translated back into U.S. dollars. The downdraft in consumer spending finally [OLSSON portfolio manager and
caught up to the stock and although we PHOTO] head of AIM's
During the fiscal year, Fund still believe this is a top European International
performance was broadly based with company, we sold our position during the Investment Management
investments in many countries contributing fiscal year Unit, is lead manager of AIM European
to returns. In France, Spain and the Growth Fund with respect to the Fund's
Netherlands, hybrid industrial companies-- Foreign exchange was another detractor. large cap investments. Mr. Olsson joined
Vinci S.A., Grupo Ferrovial S.A. and BAM As mentioned earlier, both the euro and AIM in 1994. Mr. Olsson became a
Groep N.V.--were top performers. We find pound depreciated during the fiscal year commissioned naval officer at the Royal
these companies attractive as we believe as the U.S. dollar gained strength. As we Swedish Naval Academy in 1988. He also
the market has underpriced them in the do not hedge currencies--we buy stocks in received a B.B.A. from The University of
past, because many analysts view these their local currency and then translate Texas at Austin.
companies on a simplistic PE that value back into dollars for the
(price-to-earnings) manner, while ignoring Fund--foreign currency depreciation proved MATTHEW W. DENNIS,
long-term concession activities whose a drag on Fund performance. [DENNIS Chartered Financial
earnings are back-end loaded. PHOTO] Analyst, portfolio
IN CLOSING manager, is manager of
Not surprisingly, energy was the best AIM European Growth
performing sector world-wide. We believed European markets once again outperformed Fund. He has been in the investment
there were a variety of themes in the U.S. markets. In our opinion, low interest business since 1994. Mr. Dennis received a
energy arena and we therefore owned a rates in the euro zone, structured reform B.A. in economics from The University of
variety of different types of efforts throughout Europe and increased Texas at Austin. He also earned an M.S. in
energy-related companies including: private equity takeovers continue to finance from Texas A&M University.
integrated oil and gas, oil and gas support European markets and make Europe a
equipment and services, and refining and compelling investment arena. We are BORGE ENDRESEN,
drilling. In addition, we believe some oil pleased to provide shareholders with [ENDERSEN Chartered Financial
companies have underlying drivers beyond positive Fund returns for the fiscal year PHOTO] Analyst, portfolio
rising commodity prices. For instance, and thank you for your continued support manager, is manager
Total S.A. (France) and Eni S.p.A. (Italy) in AIM European Growth Fund. of AIM European Growth
are companies that have strong production Fund. He joined AIM in 1999 and graduated
growth relative to peers as well as The views and opinions expressed in summa cum laude from the University of
attractive valuations--characteristics we management's discussion of Fund Oregon with a B.S. in finance. He also
believe can lead to strong long-term performance are those of A I M Advisors, earned an M.B.A. from The University of
performance. Inc. These views and opinions are subject Texas at Austin.
to change at any time based on factors
Our largest sector weights are in such as market and economic conditions. RICHARD NIELD,
consumer discretionary and financials. These views and opinions may not be relied [NIELD Chartered Financial
Consumer stocks contributed the most to upon as investment advice or PHOTO] Analyst, portfolio
Fund performance, while financials also recommendations, or as an offer for a manager, is manager of
did well with long-time Fund holding Anglo particular security. The information is AIM European Growth
Irish Bank and Hungary-based OTP Bank Rt., not a complete analysis of every aspect of Fund. Mr. Nield joined AIM in 2000. He
both top five contributors. any market, country, industry, security or earned a bachelor of commerce degree in
the Fund. Statements of fact are from finance and international business from
We believe a strong competitive sources considered reliable, but A I M McGill University in Montreal, Canada.
advantage we have is our flexibility to Advisors, Inc. makes no representation or
choose stocks among market warranty as to their completeness or Assisted by Europe/Canada Team
capitalizations. European small- and accuracy. Although historical performance
mid-cap stocks significantly is no guarantee of future results, these [RIGHT ARROW GRAPHIC]
insights may help you understand our
investment management philosophy. FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE PAGES 6
See important Fund and index AND 7.
disclosures inside front cover.
</Table>
AIM EUROPEAN GROWTH FUND
Calculating your ongoing Fund expenses
<Table>
EXAMPLE estimate the expenses that you paid over The hypothetical account values and
the period. Simply divide your account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value by $1,000 (for example, an $8,600 actual ending account balance or expenses
two types of costs: (1) transaction costs, account value divided by $1,000 = 8.6), you paid for the period. You may use this
which may include sales charges (loads) on then multiply the result by the number in information to compare the ongoing costs
purchase payments; contingent deferred the table under the heading entitled of investing in the Fund and other funds.
sales charges on redemptions; and "Actual Expenses Paid During Period" to To do so, compare this 5% hypothetical
redemption fees, if any; and (2) ongoing estimate the expenses you paid on your example with the 5% hypothetical examples
costs, including management fees; account during this period. that appear in the shareholder reports of
distribution and/or service fees (12b-1); the other funds.
and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR
intended to help you understand your COMPARISON PURPOSES Please note that the expenses shown in
ongoing costs (in dollars) of investing in the table are meant to highlight your
the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any
ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges
funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent
investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and
beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the
entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in
31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not
net asset value after expenses for the six help you determine the relative total
ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In
the table "Cumulative Total Returns" on addition, if these transactional costs
The table below provides information about Page 7. were included, your costs would have been
actual account values and actual expenses. higher.
You may use the information in this table,
together with the amount you invested, to
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% annual return before expenses)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO
A $1,000.00 $1,063.60 $ 8.74 $1,016.74 $ 8.54 1.68%
B 1,000.00 1,059.60 12.46 1,013.11 12.18 2.40
C 1,000.00 1,059.50 12.46 1,013.11 12.18 2.40
R 1,000.00 1,062.40 9.88 1,015.63 9.65 1.90
Investor 1,000.00 1,063.70 8.58 1,016.89 8.39 1.65
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31,
2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value
after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor
contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if
this agreement had been in effect throughout the entire most recent fiscal half year is 1.65% for the Class A shares.
(3) The actual expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal
half year are $8.58 for the Class A shares.
(4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the entire most recent
fiscal half year are $8.39 for the Class A shares.
====================================================================================================================================
[ARROW
BUTTON For More Information Visit
IMAGE] AIMinvestments.com
</Table>
5
AIM EUROPEAN GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
<Table>
RESULTS OF A $10,000 INVESTMENT
Fund data from 11/3/97, index data from 10/31/97
[MOUNTAIN CHART]
AIM EUROPEAN GROWTH AIM EUROPEAN GROWTH AIM EUROPEAN GROWTH LIPPER EUROPEAN MSCI EAFE MSCI EUROPE
DATE FUND-CLASS A SHARES FUND-CLASS B SHARES FUND-CLASS C SHARES FUND INDEX INDEX GROWTH INDEX
10/31/97 $ 9450 $10000 $10000 $10000 $10000 $10000
11/97 9233 9770 9770 10075 9898 10139
12/97 9592 10150 10150 10309 9984 10508
1/98 10026 10600 10600 10694 10441 10964
2/98 10972 11590 11590 11575 11111 11898
3/98 12172 12850 12850 12451 11453 12431
4/98 12910 13609 13609 12738 11544 12652
5/98 13789 14529 14538 13058 11488 12882
6/98 13855 14599 14608 13097 11575 13172
7/98 14535 15298 15308 13346 11692 13270
8/98 12551 13197 13198 11419 10244 11889
9/98 11842 12457 12458 10779 9929 11415
10/98 12248 12867 12878 11533 10965 12436
11/98 12900 13546 13558 12190 11526 13065
12/98 13489 14156 14168 12758 11981 13940
1/99 14322 15025 15038 12985 11946 14004
2/99 13593 14245 14257 12605 11661 13455
3/99 13063 13685 13697 12640 12148 13166
4/99 13195 13815 13818 13002 12640 13029
5/99 12797 13386 13388 12530 11989 12536
6/99 13185 13786 13788 12849 12456 12737
7/99 13904 14526 14538 13065 12827 12607
8/99 14244 14876 14878 13171 12873 12802
9/99 14528 15167 15169 13027 13003 12748
10/99 15530 16196 16209 13468 13490 13456
11/99 18594 19385 19399 14404 13959 14279
12/99 22473 23404 23419 16266 15212 16049
1/00 23676 24644 24669 15741 14245 15279
2/00 29521 30712 30728 17911 14628 16493
3/00 26852 27914 27929 17924 15196 16722
4/00 24130 25064 25088 16952 14396 15939
5/00 23307 24194 24218 16609 14044 15194
6/00 24043 24944 24968 17002 14594 15410
7/00 24375 25284 25308 16872 13982 14788
8/00 25038 25954 25979 16936 14103 14519
9/00 23921 24775 24799 16062 13416 13709
10/00 22323 23115 23140 15574 13099 13389
11/00 20082 20785 20810 14740 12608 12682
12/00 21737 22475 22500 15847 13056 13378
1/01 21528 22246 22270 15799 13050 13230
2/01 19164 19805 19821 14466 12071 11777
3/01 17064 17617 17640 13196 11267 10773
4/01 18001 18577 18600 14070 12050 11602
5/01 17841 18397 18419 13528 11624 10917
6/01 17377 17917 17939 12977 11149 10446
7/01 16970 17487 17508 12845 10946 10416
8/01 17036 17537 17559 12516 10669 9959
9/01 15135 15568 15589 11112 9588 9054
10/01 15627 16068 16089 11501 9834 9453
11/01 15996 16437 16450 11999 10196 9896
12/01 16365 16807 16830 12254 10257 10142
1/02 15958 16377 16400 11717 9712 9665
2/02 16148 16577 16591 11725 9780 9735
3/02 16753 17187 17201 12312 10356 10079
4/02 17028 17446 17471 12279 10377 9962
5/02 17350 17776 17791 12286 10509 9777
6/02 17350 17765 17780 11957 10090 9601
7/02 15401 15767 15780 10708 9094 8467
8/02 15515 15866 15879 10636 9074 8406
9/02 14001 14306 14320 9318 8099 7581
10/02 14759 15076 15091 10032 8534 8263
11/02 14863 15176 15190 10506 8922 8450
12/02 14779 15075 15090 10119 8622 8261
1/03 14211 14486 14500 9677 8262 7833
2/03 14097 14366 14369 9308 8072 7599
3/03 14286 14555 14569 9194 7914 7546
4/03 15459 15734 15739 10350 8689 8457
5/03 16793 17084 17099 11112 9216 8895
6/03 16728 17014 17029 11201 9439 8915
7/03 16842 17115 17129 11415 9667 8938
8/03 16870 17144 17158 11502 9900 8856
9/03 17825 18094 18109 11758 10206 9132
10/03 18952 19223 19248 12502 10842 9681
11/03 19725 20003 20018 13052 11083 10123
12/03 21163 21453 21467 13979 11949 10853
1/04 22062 22352 22367 14387 12118 11049
2/04 23095 23383 23398 14835 12397 11363
3/04 22838 23111 23129 14357 12467 10971
4/04 22489 22742 22759 14128 12185 10820
5/04 22754 23001 23018 14274 12211 10965
6/04 23218 23461 23478 14549 12494 11060
7/04 22508 22722 22748 14040 12088 10689
8/04 22963 23172 23199 14079 12142 10638
9/04 24079 24291 24308 14696 12459 11047
10/04 24825 25029 25047 15216 12884 11424
11/04 26709 26909 26925 16309 13764 12224
12/04 28133 28327 28355 17067 14368 12696
1/05 28029 28208 28224 16871 14104 12401
2/05 29470 29647 29664 17829 14714 12973
3/05 28618 28766 28795 17313 14344 12678
4/05 27719 27857 27873 16867 14007 12468
5/05 27747 27868 27884 16857 14014 12532
6/05 28324 28429 28453 17232 14200 12608
7/05 29650 29748 29773 18074 14635 13076
8/05 30625 30708 30723 18663 15005 13283
9/05 30824 30877 30901 19068 15673 13540
10/05 29475 29530 29540 18258 15215 13135
====================================================================================================================================
Source: Lipper,Inc.
The data shown in the chart include This chart, which is a logarithmic
reinvested distributions, applicable sales chart, presents the fluctuations in the
charges, Fund expenses and management value of the Fund and its indexes. We
fees. Results for Class B shares are believe that a logarithmic chart is more
calculated as if a hypothetical effective than other types of charts in
shareholder had liquidated his entire illustrating changes in value during the
investment in the Fund at the close of the early years shown in the chart. The
reporting period and paid the applicable vertical axis, the one that indicates the
contingent deferred sales charges. Index dollar value of an investment, is
results include reinvested dividends, but constructed with each segment representing
they do not reflect sales charges. a percent change in the value of the
Performance of an index of funds reflects investment. In this chart, each segment
fund expenses and management fees; represents a doubling, or 100% change, in
performance of a market index does not. the value of the investment. In other
Performance shown in the chart and words, the space between $5,000 and
table(s) does not reflect deduction of $10,000 is the same size as the space
taxes a shareholder would pay on Fund between $10,000 and $20,000 and is the
distributions or sale of Fund shares. same as that between $20,000 and $40,000.
Performance of the indexes does not
reflect the effects of taxes.
</Table>
6
AIM EUROPEAN GROWTH FUND
<Table>
========================================== ========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding
charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 6.36%
Inception (11/3/97) 14.48% CLASS A SHARES Class B Shares 5.96
5 Years 4.53 Inception (11/3/97) 15.30% Class C Shares 5.95
1 Year 12.20 5 Years 4.01 Class R Shares 6.24
1 Year 20.98 Investor Class Shares 6.37
CLASS B SHARES
Inception (11/3/97) 14.51% CLASS B SHARES
5 Years 4.69 Inception (11/3/97) 15.33% ==========================================
1 Year 12.93 5 Years 4.17
1 Year 22.12
CLASS C SHARES
Inception (11/3/97) 14.51% CLASS C SHARES
5 Years 5.00 Inception (11/3/97) 15.34%
1 Year 16.92 5 Years 4.50
1 Year 26.15
CLASS R SHARES
Inception 15.11% CLASS R SHARES
5 Years 5.54 Inception 15.94%
1 Year 18.56 5 Years 5.02
1 Year 27.72
INVESTOR CLASS SHARES
Inception 15.31% INVESTOR CLASS SHARES
5 Years 5.74 Inception 16.14%
1 Year 18.82 5 Years 5.22
1 Year 28.11
========================================== ==========================================
CLASS R SHARES' INCEPTION DATE IS JUNE 3, THE PERFORMANCE DATA QUOTED REPRESENT THE SEVENTH YEAR. THE CDSC ON CLASS C
2002. RETURNS SINCE THAT DATE ARE PAST PERFORMANCE AND CANNOT GUARANTEE SHARES IS 1% FOR THE FIRST YEAR AFTER
HISTORICAL RETURNS. ALL OTHER RETURNS ARE COMPARABLE FUTURE RESULTS; CURRENT PURCHASE.
BLENDED RETURNS OF HISTORICAL CLASS R PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
SHARE PERFORMANCE AND RESTATED CLASS A VISIT AIMINVESTMENTS.COM FOR THE MOST CLASS R SHARES DO NOT HAVE A FRONT-END
SHARE PERFORMANCE (FOR PERIODS PRIOR TO RECENT MONTH-END PERFORMANCE. PERFORMANCE SALES CHARGE; RETURNS SHOWN ARE NET ASSET
THE INCEPTION DATE OF CLASS R SHARES) AT FIGURES REFLECT REINVESTED DISTRIBUTIONS, VALUE AND DO NOT REFLECT A 0.75% CDSC
NET ASSET VALUE, ADJUSTED TO REFLECT THE CHANGES IN NET ASSET VALUE AND THE EFFECT THAT MAY BEIMPOSED ON TOTAL REDEMPTION OF
HIGHER RULE 12b-1 FEES APPLICABLE TO CLASS OF THE MAXIMUM SALES CHARGE UNLESS RETIREMENT PLAN ASSETS WITHIN THE FIRST
R SHARES. CLASS A SHARES' INCEPTION DATE OTHERWISE STATED. INVESTMENT RETURN AND YEAR. INVESTOR CLASS SHARES DO NOT HAVE A
IS NOVEMBER 3, 1997. PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU FRONT-END SALES CHARGE OR A CDSC;
MAY HAVE A GAIN OR LOSS WHEN YOU SELL THEREFORE, PERFORMANCE IS AT NET ASSET
INVESTOR CLASS SHARES' INCEPTION DATE SHARES. VALUE.
IS SEPTEMBER 30, 2003. RETURNS SINCE THAT
DATE ARE HISTORICAL RETURNS. ALL OTHER CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE
RETURNS ARE BLENDED RETURNS OF HISTORICAL MAXIMUM 5.50% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT SALES
INVESTOR CLASS SHARE PERFORMANCE AND AND CLASS C SHARE PERFORMANCE REFLECTS THE CHARGE STRUCTURES AND CLASS EXPENSES.
RESTATED CLASS A SHARE PERFORMANCE (FOR APPLICABLE CONTINGENT DEFERRED SALES
PERIODS PRIOR TO THE INCEPTION DATE OF CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE A REDEMPTION FEE OF 2% WILL BE IMPOSED
INVESTOR CLASS SHARES) AT NET ASSET VALUE CDSC ON CLASS B SHARES DECLINES FROM 5% ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
AND REFLECT THE HIGHER RULE 12b-1 FEES BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE FUND WITHIN 30 DAYS OF PURCHASE.
APPLICABLE TO CLASS A SHARES. CLASS A THE BEGINNING OF EXCEPTIONS TO THE REDEMPTION FEE ARE
SHARES' INCEPTION DATE IS NOVEMBER 3, LISTED IN THE FUND'S PROSPECTUS.
1997.
</Table>
7
AIM EUROPEAN GROWTH FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
<Table>
The Board of Trustees of AIM International o The quality of services to be provided fee rate for the Fund under the Advisory
Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials Agreement was fair and reasonable.
management of AIM European Growth Fund and experience of the officers and
(the "Fund") and, as required by law, employees of AIM who will provide
determines annually whether to approve the investment advisory services to the Fund. o Fees relative to those of comparable
continuance of the Fund's advisory In reviewing the qualifications of AIM to funds with other advisors. The Board
agreement with A I M Advisors, Inc. provide investment advisory services, the reviewed the advisory fee rate for the
("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's Fund under the Advisory Agreement. The
the Investments Committee of the Board, investment personnel and considered such Board compared effective contractual
which is comprised solely of independent issues as AIM's portfolio and product advisory fee rates at a common asset level
trustees, at a meeting held on June 30, review process, various back office and noted that the Fund's rate was above
2005, the Board, including all of the support functions provided by AIM and the median rate of the funds advised by
independent trustees, approved the AIM's equity and fixed income trading other advisors with investment strategies
continuance of the advisory agreement (the operations. Based on the review of these comparable to those of the Fund that the
"Advisory Agreement") between the Fund and and other factors, the Board concluded Board reviewed. The Board noted that AIM
AIM for another year, effective July 1, that the quality of services to be has agreed to waive advisory fees of the
2005. provided by AIM was appropriate and that Fund, as discussed below. Based on this
AIM currently is providing satisfactory review, the Board concluded that the
The Board considered the factors services in accordance with the terms of advisory fee rate for the Fund under the
discussed below in evaluating the fairness the Advisory Agreement. Advisory Agreement was fair and
and reasonableness of the Advisory reasonable.
Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to
and as part of the Board's ongoing comparable funds. The Board reviewed the o Expense limitations and fee waivers. The
oversight of the Fund. In their performance of the Fund during the past Board noted that AIM has contractually
deliberations, the Board and the one, three and five calendar years against agreed to waive advisory fees of the Fund
independent trustees did not identify any the performance of funds advised by other through December 31, 2009 to the extent
particular factor that was controlling, advisors with investment strategies necessary so that the advisory fees
and each trustee attributed different comparable to those of the Fund. The Board payable by the Fund do not exceed a
weights to the various factors. noted that the Fund's performance in such specified maximum advisory fee rate, which
periods was above the median performance maximum rate includes breakpoints and is
One of the responsibilities of the of such comparable funds. Based on this based on net asset levels. The Board
Senior Officer of the Fund, who is review, the Board concluded that no considered the contractual nature of this
independent of AIM and AIM's affiliates, changes should be made to the Fund and fee waiver and noted that it remains in
is to manage the process by which the that it was not necessary to change the effect until December 31, 2009. The Board
Fund's proposed management fees are Fund's portfolio management team at this considered the effect this fee waiver
negotiated to ensure that they are time. would have on the Fund's estimated
negotiated in a manner which is at arm's expenses and concluded that the levels of
length and reasonable. To that end, the o The performance of the Fund relative to fee waivers/expense limitations for the
Senior Officer must either supervise a indices. The Board reviewed the Fund were fair and reasonable.
competitive bidding process or prepare an performance of the Fund during the past
independent written evaluation. The Senior one, three and five calendar years against o Breakpoints and economies of scale. The
Officer has recommended an independent the performance of the Lipper European Board reviewed the structure of the Fund's
written evaluation in lieu of a Fund Index. The Board noted that the advisory fee under the Advisory Agreement,
competitive bidding process and, upon the Fund's performance in such periods was noting that it includes one breakpoint.
direction of the Board, has prepared such above the performance of such Index. Based The Board reviewed the level of the Fund's
an independent written evaluation. Such on this review, the Board concluded that advisory fees, and noted that such fees,
written evaluation also considered certain no changes should be made to the Fund and as a percentage of the Fund's net assets,
of the factors discussed below. In that it was not necessary to change the have decreased as net assets increased
addition, as discussed below, the Senior Fund's portfolio management team at this because the Advisory Agreement includes a
Officer made certain recommendations to time. breakpoint. The Board noted that AIM has
the Board in connection with such written contractually agreed to waive advisory
evaluation. o Meeting with the Fund's portfolio fees of the Fund through December 31, 2009
managers and investment personnel. With to the extent necessary so that the
The discussion below serves as a respect to the Fund, the Board is meeting advisory fees payable by the Fund do not
summary of the Senior Officer's periodically with such Fund's portfolio exceed a specified maximum advisory fee
independent written evaluation and managers and/or other investment personnel rate, which maximum rate includes
recommendations to the Board in connection and believes that such individuals are breakpoints and is based on net asset
therewith, as well as a discussion of the competent and able to continue to carry levels. The Board concluded that the
material factors and the conclusions with out their responsibilities under the Fund's fee levels under the Advisory
respect thereto that formed the basis for Advisory Agreement. Agreement therefore reflect economies of
the Board's approval of the Advisory scale and that it was not necessary to
Agreement. After consideration of all of o Overall performance of AIM. The Board change the advisory fee breakpoints in the
the factors below and based on its considered the overall performance of AIM Fund's advisory fee schedule.
informed business judgment, the Board in providing investment advisory and
determined that the Advisory Agreement is portfolio administrative services to the o Investments in affiliated money market
in the best interests of the Fund and its Fund and concluded that such performance funds. The Board also took into account
shareholders and that the compensation to was satisfactory. the fact that uninvested cash and cash
AIM under the Advisory Agreement is fair collateral from securities lending
and reasonable and would have been o Fees relative to those of clients of AIM arrangements (collectively, "cash
obtained through arm's length with comparable investment strategies. The balances") of the Fund may be invested in
negotiations. Board reviewed the advisory fee rate for money market funds advised by AIM pursuant
the Fund under the Advisory Agreement. The to the terms of an SEC exemptive order.
o The nature and extent of the advisory Board noted that this rate was lower than The Board found that the Fund may realize
services to be provided by AIM. The Board the advisory fee rates for one offshore certain benefits upon investing cash
reviewed the services to be provided by fund for which an AIM affiliate serves as balances in AIM advised money market
AIM under the Advisory Agreement. Based on advisor with investment strategies funds, including a higher net return,
such review, the Board concluded that the comparable to those of the Fund. The Board increased liquidity, increased
range of services to be provided by AIM noted that AIM has agreed to waive diversification or decreased transaction
under the Advisory Agreement was advisory fees of the Fund, as discussed costs. The Board also found that
appropriate and that AIM currently is below. Based on this review, the Board
providing services in accordance with the concluded that the advisory
terms of the Advisory Agreement. (continued)
</Table>
8
AIM EUROPEAN GROWTH FUND
<Table>
the Fund will not receive reduced services o AIM's financial soundness in light of
if it invests its cash balances in such the Fund's needs. The Board considered
money market funds. The Board noted that, whether AIM is financially sound and has
to the extent the Fund invests in the resources necessary to perform its
affiliated money market funds, AIM has obligations under the Advisory Agreement,
voluntarily agreed to waive a portion of and concluded that AIM has the financial
the advisory fees it receives from the resources necessary to fulfill its
Fund attributable to such investment. The obligations under the Advisory Agreement.
Board further determined that the proposed
securities lending program and related o Historical relationship between the Fund
procedures with respect to the lending and AIM. In determining whether to
Fund is in the best interests of the continue the Advisory Agreement for the
lending Fund and its respective Fund, the Board also considered the prior
shareholders. The Board therefore relationship between AIM and the Fund, as
concluded that the investment of cash well as the Board's knowledge of AIM's
collateral received in connection with the operations, and concluded that it was
securities lending program in the money beneficial to maintain the current
market funds according to the procedures relationship, in part, because of such
is in the best interests of the lending knowledge. The Board also reviewed the
Fund and its respective shareholders. general nature of the non-investment
advisory services currently performed by
o Independent written evaluation and AIM and its affiliates, such as
recommendations of the Fund's Senior administrative, transfer agency and
Officer. The Board noted that, upon their distribution services, and the fees
direction, the Senior Officer of the Fund, received by AIM and its affiliates for
who is independent of AIM and AIM's performing such services. In addition to
affiliates, had prepared an independent reviewing such services, the trustees also
written evaluation in order to assist the considered the organizational structure
Board in determining the reasonableness of employed by AIM and its affiliates to
the proposed management fees of the AIM provide those services. Based on the
Funds, including the Fund. The Board noted review of these and other factors, the
that the Senior Officer's written Board concluded that AIM and its
evaluation had been relied upon by the affiliates were qualified to continue to
Board in this regard in lieu of a provide non-investment advisory services
competitive bidding process. In to the Fund, including administrative,
determining whether to continue the transfer agency and distribution services,
Advisory Agreement for the Fund, the Board and that AIM and its affiliates currently
considered the Senior Officer's written are providing satisfactory non-investment
evaluation and the recommendation made by advisory services.
the Senior Officer to the Board that the
Board consider implementing a process to o Other factors and current trends. In
assist them in more closely monitoring the determining whether to continue the
performance of the AIM Funds. The Board Advisory Agreement for the Fund, the Board
concluded that it would be advisable to considered the fact that AIM, along with
implement such a process as soon as others in the mutual fund industry, is
reasonably practicable. subject to regulatory inquiries and
litigation related to a wide range of
o Profitability of AIM and its affiliates. issues. The Board also considered the
The Board reviewed information concerning governance and compliance reforms being
the profitability of AIM's (and its undertaken by AIM and its affiliates,
affiliates') investment advisory and other including maintaining an internal controls
activities and its financial condition. committee and retaining an independent
The Board considered the overall compliance consultant, and the fact that
profitability of AIM, as well as the AIM has undertaken to cause the Fund to
profitability of AIM in connection with operate in accordance with certain
managing the Fund. The Board noted that governance policies and practices. The
AIM's operations remain profitable, Board concluded that these actions
although increased expenses in recent indicated a good faith effort on the part
years have reduced AIM's profitability. of AIM to adhere to the highest ethical
Based on the review of the profitability standards, and determined that the current
of AIM's and its affiliates' investment regulatory and litigation environment to
advisory and other activities and its which AIM is subject should not prevent
financial condition, the Board concluded the Board from continuing the Advisory
that the compensation to be paid by the Agreement for the Fund.
Fund to AIM under its Advisory Agreement
was not excessive.
o Benefits of soft dollars to AIM. The
Board considered the benefits realized by
AIM as a result of brokerage transactions
executed through "soft dollar"
arrangements. Under these arrangements,
brokerage commissions paid by the Fund
and/or other funds advised by AIM are used
to pay for research and execution
services. This research is used by AIM in
making investment decisions for the Fund.
The Board concluded that such arrangements
were appropriate.
</Table>
9
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-94.88%
BELGIUM-3.33%
Colruyt N.V. (Food Retail) 68,300 $ 8,842,091
- ------------------------------------------------------------------------
InBev N.V. (Brewers) 237,800 9,506,446
- ------------------------------------------------------------------------
KBC Groep N.V. (Diversified Banks)(a) 146,855 11,965,945
========================================================================
30,314,482
========================================================================
DENMARK-0.74%
DSV A.S. (Trucking)(a) 69,200 6,745,634
========================================================================
FRANCE-16.32%
Axa (Multi-Line Insurance)(a) 264,300 7,655,815
- ------------------------------------------------------------------------
BNP Paribas S.A. (Diversified Banks)(a) 208,547 15,814,226
- ------------------------------------------------------------------------
Eiffage S.A. (Construction & Engineering)(a) 99,750 8,609,907
- ------------------------------------------------------------------------
Eiffage S.A. (Construction & Engineering)
(Acquired 03/03/04; Cost $2,591,265)(a)(b) 57,000 4,919,947
- ------------------------------------------------------------------------
Elior (Restaurants)(a) 734,300 9,574,605
- ------------------------------------------------------------------------
Euler Hermes S.A. (Property & Casualty
Insurance) 63,700 5,421,361
- ------------------------------------------------------------------------
Neopost S.A. (Office Electronics) 104,800 10,112,713
- ------------------------------------------------------------------------
Pernod Ricard S.A. (Distillers & Vintners) 45,978 8,041,108
- ------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(a) 118,800 9,514,223
- ------------------------------------------------------------------------
Societe Generale (Diversified Banks)(a) 67,790 7,741,342
- ------------------------------------------------------------------------
Technip S.A. (Oil & Gas Equipment &
Services)(a) 153,800 8,375,825
- ------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(a) 73,573 18,530,314
- ------------------------------------------------------------------------
Veolia Environnement (Multi-Utilities)(a) 166,900 6,960,029
- ------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 197,700 15,451,291
- ------------------------------------------------------------------------
Vivendi Universal S.A. (Movies &
Entertainment)(a) 381,700 11,996,355
========================================================================
148,719,061
========================================================================
GERMANY-8.36%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods) 40,400 6,779,363
- ------------------------------------------------------------------------
Celesio A.G. (Health Care Distributors) 89,200 7,710,293
- ------------------------------------------------------------------------
Continental A.G. (Tires & Rubber)(a) 107,625 8,227,897
- ------------------------------------------------------------------------
Deutsche Boerse A.G. (Specialized Finance)(a) 92,500 8,704,992
- ------------------------------------------------------------------------
Henkel KGaA-Pfd. (Household Products)(a) 48,300 4,163,263
- ------------------------------------------------------------------------
MAN A.G. (Industrial Machinery)(a) 105,100 4,880,404
- ------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(a) 94,700 7,836,848
- ------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 10,330 7,448,116
- ------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear) 80,839 20,470,486
========================================================================
76,221,662
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
GREECE-4.99%
EFG Eurobank Ergasias (Diversified Banks) 151,700 $ 4,564,254
- ------------------------------------------------------------------------
Germanos S.A. (Computer & Electronics Retail) 579,800 8,631,978
- ------------------------------------------------------------------------
OPAP S.A. (Casinos & Gaming)(a) 372,600 10,767,924
- ------------------------------------------------------------------------
OPAP S.A. (Casinos & Gaming) (Acquired
07/14/03; Cost $1,109,094)(a)(b) 104,000 3,005,540
- ------------------------------------------------------------------------
Piraeus Bank S.A. (Diversified Banks)(a) 378,700 7,683,952
- ------------------------------------------------------------------------
Titan Cement Co. S.A. (Construction
Materials) 317,300 10,847,511
========================================================================
45,501,159
========================================================================
HUNGARY-3.23%
MOL Magyar Olaj-es Gazipari Rt. (Integrated
Oil & Gas)(a) 90,500 8,441,891
- ------------------------------------------------------------------------
OTP Bank Rt. (Diversified Banks)(a) 581,900 21,021,737
========================================================================
29,463,628
========================================================================
IRELAND-5.21%
Anglo Irish Bank Corp. PLC (Diversified
Banks)(a) 1,828,944 24,761,995
- ------------------------------------------------------------------------
CRH PLC (Construction Materials)(a) 266,341 6,668,655
- ------------------------------------------------------------------------
FBD Holdings PLC (Multi-Line Insurance)(a) 126,600 4,658,896
- ------------------------------------------------------------------------
IAWS Group PLC (Packaged Foods & Meats) 373,500 5,148,716
- ------------------------------------------------------------------------
Independent News & Media PLC (Publishing) 2,289,800 6,203,210
========================================================================
47,441,472
========================================================================
ITALY-4.77%
Davide Campari-Milano S.p.A. (Distillers &
Vintners) 1,264,000 8,575,787
- ------------------------------------------------------------------------
Eni S.p.A. (Integrated Oil & Gas)(a)(c) 725,414 19,406,630
- ------------------------------------------------------------------------
Lottomatica S.p.A. (Casinos & Gaming)(a) 288,000 10,459,436
- ------------------------------------------------------------------------
Mediaset S.p.A. (Broadcasting & Cable TV)(a) 454,800 4,995,439
========================================================================
43,437,292
========================================================================
NETHERLANDS-3.03%
Aalberts Industries N.V. (Industrial
Conglomerates)(a) 252,436 12,282,118
- ------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &
Engineering)(a) 101,135 8,212,370
- ------------------------------------------------------------------------
Nutreco Holding N.V. (Agricultural
Products)(a) 177,617 7,148,365
========================================================================
27,642,853
========================================================================
NORWAY-4.75%
Aktiv Kapital A.S.A. (Specialized Finance)(a) 357,300 4,832,831
- ------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Oil & Gas
Equipment & Services)(a)(c)(d) 331,410 8,385,172
- ------------------------------------------------------------------------
Schibsted A.S.A. (Publishing)(a)(c) 296,200 8,526,594
- ------------------------------------------------------------------------
Smedvig A.S.A.-Class A (Oil & Gas
Drilling)(a)(c) 202,678 4,256,773
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
NORWAY-(CONTINUED)
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas
Equipment & Services)(a)(d) 209,000 $ 7,780,287
- ------------------------------------------------------------------------
Tomra Systems A.S.A. (Environmental &
Facilities Services)(a)(c) 1,389,700 9,522,141
========================================================================
43,303,798
========================================================================
RUSSIA-1.46%
AO VimpelCom-ADR (Wireless Telecommunication
Services)(d) 210,400 8,416,000
- ------------------------------------------------------------------------
OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 89,000 4,908,897
========================================================================
13,324,897
========================================================================
SPAIN-6.00%
Banco Santander Central Hispano S.A.
(Diversified Banks)(a) 597,300 7,619,009
- ------------------------------------------------------------------------
Corporacion Mapfre S.A. (Multi-Line
Insurance)(a) 721,763 12,642,225
- ------------------------------------------------------------------------
Enagas (Gas Utilities) 287,360 5,080,762
- ------------------------------------------------------------------------
Enagas (Gas Utilities) (Acquired 06/25/02;
Cost $1,895,584)(b) 300,400 5,311,320
- ------------------------------------------------------------------------
Grupo Ferrovial, S.A. (Construction &
Engineering)(a) 213,748 15,787,602
- ------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 278,750 8,250,229
========================================================================
54,691,147
========================================================================
SWEDEN-2.43%
Atlas Copco A.B.-Class A (Industrial
Machinery) 252,600 4,616,553
- ------------------------------------------------------------------------
Gambro A.B.-Class A (Health Care
Services)(a)(c)(d) 382,100 5,399,803
- ------------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(a) 556,500 6,326,695
- ------------------------------------------------------------------------
Volvo A.B.-Class B (Construction & Farm
Machinery & Heavy Trucks)(a)(c) 141,340 5,815,201
========================================================================
22,158,252
========================================================================
SWITZERLAND-7.76%
Compagnie Financiere Richemont A.G.-Class A
(Apparel, Accessories & Luxury Goods)(a)(e) 367,230 13,978,420
- ------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)(a) 22,100 6,579,674
- ------------------------------------------------------------------------
Rieter Holding A.G. (Auto Parts &
Equipment)(a) 15,700 4,480,895
- ------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals) 108,450 16,203,770
- ------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology)(a) 7,010 4,540,344
- ------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(a)(d) 136,930 14,681,834
- ------------------------------------------------------------------------
UBS A.G. (Diversified Capital Markets)(a) 121,140 10,285,442
========================================================================
70,750,379
========================================================================
TURKEY-1.86%
Akbank T.A.S. (Diversified Banks)(a) 920,600 5,726,575
- ------------------------------------------------------------------------
Tupras-Turkiye Petrol Rafinerileri A.S. (Oil
& Gas Refining, Marketing & Transportation) 656,918 11,228,121
========================================================================
16,954,696
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
UNITED KINGDOM-20.64%
Aviva PLC (Multi-Line Insurance) 574,000 $ 6,778,309
- ------------------------------------------------------------------------
Balfour Beatty PLC (Construction &
Engineering) 1,766,700 9,532,135
- ------------------------------------------------------------------------
British Energy Group PLC (Electric
Utilities)(a)(d) 952,000 7,480,105
- ------------------------------------------------------------------------
Bunzl PLC (Trading Companies &
Distributors)(a) 887,988 8,877,838
- ------------------------------------------------------------------------
Capita Group PLC (Human Resource & Employment
Services) 1,273,300 8,791,825
- ------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(a) 1,258,580 17,356,587
- ------------------------------------------------------------------------
Filtrona PLC (Commodity Chemicals)(a) 1,101,418 5,258,220
- ------------------------------------------------------------------------
Homeserve PLC (Diversified Commercial &
Professional Services) 276,000 4,935,306
- ------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco) 645,580 18,516,067
- ------------------------------------------------------------------------
Inchcape PLC (Distributors)(a) 228,530 8,331,104
- ------------------------------------------------------------------------
Informa PLC (Publishing) 1,713,866 11,355,920
- ------------------------------------------------------------------------
International Power PLC (Independent Power
Producers & Energy Traders)(a) 2,078,000 8,536,540
- ------------------------------------------------------------------------
Intertek Group PLC (Diversified Commercial &
Professional Services) 350,800 4,425,151
- ------------------------------------------------------------------------
NETeller PLC (Specialized Finance)(a)(d) 243,000 2,964,660
- ------------------------------------------------------------------------
Punch Taverns PLC (Restaurants) 678,000 8,774,669
- ------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products)(a) 257,245 7,775,602
- ------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC
(Pharmaceuticals)(a) 1,105,300 13,061,594
- ------------------------------------------------------------------------
Sportingbet PLC (Casinos & Gaming)(a)(d) 798,661 4,234,678
- ------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 1,736,235 9,245,694
- ------------------------------------------------------------------------
Ultra Electronics Holdings PLC (Aerospace &
Defense) 547,110 8,523,952
- ------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services)(a) 3,880,946 10,187,949
- ------------------------------------------------------------------------
William Hill PLC (Casinos & Gaming)(a) 332,590 3,145,426
========================================================================
188,089,331
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $596,543,011) 864,759,743
========================================================================
MONEY MARKET FUNDS-3.26%
Liquid Assets Portfolio-Institutional
Class(f) 14,835,210 14,835,210
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 14,835,210 14,835,210
========================================================================
Total Money Market Funds (Cost
$29,670,420) 29,670,420
========================================================================
TOTAL INVESTMENTS-98.14% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $626,213,431) 894,430,163
========================================================================
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.77%
Liquid Assets Portfolio-Institutional
Class(f)(g) 34,397,412 $ 34,397,412
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $34,397,412) 34,397,412
========================================================================
TOTAL INVESTMENTS-101.91% (Cost $660,610,843) 928,827,575
========================================================================
OTHER ASSETS LESS LIABILITIES-(1.91%) (17,392,131)
========================================================================
NET ASSETS-100.00% $911,435,444
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2005 was $588,515,159,
which represented 64.57% of the Fund's Total Net Assets. See Note 1A.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2005 was $13,236,807,
which represented 1.45% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
(d) Non-income producing security.
(e) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
<Table>
ASSETS:
Investments, at value (cost $596,543,011)* $864,759,743
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $64,067,832) 64,067,832
===========================================================
Total investments (cost $660,610,843) 928,827,575
===========================================================
Foreign currencies, at value (cost
$4,626,443) 4,608,516
- -----------------------------------------------------------
Receivables for:
Investments sold 12,495,085
- -----------------------------------------------------------
Fund shares sold 1,557,722
- -----------------------------------------------------------
Dividends and interest 914,186
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 99,199
- -----------------------------------------------------------
Other assets 39,902
===========================================================
Total assets 948,542,185
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,715,836
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 144,584
- -----------------------------------------------------------
Collateral upon return of securities loaned 34,397,412
- -----------------------------------------------------------
Accrued distribution fees 330,165
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,552
- -----------------------------------------------------------
Accrued transfer agent fees 293,839
- -----------------------------------------------------------
Accrued operating expenses 222,353
===========================================================
Total liabilities 37,106,741
===========================================================
Net assets applicable to shares outstanding $911,435,444
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $656,564,597
- -----------------------------------------------------------
Undistributed net investment income 4,834,314
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (18,144,321)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 268,180,854
===========================================================
$911,435,444
___________________________________________________________
===========================================================
NET ASSETS:
Class A $496,328,468
___________________________________________________________
===========================================================
Class B $144,210,898
___________________________________________________________
===========================================================
Class C $ 63,806,019
___________________________________________________________
===========================================================
Class R $ 4,767,391
___________________________________________________________
===========================================================
Investor Class $202,322,668
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 15,955,474
___________________________________________________________
===========================================================
Class B 4,884,173
___________________________________________________________
===========================================================
Class C 2,159,872
___________________________________________________________
===========================================================
Class R 153,976
___________________________________________________________
===========================================================
Investor Class 6,509,882
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 31.11
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $31.11 divided by
94.50%) $ 32.92
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 29.53
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 29.54
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 30.96
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per
share $ 31.08
___________________________________________________________
===========================================================
</Table>
* At October 31, 2005, securities with an aggregate value of $33,085,288 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,760,786) $ 19,785,370
- --------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $583,315, after compensation
to counterparties of $822,042) 2,025,334
- --------------------------------------------------------------------------
Interest 55,432
==========================================================================
Total investment income 21,866,136
==========================================================================
EXPENSES:
Advisory fees 8,429,581
- --------------------------------------------------------------------------
Administrative services fees 249,034
- --------------------------------------------------------------------------
Custodian fees 1,007,879
- --------------------------------------------------------------------------
Distribution fee:
Class A 1,537,791
- --------------------------------------------------------------------------
Class B 1,483,680
- --------------------------------------------------------------------------
Class C 602,101
- --------------------------------------------------------------------------
Class R 18,956
- --------------------------------------------------------------------------
Investor Class 504,254
- --------------------------------------------------------------------------
Transfer agent fees 2,587,926
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 45,570
- --------------------------------------------------------------------------
Other 494,225
==========================================================================
Total expenses 16,960,997
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (238,837)
==========================================================================
Net expenses 16,722,160
==========================================================================
Net investment income 5,143,976
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 134,302,290
- --------------------------------------------------------------------------
Foreign currencies (205,042)
==========================================================================
134,097,248
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 5,701,450
- --------------------------------------------------------------------------
Foreign currencies (167,462)
==========================================================================
5,533,988
==========================================================================
Net gain from investment securities and foreign currencies 139,631,236
==========================================================================
Net increase in net assets resulting from operations $144,775,212
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
<Table>
<Caption>
2005 2004
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,143,976 $ 593,975
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 134,097,248 67,086,371
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 5,533,988 113,461,421
==========================================================================================
Net increase in net assets resulting from operations 144,775,212 181,141,767
==========================================================================================
Distributions to shareholders from net investment income:
Class A (528,401) (106,111)
- ------------------------------------------------------------------------------------------
Class R (715) --
- ------------------------------------------------------------------------------------------
Investor Class (486,652) (212,530)
==========================================================================================
Decrease in net assets resulting from distributions (1,015,768) (318,641)
==========================================================================================
Share transactions-net:
Class A 11,635,750 12,387,787
- ------------------------------------------------------------------------------------------
Class B (10,160,016) (8,714,512)
- ------------------------------------------------------------------------------------------
Class C 9,944,523 4,006,947
- ------------------------------------------------------------------------------------------
Class R 2,163,148 1,093,306
- ------------------------------------------------------------------------------------------
Investor Class (16,521,258) 139,066,257
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (2,937,853) 147,839,785
==========================================================================================
Net increase in net assets 140,821,591 328,662,911
==========================================================================================
NET ASSETS:
Beginning of year 770,613,853 441,950,942
==========================================================================================
End of year (including undistributed net investment income
of $4,834,314 and $911,149, respectively) $911,435,444 $770,613,853
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM European Growth Fund (the "Fund") is a series portfolio of AIM International
Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six separate
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently consists of multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
is valued on the basis of prices furnished by independent pricing services,
which may be considered fair valued, or market makers. Each security
reported on the NASDAQ National Market System is valued at the NASDAQ
Official Closing Price ("NOCP") as of the close of the customary trading
session on the valuation date or absent a NOCP, at the closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices.
For purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not
ordinarily be reflected in the computation of the Fund's net asset value.
If the event is likely to have affected the closing price of the security,
the security will be valued at fair value in good faith using procedures
approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent
pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the
NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the
indication of fair value from the independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to
sector indices, ADRs and domestic and foreign index futures.
F-7
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is accounted for as an
addition to shares of beneficial interest by the Fund and is allocated
among the share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F-8
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $500 million 0.95%
- -------------------------------------------------------------------
Over $500 million 0.90%
__________________________________________________________________
===================================================================
</Table>
Effective January 1, 2005 through December 31, 2009, AIM has contractually
agreed to waive advisory fees to the extent necessary so that the advisory fees
payable by the Fund (based on the Fund's average daily net assets) do not exceed
the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
- --------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). AIM is also voluntarily waiving a portion of the
advisory fee payable by the Fund equal to the difference between the income
earned from investing in the affiliated money market fund and the hypothetical
income earned from investing in an appropriate comparative benchmark. Voluntary
fee waivers or reimbursements may be modified or discontinued at any time upon
consultation with the Board of Trustees without further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $179,839.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement, are included in the Statement of Operations. For
the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the
amount of $32,550.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $249,034.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. For the year ended October 31, 2005, the
Fund paid AISI $2,587,926.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R and Investor Class shares of the Fund. The Trust has adopted
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A, Class B, Class C, Class R and Investor Class shares (collectively the
"Plans"). The Fund, pursuant to the Class A, Class B, Class C and Class R Plans,
pays ADI compensation at the annual rate of 0.25% of the Fund's average daily
net assets of Class A shares, 1.00% of the average daily net assets of Class B
and Class C shares and 0.50% of the average daily net assets of Class R shares.
The Fund, pursuant to the Investor Class Plan, pays ADI for its allocated share
of expenses incurred pursuant to the Investor Class Plan for the period, up to a
maximum annual rate of 0.25% of the average daily net assets of the Investor
Class shares. Prior to July 1, 2005, the Fund paid ADI 0.35% of the average
daily net assets of Class A shares. Of these amounts, up to 0.25% of the average
daily net assets of the Class A, Class B, Class C, Class R or Investor Class
shares may be paid to furnish continuing personal shareholder services to
customers who purchase and own shares of such classes. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge.
National Association of Securities Dealers ("NASD") Rules also impose a cap on
the total sales charges, including asset-based sales charges that may be paid by
any class of shares of the Fund. Pursuant to the Plans, for the year ended
October 31, 2005, the Class A, Class B, Class C, Class R and Investor Class
shares paid $1,537,791, $1,483,680, $602,101, $18,956 and $504,254,
respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2005, ADI advised the Fund it retained $159,110 in front-end
sales commissions from the sale of Class A shares and $1,096, $35,987, $8,900
and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC
imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
F-9
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market funds below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in affiliated money market
funds for the year ended October 31, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $26,427,712 $106,874,355 $(118,466,857) $ -- $14,835,210 $ 717,974 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 26,427,712 106,874,355 (118,466,857) -- 14,835,210 724,045 --
===================================================================================================================================
Subtotal $52,855,424 $213,748,710 $(236,933,714) $ -- $29,670,420 $1,442,019 $ --
===================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ -- $128,057,627 $ (93,660,215) $ -- $34,397,412 $ 100,399 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 11,605,133 348,824,869 (360,430,002) -- -- 482,916 --
===================================================================================================================================
Subtotal $11,605,133 $476,882,496 $(454,090,217) $ -- $34,397,412 $ 583,315 $ --
===================================================================================================================================
Total $64,460,557 $690,631,206 $(691,023,931) $ -- $64,067,832 $2,025,334 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2005, the
Fund received credits from this arrangement which resulted in the reduction of
the Fund's total expenses of $26,448.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $5,259
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are
F-10
parties to the credit facility can borrow on a first come, first served basis.
Principal on each loan outstanding shall bear interest at the bid rate quoted by
SSB at the time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to a loss on
the collateral invested.
At October 31, 2005, securities with an aggregate value of $33,085,392 were
on loan to brokers. The loans were secured by cash collateral of $34,397,412
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $583,315 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2005
and 2004 was as follows:
<Table>
<Caption>
2005 2004
- ------------------------------------------------------------------------------------
Distributions paid from ordinary income $1,015,768 $318,641
____________________________________________________________________________________
====================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2005, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2005
- --------------------------------------------------------------------------
Undistributed ordinary income $ 4,946,764
- --------------------------------------------------------------------------
Undistributed long-term gain 60,635,080
- --------------------------------------------------------------------------
Unrealized appreciation -- investments 267,869,177
- --------------------------------------------------------------------------
Temporary book/tax differences (112,450)
- --------------------------------------------------------------------------
Capital loss carryforward (78,467,724)
- --------------------------------------------------------------------------
Shares of beneficial interest 656,564,597
==========================================================================
Total net assets $911,435,444
__________________________________________________________________________
==========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to the deferral
of losses on wash sales. The tax-basis unrealized appreciation (depreciation) on
investments amount includes appreciation (depreciation) on foreign currencies of
$(35,878).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of October
31, 2005 to utilizing $15,589,322 of capital loss carryforward in the fiscal
year ended October 31, 2006.
F-11
The Fund utilized $73,030,987 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2005 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2008 $13,477,659
- -----------------------------------------------------------------------------
October 31, 2009 64,990,065
=============================================================================
Total capital loss carryforward $78,467,724
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of November 24, 2003, the date of the
reorganization of INVESCO European Growth Fund into the Fund, are realized on
securities held on such date, the capital loss carryforward may be further
limited for up to five years from the date of the reorganization.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $425,257,561 and $403,123,855, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $272,168,990
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,263,935)
==============================================================================
Net unrealized appreciation of investment securities $267,905,055
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $660,922,520.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions, on
October 31, 2005, undistributed net investment income (loss) was decreased by
$205,043 and undistributed net realized gain (loss) was increased by $205,043.
This reclassification had no effect on the net assets of the Fund.
F-12
NOTE 11--SHARE INFORMATION
The Fund currently consists of five different classes of shares: Class A shares,
Class B shares, Class C shares Class R shares and Investor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with CDSC. Class R shares and Investor Class shares are sold at net
asset value. Under certain circumstances, Class A shares and Class R shares are
subject to CDSC. Generally, Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase.
Investor Class shares of the Fund are offered only to certain grandfathered
investors.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
2005(A) 2004
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,313,933 $ 128,881,535 4,125,663 $ 97,941,773
- -----------------------------------------------------------------------------------------------------------------------
Class B 935,289 26,603,825 860,401 19,605,645
- -----------------------------------------------------------------------------------------------------------------------
Class C 865,525 24,612,056 748,539 17,048,651
- -----------------------------------------------------------------------------------------------------------------------
Class R 122,192 3,670,884 74,842 1,721,074
- -----------------------------------------------------------------------------------------------------------------------
Investor Class 794,722 23,632,443 780,496 18,487,554
=======================================================================================================================
Issued as reinvestment of dividends:
Class A 15,791 454,301 4,447 91,218
- -----------------------------------------------------------------------------------------------------------------------
Class R 24 704 -- --
- -----------------------------------------------------------------------------------------------------------------------
Investor Class 16,214 465,660 9,940 203,374
=======================================================================================================================
Issued in connection with acquisitions:(b)
Class A -- -- 22,379 452,046
- -----------------------------------------------------------------------------------------------------------------------
Class B -- -- 5,121 99,255
- -----------------------------------------------------------------------------------------------------------------------
Class C -- -- 53,300 1,033,743
- -----------------------------------------------------------------------------------------------------------------------
Investor Class -- -- 7,999,868 161,401,679
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 265,583 8,009,256 283,516 6,765,403
- -----------------------------------------------------------------------------------------------------------------------
Class B (278,801) (8,009,256) (296,150) (6,765,403)
=======================================================================================================================
Reacquired:(c)
Class A (4,180,070) (125,709,342) (3,960,360) (92,862,653)
- -----------------------------------------------------------------------------------------------------------------------
Class B (999,545) (28,754,585) (955,724) (21,654,009)
- -----------------------------------------------------------------------------------------------------------------------
Class C (511,006) (14,667,533) (633,985) (14,075,447)
- -----------------------------------------------------------------------------------------------------------------------
Class R (49,790) (1,508,440) (26,338) (627,768)
- -----------------------------------------------------------------------------------------------------------------------
Investor Class (1,351,519) (40,619,361) (1,747,995) (41,026,350)
=======================================================================================================================
(41,458) $ (2,937,853) 7,347,960 $147,839,785
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) There are three entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they owns 20% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(b) As of the opening of business on November 24, 2003, the Fund acquired
all of the net assets of INVESCO European Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on June 11, 2003 and
INVESCO European Fund shareholders on October 28, 2003. The acquisition
was accomplished by a tax-free exchange of 8,080,668 shares of the Fund
for 18,162,024 shares of INVESCO European Fund outstanding as of the
close of business on November 21, 2003. INVESCO European Fund's net
assets at that date of $162,986,723, including $27,261,043 of unrealized
appreciation, were combined with those of the Fund. The aggregate net
assets of the Fund immediately before the acquisition were $448,879,513.
(c) Amount is net of redemption fees of $9,574, $2,938, $1,171, $70 and
$4,128 for Class A, Class B, Class C, Class R and Investor Class shares,
respectively, for the year ended October 31, 2005 and $4,825, $1,632,
$518, $20 and $2,335 for Class A, Class B, Class C, Class R and Investor
Class shares, respectively, for the year ended October 31, 2004.
F-13
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.23 $ 20.02 $ 15.60 $ 16.52 $ 23.59
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.21(a) 0.05(a) (0.01)(a) (0.07)(a) (0.06)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 4.70 6.17 4.43 (0.85) (7.01)
================================================================================================================================
Total from investment operations 4.91 6.22 4.42 (0.92) (7.07)
================================================================================================================================
Less dividends from net investment income (0.03) (0.01) -- -- --
================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
================================================================================================================================
Net asset value, end of period $ 31.11 $ 26.23 $ 20.02 $ 15.60 $ 16.52
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 18.74% 31.06% 28.33% (5.57)% (29.97)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $496,328 $407,566 $301,659 $283,812 $157,651
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 1.70%(c) 1.87% 2.01% 1.93% 1.83%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.72%(c) 1.87% 2.02% 1.93% 1.83%
================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.71%(c) 0.19% (0.04)% (0.42)% (0.32)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 48% 60% 81% 94% 99%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $488,094,970.
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.03 $ 19.23 $ 15.08 $ 16.07 $ 23.11
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 4.49 5.90 4.26 (0.81) (6.85)
================================================================================================================================
Total from investment operations 4.50 5.80 4.15 (0.99) (7.04)
================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
================================================================================================================================
Net asset value, end of period $ 29.53 $ 25.03 $ 19.23 $ 15.08 $ 16.07
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 17.98% 30.16% 27.52% (6.16)% (30.46)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $144,211 $130,863 $107,959 $97,436 $105,324
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 2.39%(c) 2.52% 2.66% 2.58% 2.50%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.41%(c) 2.52% 2.67% 2.58% 2.50%
================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.02%(c) (0.46)% (0.69)% (1.07)% (0.98)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 48% 60% 81% 94% 99%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $148,368,059.
F-14
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.05 $ 19.24 $ 15.09 $ 16.09 $ 23.13
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 4.48 5.91 4.26 (0.82) (6.85)
================================================================================================================================
Total from investment operations 4.49 5.81 4.15 (1.00) (7.04)
================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
================================================================================================================================
Net asset value, end of period $ 29.54 $ 25.05 $ 19.24 $ 15.09 $ 16.09
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 17.92% 30.20% 27.50% (6.22)% (30.44)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $63,806 $45,222 $31,509 $27,323 $32,604
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 2.39%(c) 2.52% 2.66% 2.58% 2.50%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.41%(c) 2.52% 2.67% 2.58% 2.50%
================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.02%(c) (0.46)% (0.69)% (1.07)% (0.98)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 48% 60% 81% 94% 99%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $60,210,078.
<Table>
<Caption>
CLASS R
---------------------------------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------- OCTOBER 31,
2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $26.13 $19.98 $15.59 $ 18.35
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.16(a) 0.01(a) (0.03)(a) (0.04)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 4.68 6.14 4.42 (2.72)
=======================================================================================================================
Total from investment operations 4.84 6.15 4.39 (2.76)
=======================================================================================================================
Less dividends from net investment income (0.01) -- -- --
=======================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- --
=======================================================================================================================
Net asset value, end of period $30.96 $26.13 $19.98 $ 15.59
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 18.52% 30.78% 28.16% (15.04)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,767 $2,131 $ 660 $ 15
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 1.89%(c) 2.02% 2.16% 2.08%(d)
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.91%(c) 2.02% 2.17% 2.08%(d)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets 0.52%(c) 0.04% (0.19)% (0.57)%(d)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 48% 60% 81% 94%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $3,791,182.
(d) Annualized.
F-15
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INVESTOR CLASS
----------------------------------------------------
SEPTEMBER 30, 2003
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------------- OCTOBER 31,
2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.22 $ 20.01 $18.84
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.24(a) 0.09(a) 0.00(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 4.69 6.15 1.17
==================================================================================================================
Total from investment operations 4.93 6.24 1.17
==================================================================================================================
Less dividends from net investment income (0.07) (0.03) --
==================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 --
==================================================================================================================
Net asset value, end of period $ 31.08 $ 26.22 $20.01
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 18.82% 31.20% 6.21%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $202,323 $184,832 $ 163
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets
With fee waivers and/or expense reimbursements 1.63%(c) 1.71% 1.79%(d)
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.65%(c) 1.74% 1.79%(d)
==================================================================================================================
Ratio of net investment income to average net assets 0.78%(c) 0.35% 0.18%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 48% 60% 81%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $208,378,016.
(d) Annualized.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. As the methodology is unknown at the present time, management
of AIM and the Fund are unable to estimate the impact, if any, that the
distribution of these two fair funds may have on the Fund or whether such
distribution will have an impact on the Fund's financial statements in the
future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue sharing
and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to Section
529 college savings plans and procedures for locating lost securityholders. IFG,
AIM and ADI are providing full cooperation with respect to these
F-16
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals are defendants in numerous civil lawsuits
related to one or more of these issues. Regulatory actions and/or additional
civil lawsuits related to these or other issues may be filed against the AIM
Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated
mutual fund complexes and financial institutions. None of the AIM Funds has been
named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit
Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in
substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or
deceptive trade practices by failing to disclose in the prospectuses for the AIM
Funds, including those formerly advised by IFG, that they had entered into
certain arrangements permitting market timing of such Funds. As a result of the
foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq.
(the West Virginia Consumer Credit and Protection Act). The WVAG complaint is
seeking, among other things, injunctive relief, civil monetary penalties and a
writ of quo warranto against the defendants. If AIM is unsuccessful in its
defense of the WVAG lawsuit, it could be barred from serving as an investment
advisor for any investment company registered under the Investment Company Act
of 1940, as amended (a "registered investment company"). Such results could
affect the ability of AIM or any other investment advisor directly or indirectly
owned by AMVESCAP, from serving as an investment advisor to any registered
investment company, including the Fund. The Fund has been informed by AIM that,
if these results occur, AIM will seek exemptive relief from the SEC to permit it
to continue to serve as the Fund's investment advisor. There is no assurance
that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings
of fact that essentially mirror the WVAG's allegations mentioned above and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. AIM and ADI have the right to contest the WVASC's findings and
conclusions, which they intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and
failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans;
- that the defendants breached their fiduciary duties by charging distribution
fees while AIM Funds and/or specific share classes were closed generally to
new investors and/or while other share classes of the same AIM Fund were not
charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure
that the AIM Funds participated in class action settlements in which they
were eligible to participate (this lawsuit was dismissed by the Court on
August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the common
issues of law presented in defendants' motions to dismiss the shareholder class
and derivative complaints. These rulings were issued in the context of the Janus
lawsuits, but the Court's legal determinations apply at the omnibus level to all
cases within his track, including the AIM and IFG cases. The Court dismissed for
failure to make pre-suit demand on the fund board all derivative causes of
action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"), as to which the demand requirement does
not apply. The Court dismissed all claims asserted in the class complaint but
two: (i) the securities fraud claims under Section 10(b) of the Securities
Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of
the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on
the 36(b) claim to fees attributable to timing assets, as opposed to all fees on
funds in which any timing occurred. The question whether the duplicative Section
36(b) claim properly belongs in the derivative complaint or in the class action
complaint will be decided at a later date. The Court will subsequently issue an
order applying his legal rulings to the allegations in the AIM and IFG
complaints.
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds
and Shareholders of AIM European Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM European Growth Fund (one of
the funds constituting AIM International Mutual Funds, hereafter referred to as
the "Fund") at October 31, 2005, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-18
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Group Inc. (financial services holding
Principal Executive Officer company); Director and Vice Chairman,
and President AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC -- Managed Products
- -------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice Officer, A I M Management Group Inc.
President (financial services holding company);
Director and President, A I M Advisors,
Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor) and
A I M Distributors, Inc. (registered
broker dealer); Director and Chairman,
AIM Investment Services, Inc.
(registered transfer agent), Fund
Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -- AIM
Division (parent of AIM and a global
investment management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO Distributors,
Inc.; Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and Chairman,
AIM Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None
Trustee & Bunch Ltd., (investment banking firm);
and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); and CompuDyne Corporation
(provider of products and services to
the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and director of various
affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, 2005 Retired None
Jr.(3) -- 1944
Trustee
Formerly: Partner, Deloitte & Touche
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Group Inc. (financial services holding
Chief Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc. and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and General Counsel, A I M
Secretary and Chief Legal Management Group Inc. and A I M
Officer Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President,
A I M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; Senior Vice President
and General Counsel, Liberty Funds
Group, LLC; Vice President, A I M
Distributors, Inc.; and Director and
General Counsel, Fund Management Company
- -------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.
Financial Officer and
Treasurer Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, and Senior
Investment Officer, A I M Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
</Table>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2005, 0% is eligible for the dividends received deduction for
corporations.
For its tax year ended October 31, 2005, the Fund designates 100%, or the
maximum amount allowable, of its dividend distributions as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported on Form 1099-DIV. You should consult your tax advisor regarding
treatment of these amounts.
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005, and
October 31, 2005 are 99.88%, 99.88%, 99.94%, 98.62%, respectively.
<Table>
DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS
AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund
AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2)
AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund
AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund
AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation
AIM Charter Fund AIM Gold & Precious Metals Fund Fund
AIM Constellation Fund AIM Leisure Fund
AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS
AIM Dynamics Fund AIM Real Estate Fund(1)
AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund
AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund(1) FIXED INCOME
AIM Mid Cap Growth Fund
AIM Opportunities I Fund TAXABLE
AIM Opportunities II Fund
AIM Opportunities III Fund AIM Floating Rate Fund
AIM Premier Equity Fund AIM High Yield Fund
AIM S&P 500 Index Fund AIM Income Fund
AIM Select Equity Fund AIM Intermediate Government Fund
AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund
AIM Small Cap Growth Fund(1) AIM Money Market Fund
AIM Small Company Growth Fund AIM Short Term Bond Fund
AIM Summit Fund AIM Total Return Bond Fund
AIM Trimark Endeavor Fund Premier Portfolio
AIM Trimark Small Companies Fund Premier U.S.Government Money Portfolio
AIM Weingarten Fund
*Domestic equity and income fund TAX-FREE
INTERNATIONAL/GLOBAL EQUITY
AIM High Income Municipal Fund(1)
AIM Asia Pacific Growth Fund AIM Municipal Bond Fund
AIM Developing Markets Fund AIM Tax-Exempt Cash Fund
AIM European Growth Fund AIM Tax-Free Intermediate Fund
AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio
AIM Global Aggressive Growth Fund
AIM Global Equity Fund =======================================================================================
AIM Global Growth Fund Consider the investment objectives,risks,and charges and expenses carefully. For this
AIM Global Value Fund and other information about AIM Funds,obtain a prospectus from your financial advisor
AIM International Core Equity Fund and read it carefully before investing.
AIM International Growth Fund =======================================================================================
AIM International Small Company Fund(1)
AIM Trimark Fund
</Table>
(1) This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
(2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of
AMVESCAP PLC, one of the world's largest independent financial services
companies with $381 billion in assets under management. Data as of September 30,
2005.
AIMinvestments.com EGR-AR-1 A I M Distributors, Inc.
<Table>
YOUR GOALS. OUR SOLUTIONS. --Registered Trademark--
- ---------------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO]
Funds Products Savings Managed Products Management --Registered Trademark--
Plans Accounts
- ---------------------------------------------------------------------------------------
</Table>
AIM GLOBAL AGGRESSIVE GROWTH FUND
Annual Report to Shareholders o October 31, 2005
[COVER IMAGE]
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
AIM GLOBAL AGGRESSIVE GROWTH FUND SEEKS TO PROVIDE ABOVE AVERAGE LONG-TERM
GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October
31, 2005, and is based on total net assets.
<Table>
ABOUT SHARE CLASSES
o The unmanaged LIPPER GLOBAL SMALL/ The Fund provides a complete list of its
o Class B shares are not available as an MID-CAP GROWTH CATEGORY AVERAGE holdings four times in each fiscal year,
investment for retirement plans represents the average performance of at the quarter-ends. For the second and
maintained pursuant to Section 401 of funds in the Lipper Global Small/Mid Cap fourth quarters, the lists appear in the
the Internal Revenue Code, including 401(k) Category, tracked by Lipper, Inc. an Fund's semiannual and annual reports to
plans, money purchase pension plans independent mutual fund performance shareholders. For the first and third
and profit sharing plans. Plans that had monitor. quarters, the Fund files the lists with
existing accounts invested in Class B the Securities and Exchange Commission
shares prior to September 30, 2003, will o The unmanaged Standard & Poor's (SEC) on Form N-Q. The most recent list
continue to be allowed to make Composite Index of 500 Stocks (the S&P of portfolio holdings is available at
additional purchases. 500--Registered Trademark-- INDEX) is AIMinvestments.com. From our home page,
an index of common stocks frequently click on Products & Performance, then
PRINCIPAL RISKS OF INVESTING IN THE FUND used as a general measure of U.S. stock Mutual Funds, then Fund Overview. Select
market performance. your Fund from the drop-down menu and
o International investing presents click on Complete Quarterly Holdings.
certain risks not associated with o The Fund is not managed to track the Shareholders can also look up the Fund's
investing solely in the United States. performance of any particular index, Forms N-Q on the SEC's Web site at
These include risks relating to including the indexes defined here, and sec.gov. And copies of the Fund's Forms
fluctuations in the value of the U.S. consequently, the performance of the N-Q may be reviewed and copied at the
dollar relative to the values of other Fund may deviate significantly from the SEC's Public Reference Room at 450 Fifth
currencies, the custody arrangements performance of the indexes. Street, N.W., Washington, D.C.
made for the Fund's foreign holdings, 20549-0102. You can obtain information
differences in accounting, political o A direct investment cannot be made in on the operation of the Public Reference
risks and the lesser degree of public an index. Unless otherwise indicated, Room, including information about
information required to be provided by index results include reinvested duplicating fee charges, by calling
non-U.S. companies. dividends, and they do not reflect sales 202-942-8090 or 800-732-0330, or by
charges. Performance of an index of electronic request at the following
o Investing in emerging markets involves funds reflects fund expenses; e-mail address: publicinfo@sec.gov. The
greater risk and potential reward than performance of a market index does not. SEC file numbers for the Fund are
investing in more established markets. 811-06463 and 33-44611.
OTHER INFORMATION
o Investing in smaller companies A description of the policies and
involves greater risk than investing in o The returns shown in management's procedures that the Fund uses to
more established companies, such as discussion of Fund performance are based determine how to vote proxies relating
business risk, significant stock price on net asset values calculated for to portfolio securities is available
fluctuations and illiquidity. shareholder transactions. Generally without charge, upon request, from our
accepted accounting principles require Client Services department at
ABOUT INDEXES USED IN THIS REPORT adjustments to be made to the net assets 800-959-4246 or on the AIM Web site,
of the Fund at period end for financial AIMinvestments.com. On the home page,
o The unmanaged MSCI WORLD INDEX is a reporting purposes, and as such, the net scroll down and click on AIM Funds Proxy
group of global securities tracked by asset values for shareholder Policy. The information is also
Morgan Stanley Capital International. transactions and the returns based on available on the Securities and Exchange
those net asset values may differ from Commission's Web site, sec.gov.
o The unmanaged MSCI WORLD GROWTH INDEX the net asset values and returns
is a subset of the MSCI World Index, a reported in the Financial Highlights. Information regarding how the Fund voted
group of global securities tracked by proxies related to its portfolio
Morgan Stanley Capital International; o Industry classifications used in this securities during the 12 months ended
the Growth subset measures performance report are generally according to the June 30, 2005, is available at our Web
of companies with higher price/earnings Global Industry Classification Standard, site. Go to AIMinvestments.com, access
ratios and higher forecasted growth which was developed by and is the the About Us tab, click on Required
values. exclusive property and a service mark of Notices and then click on Proxy Voting
Morgan Stanley Capital International Activity. Next, select the Fund from the
Inc. and Standard & Poor's. drop-down menu. The information is also
available on the Securities and Exchange
Commission's Web site, sec.gov.
======================================
Fund NASDAQ Symbols
Class A Shares AGAAX
Class B Shares AGABX
Class C Shares AGACX
======================================
=====================================================================================
This report must be accompanied or preceded by a currently effective Fund prospectus,
which contains more complete information, including sales charges and expenses.
Investors should read it carefully before investing
=====================================================================================
=====================================================================================
Not FDIC Insured May Lose Value No Bank Guarantee
=====================================================================================
AIMinvestments.com
</Table>
AIM GLOBAL AGGRESSIVE GROWTH FUND
DEAR FELLOW AIM FUNDS SHAREHOLDERS:
The fiscal year covered by this report was quite good to equity
investors. Domestically, the broad-based S&P 500 Index returned
[PHOTO OF 8.72%. Globally, Morgan Stanley's MSCI World Index rose 13.27%.
ROBERT H. Much of this good performance, though, was attained early in the
GRAHAM] fiscal year as virtually every equity index declined during
October of 2005. Concern about the inflationary potential of
rising energy costs was frequently cited as a major cause of
market weakness.
Within the indexes, there was considerable variability in the
performance of different sectors and markets. Domestically, energy
sector performance far outpaced that of the other sectors in the
ROBERT H. S&P 500 Index, reflecting rising oil and gas prices. Overseas,
GRAHAM emerging markets produced more attractive results than did
developed markets, at least in part because emerging markets tend
to be more closely tied to the performance of natural resources
and commodities.
One could make a strong argument for global diversification of a
stock portfolio using the performance data for the fiscal year
ended October 31, 2005. Of course, your financial advisor is the
person most qualified to help you decide whether such
diversification is appropriate for you.
[PHOTO OF For a discussion of the specific market conditions that affected
MARK H. your Fund and how your Fund was managed during the fiscal year,
WILLIAMSON] please turn to Page 3.
NEW INFORMATION IN THIS REPORT
MARK H. We would like to call your attention to two new elements in this
WILLIAMSON report. First, on Page 2, is a message from Bruce Crockett, the
independent Chair of the Board of Trustees of the AIM Funds. We
first introduced you to Mr. Crockett in the annual report on your
Fund dated October 31, 2004. Mr. Crockett has been on our Funds'
Board since 1992; he assumed his responsibilities as Chair in
October 2004.
Mr. Crockett plans to keep AIM shareholders informed of the work
of the Board regularly via letters in the Fund reports. We
certainly think this is a valuable addition to the reports. The
Board is charged with looking out for the interests of
shareholders, and Mr. Crockett's letter provides insight into some
of the many issues the Board addresses in governing your Fund.
One of the most important decisions the Board makes each year is
whether to approve the advisory agreement your Fund has with AIM.
Essentially, this agreement hires AIM to manage the assets in your
Fund. A discussion of the factors the Board considered in
reviewing the agreement is the second new element in the report,
and we encourage you to read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and investing
in general is always available on our widely acclaimed Web site,
AIMinvestments.com. We invite you to visit it frequently.
We at AIM remain committed to building solutions to help you
meet your investment goals. We thank you for your continued
participation in AIM Investments--Registered Trademark--. If you
have any questions, please contact our award-winning Client
Service representatives at 800-959-4246. We are happy to be of
help.
Sincerely,
/s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, AIM Funds President, A I M Advisors, Inc.
December 15, 2005
AIM Investments is a registered service mark of A I M Management
Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc.
are the investment advisors. A I M Distributors, Inc. is the
distributor for the retail funds represented by AIM Investments.
AIM GLOBAL AGGRESSIVE GROWTH FUND
DEAR AIM FUNDS SHAREHOLDERS:
As independent Chair of the Board of Trustees of the AIM Funds,
I'm writing to report on the work being done by your Board.
At our most recent meeting in June 2005, your Board approved
[PHOTO OF voluntary fee reductions from A I M Advisors, Inc. (AIM) that save
BRUCE L. shareholders approximately $20.8 million annually, based on asset
CROCKETT] levels as of March 31, 2005. The majority of these expense
reductions, which took effect July 1, 2005, will be achieved by a
permanent reduction to 0.25% of the Rule 12b-1 fees on Class A
BRUCE L. and Class A3 shares of those AIM Funds that previously charged
CROCKETT these fees at a higher rate.
Our June meeting, which was the culmination of more than two and
one-half months of review and discussions, took place over a
three-day period. The meeting included your Board's annual
comprehensive evaluation of each fund's advisory agreement with
AIM. After this evaluation, in which questions about fees,
performance and operations were addressed by AIM, your Board
approved all advisory agreements for the year beginning July 1,
2005. You can find information on the factors considered and
conclusions reached by your Board in its evaluation of each fund's
advisory agreement at AIMinvestments.com. (Go to "Products &
Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your Fund is
also included in this annual report on Pages 8 and 9. I encourage
you to review it.
Together with monitoring fund expenses, fund performance is your
Board's priority. Our initial goal is to work with AIM to bring
about improvement in every AIM Fund that has been underperforming
its category.
Your Board has a well-defined process and structure for
monitoring all funds and identifying and assisting AIM in
improving underperforming funds. Our Investments Committee--which
functions along with Audit, Governance, Valuation and Compliance
Committees--is the only one of these five standing committees to
include all 14 independent Board members. Further, our Investments
Committee is divided into three underlying subcommittees, each
responsible for, among other things, reviewing the performance,
fees and expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the
performance of every AIM Fund is evaluated. If a fund has
underperformed its peer group for a meaningful period, we work
closely with AIM to discover the causes and help develop the right
responses. In some cases, AIM may determine that a change in
portfolio management strategy or portfolio managers is required.
In other cases, where a fund no longer seems viable, it may be
merged with a similar fund, being careful to consider the needs of
all shareholders affected by the decision. Following AIM's
recommendation and your Board's approval, eight funds were
recently merged.
Be assured that your Board is working closely with the
management of AIM to help you reach your investment goals. Should
you or your advisor have questions or comments about the
governance of AIM Funds, I invite you to write to me at AIM
Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100,
Houston, TX 77046. Your Board looks forward to keeping you
informed about the governance of your funds.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of
Trustees AIM Funds
December 15, 2005
2
AIM GLOBAL AGGRESSIVE GROWTH FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
<Table>
===================================================================================== diversification benefit of international
PERFORMANCE SUMMARY investing.
========================================
Despite higher oil prices, most world FUND VS. INDEXES We seek to minimize stock-specific risk
equity markets posted positive returns by building a portfolio that holds a
for the fiscal year. Given this TOTAL RETURNS, 10/31/04-10/31/05, variety of companies.
environment, we are pleased to once EXCLUDING APPLICABLE SALES CHARGES. IF
again reward shareholders with SALES CHARGES WERE INCLUDED, RETURNS We believe disciplined sell decisions
double-digit Fund performance. As the WOULD BE LOWER. are a key determinant of successful
table illustrates, your Fund investing. We consider selling a stock
significantly outperformed its Class A Shares 21.25% for any one of the following reasons:
style-specific and broad market indexes. Class B Shares 20.40
Turn to Pages 6 and 7 for long-term Class C Shares 20.39 o a company's fundamentals deteriorate
performance. MSCI World Index or it posts disappointing earnings
(Broad Market Index) 13.27
We attribute our comparative success MSCI World Growth Index o a stock's price seems overvalued
to strong stock selection, an overweight (Style-specific Index) 11.68
position to European equities (compared Lipper Global Small/Mid-Cap Growth o a more attractive opportunity is
to the MSCI World Growth Index) and Category Average presented
exposure to select stocks in (Peer Group Index) 20.59
out-performing Latin American markets. SOURCE: LIPPER, INC. MARKET CONDITIONS AND YOUR FUND
Our concentration in small- and mid-cap ========================================
global stocks, Despite historically high energy prices,
which outperformed during the fiscal the majority of world markets rose
year, was also a competitive advantage. during the fiscal year. For the third
===================================================================================== consecutive year, foreign markets
outperformed U.S. markets.
HOW WE INVEST o high return on invested capital
o Latin American stocks were some of the
We believe that earnings drive stock o reasonable prices with low valuations best performers in the world as the
prices and that companies generating region's exporters benefited from rising
substantial, repeatable, above average We use a systematic, stock-by stock commodity prices as well as increased
earnings growth should provide long-term approach, focusing on strengths of domestic demand in some countries.
growth of capital. individual companies, rather than sector
or country trends. Our goal is a o In Europe, markets rallied amid a low
Therefore, when selecting stocks for well-diversified, reasonably priced, interest rate environment (the European
your Fund we look for companies, both in quality portfolio. We adhere to our Central Bank has kept rates at 2% for
the U.S. and abroad, with the following investment process regardless of the several years) and increased corporate
attributes: macroeconomic environment. profits buoyed by restructuring and
cost cutting measures.
o accelerating earnings and revenues We do not hedge currencies because we
believe currency exposure increases the o In Asia, Japanese stocks climbed to
o strong cash flow generation levels not witnessed in many years as
Japanese corporate earnings continued to
improve and Prime Minister Junichiro
Koizumi's dramatic election victory
resonated well with investors.
(continued)
========================================= ======================================= ========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. United States 31.5% 1. OTP Bank Rt. (Hungary) 2.9%
2. United Kingdom 9.0 2. Anglo Irish Bank Corp. PLC
[PIE CHART] 3. Japan 6.6 (Ireland) 2.5
4. Canada 6.4 3. Enterprise Inns PLC
Consumer Discretionary 21.1% 5. Germany 4.8 (United Kingdom) 2.4
Financials 17.9% 4. Syngenta A.G. (Switzerland) 1.9
Industrials 12.5% TOTAL NET ASSETS $851.7 MILLION 5. Standard Bank Group Ltd.
Information Technology 12.0% (South Africa) 1.6
Health Care 10.3% TOTAL NUMBER OF HOLDINGS* 126 6. Telkon South Africa Ltd.
Energy 5.6% (South Africa) 1.5
Consumer Staples 5.4% 7. OPAP S.A. (Greece) 1.5
Money Market Funds Plus 8. Grupo Ferrovial, S.A. (Spain) 1.5
Other Assets Less Liabilities 4.2% 9. Amdocs Ltd. 1.4
Utilities 2.3% 10. Sherritt International Corp.
Telecommunications Services 3.8% (Canada) 1.3
Materials 4.9%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================= ======================================= ========================================
</Table>
3
AIM GLOBAL AGGRESSIVE GROWTH FUND
<Table>
o In the United States, equity markets competitors is our willingness to go off JAMES G. BIRDSALL, portfolio
also posted positive returns for the the beaten path when it comes to stock [BIRDSALL manager, is lead manager
fiscal year but gains were muted selection. The mid-to-small-cap focus of PHOTO] of AIM Global Aggressive
compared to overseas markets. the Fund often enabled us to be exposed Growth Fund with respect to
to relatively undiscovered companies the Fund's domestic portion
Fund performance was broadly-based which many analysts don't follow. of the Fund's portfolio. He joined AIM
with all regions reporting double-digit in 1995. Mr. Birdsall received his
returns. We significantly outperformed Given strong Fund performance we had few B.B.A. with a concentration in finance
our style-specific benchmark in North detractors to report. One stock that from Stephen F. Austin State University.
America, Latin America and Europe. detracted was Korea-based KIRYUNG He also earned an M.B.A. with a
ELECTRONIC CO. LTD., a manufacturer and concentration in finance and
In North America, both U.S. and Canadian supplier of satellite radio systems to a international business at the University
stocks contributed to performance. large U.S. satellite radio company. of St. Thomas.
Canadian oil companies were among our During the fiscal year, Kiryung declined
top performers for the fiscal year. We amid increased competition from JASON T. HOLZER, Chartered
believe we can identify oil companies Taiwanese companies which subsequently [HOLZER Financial Analyst, senior
with underlying drivers beyond rising led to disappointing earnings. Despite a PHOTO] portfolio manager, is lead
commodity prices. For instance, CANADIAN rebound in the stock, the increased manager of AIM Global
OIL SANDS TRUST is an oil company we competitive atmosphere surrounding the Aggressive Growth Fund
believe has strong production growth company led us to trim the position. with respect to the Fund's investments
relative to its peers as well as in Europe and Canada. Mr. Holzer joined
attractive valuations--characteristics Foreign exchange also proved a drag on AIM in 1996. He received a B.A. in
we believe can lead to strong long-term Fund performance. During the fiscal quantitative economics and an M.S. in
performance. year, the U.S. dollar strengthened engineering-economic systems from
against many foreign currencies, most Stanford University.
We significantly notably against the euro, pound and yen.
outperformed our style- Given our large allocation to foreign BARRETT K. SIDES, senior
specific benchmark in holdings, foreign currency depreciation [SIDES portfolio manager, is lead
North America, Latin had a negative impact on Fund returns. PHOTO] manager of AIM Global
America and Europe. Aggressive Growth Fund with
IN CLOSING respect to the Fund's
investments in Asia Pacific and Latin
While not a large weighting in the The performance of international markets America. He joined AIM in 1990. Mr.
portfolio, Latin American holdings had over the last several years underscores Sides graduated with a B.S. in economics
some of the strongest returns. Mexico's the investment opportunities beyond U.S. from Bucknell University. He also
WAL-MART DE MEXICO S.A. DE C.V. borders. We believe our bottom-up received a master's in international
(Wal-Mex) has been able to pioneer a investment process allows us to build a business from the University of St.
centralized distribution system in strong portfolio based on world-class Thomas. After the close of the fiscal
Mexico by leveraging off its parent companies from around the globe. We are year, he left the portfolio team for
company's name (Wal-Mart) and know-how. pleased to once again provide this Fund.
A market leader in the shareholders with positive Fund returns
supermarket/hypermarket area, Wal-Mex for the fiscal year and thank you for SHUXIN CAO, Chartered
continues to gain market share from its your continued participation in AIM [CAO Financial Analyst,
less efficient competitors. Global Aggressive Growth Fund. PHOTO] portfolio manager, is
manager of AIM Global
Our largest regional allocation was in THE VIEWS AND OPINIONS EXPRESSED IN Aggressive Growth Fund.
European stocks. We continue to find MANAGEMENT'S DISCUSSION OF FUND He joined AIM in 1997. Mr. Cao graduated
many attractive opportunities in Europe PERFORMANCE ARE THOSE OF A I M ADVISORS, from Tianjin Foreign Language Institute
particularly in financials. INC. THESE VIEWS AND OPINIONS ARE with a B.A. in English. He also received
SUBJECT TO CHANGE AT ANY TIME BASED ON an M.B.A. from Texas A&M University and
Based on strong stock selection, we were FACTORS SUCH AS MARKET AND ECONOMIC is a Certified Public Accountant.
able to outperform our style-specific CONDITIONS. THESE VIEWS AND OPINIONS MAY
benchmark in nearly all sectors. Sectors NOT BE RELIED UPON AS INVESTMENT ADVICE BORGE ENDRESEN, Chartered
that contributed the most to Fund OR RECOMMENDATIONS, OR AS AN OFFER FOR A [ENDRESEN Financial Analyst, portfolio
performance were financials, consumer PARTICULAR SECURITY. THE INFORMATION IS PHOTO] manager, is manager of AIM
discretionary and industrials. Utilities NOT A COMPLETE ANALYSIS OF EVERY ASPECT Global Aggressive Growth
and materials contributed the least due OF ANY MARKET, COUNTRY, INDUSTRY, Fund. He joined AIM in 1999
to smaller allocations in these sectors. SECURITY OR THE FUND. STATEMENTS OF FACT and graduated summa cum laude from the
ARE FROM SOURCES CONSIDERED RELIABLE, University of Oregon with a B.S. in
In our view, what differentiates our BUT A I M ADVISORS, INC. MAKES NO finance. He also earned an M.B.A. from
Fund from its index benchmarks and many REPRESENTATION OR WARRANTY AS TO THEIR The University of Texas at Austin.
of its COMPLETENESS OR ACCURACY. ALTHOUGH
HISTORICAL PERFORMANCE IS NO GUARANTEE Assisted by Asia Pacific/Latin America
OF FUTURE RESULTS, THESE INSIGHTS MAY Team, Europe/Canada Team and Large
HELP YOU UNDERSTAND OUR INVESTMENT Multi-Cap Growth Team
MANAGEMENT PHILOSOPHY.
[RIGHT ARROW GRAPHIC]
See important Fund and index
disclosures inside front cover. FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE PAGES
6 AND 7.
</Table>
4
AIM GLOBAL AGGRESSIVE GROWTH FUND
CALCULATING YOUR ONGOING FUND EXPENSES
<Table>
EXAMPLE to estimate the expenses that you paid The hypothetical account values and
over the period. Simply divide your expenses may not be used to estimate the
As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or
two types of costs: (1) transaction $8,600 account value divided by $1,000 = expenses you paid for the period. You
costs, which may include sales charges 8.6), then multiply the result by the may use this information to compare the
(loads) on purchase payments; contingent number in the table under the heading ongoing costs of investing in the Fund
deferred sales charges on redemptions; entitled "Actual Expenses Paid During and other funds. To do so, compare this
and redemption fees, if any; and (2) Period" to estimate the expenses you 5% hypothetical example with the 5%
ongoing costs, including management paid on your account during this period. hypothetical examples that appear in the
fees; distribution and/or service fees shareholder reports of the other funds.
(12b-1); and other Fund expenses. This HYPOTHETICAL EXAMPLE FOR
example is intended to help you COMPARISON PURPOSES Please note that the expenses shown in
understand your ongoing costs (in the table are meant to highlight your
dollars) of investing in the Fund and to The table below also provides ongoing costs only and do not reflect
compare these costs with ongoing costs information about hypothetical account any transactional costs, such as sales
of investing in other mutual funds. The values and hypothetical expenses based charges (loads) on purchase payments,
example is based on an investment of on the Fund's actual expense ratio and contingent deferred sales charges on
$1,000 invested at the beginning of the an assumed rate of return of 5% per year redemptions, and redemption fees, if
period and held for the entire period before expenses, which is not the Fund's any. Therefore, the hypothetical
May 1, 2005, through October 31, 2005. actual return. The Fund's actual information is useful in comparing
cumulative total returns at net asset ongoing costs only, and will not help
value after expenses for the six months you determine the relative total costs
ACTUAL EXPENSES ended October 31, 2005, appear in the of owning different funds. In addition,
table "Cumulative Total Returns" on Page if these transactional costs were
The table below provides information 7. included, your costs would have been
about actual account values and actual higher.
expenses. You may use the information in
this table, together with the amount you
invested,
===================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO
A $1,000.00 $1,119.60 $8.44 $1,017.24 $8.03 1.58%
B 1,000.00 1,115.80 12.27 1,013.61 11.67 2.30
C 1,000.00 1,115.70 12.27 1,013.61 11.67 2.30
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October
31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value
after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half-year. Effective on July 1, 2005, the distributor
contractually agreed to reduce Rule 12b-1 plan fees for Class A shares to 0.25%. Effective on October 1, 2005, the Board of
Trustees approved an amendment to the transfer agency agreement. The annualized expense ratio restated as if the agreements had
been in effect throughout the entire most recent fiscal half year is 1.63%, 2.38%, and 2.38% for Class A, B, and C shares,
respectively.
(3) The actual expenses paid restated as if the changes discussed above had been in effect throughout the most recent fiscal half
year are $8.71, $12.69, and $12.69 for Class A, B, and C shares, respectively.
(4) The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the most recent fiscal
half year are $8.29, $12.08, and $12.08 for Class A, B, and C shares, respectively.
===================================================================================================================================
[ARROW
BUTTON For More Information Visit
IMAGE] AIMinvestments.com
</Table>
5
AIM GLOBAL AGGRESSIVE GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
<Table>
RESULTS OF A $10,000 INVESTMENT
FUND AND INDEX DATA FROM 10/31/95
[MOUNTAIN CHART]
===================================================================================================================================
AIM Global AIM Global
Aggressive Aggressive Lipper Global Small/
Growth Fund- Growth Fund- MSCI World MSCI World Mid-Cap Growth Fund
Date Class A Shares Class B Shares Growth Index Index Category Average
10/31/95 $10000 $10000 $10000 $10000 $10000
11/95 10046 10038 10318 10345 10116
12/95 10167 10151 10553 10645 10228
1/96 10312 10298 10740 10836 10205
2/96 10834 10814 10817 10899 10612
3/96 11063 11030 10975 11079 10855
4/96 11791 11754 11203 11337 11495
5/96 12328 12286 11269 11344 11786
6/96 12083 12039 11346 11399 11540
7/96 11239 11191 10923 10994 10772
8/96 11821 11762 11013 11118 11196
9/96 12266 12202 11514 11551 11485
10/96 12082 12009 11548 11630 11271
11/96 12435 12363 12134 12279 11510
12/96 12558 12471 11896 12080 11594
1/97 12849 12757 12061 12224 11732
2/97 12511 12417 12194 12362 11371
3/97 12067 11970 11909 12115 10839
4/97 11898 11800 12455 12509 10775
5/97 13087 12972 13182 13278 11763
6/97 13808 13682 13908 13938 12323
7/97 14367 14221 14550 14578 12797
8/97 13715 13574 13467 13601 12546
9/97 14635 14475 14242 14337 13348
10/97 13248 13103 13331 13580 12500
11/97 12879 12725 13669 13818 12254
12/97 13063 12902 13793 13984 12373
1/98 12703 12547 14332 14372 12156
2/98 13945 13766 15344 15342 13315
3/98 14735 14528 15873 15987 14187
4/98 15017 14813 15964 16141 14519
5/98 14680 14466 15786 15936 14114
6/98 14511 14297 16459 16312 14165
7/98 14266 14050 16431 16283 13839
8/98 11498 11314 14505 14110 11272
9/98 11498 11314 14829 14357 11249
10/98 12165 11962 16117 15652 11690
11/98 12855 12633 17154 16580 12479
12/98 13575 13334 18405 17388 13342
1/99 13919 13664 19052 17766 13786
2/99 12977 12739 18292 17291 13026
3/99 13430 13179 18965 18008 13692
4/99 13982 13711 18932 18716 14382
5/99 13667 13394 18269 18029 14209
6/99 14763 14466 19390 18868 15575
7/99 14939 14628 19174 18809 15861
8/99 15100 14774 19408 18773 16163
9/99 15507 15167 19438 18588 16360
10/99 16825 16455 20708 19552 17284
11/99 19538 19098 21921 20099 20415
12/99 23155 22619 24428 21724 24326
1/00 23648 23092 22895 20477 24479
2/00 29719 29001 23688 20530 30315
3/00 27148 26487 25098 21946 28505
4/00 23923 23330 23413 21016 25210
5/00 21547 21001 22023 20481 23241
6/00 23381 22784 23367 21168 25744
7/00 22855 22263 22190 20570 24236
8/00 24827 24168 22975 21237 26470
9/00 22531 21921 20939 20105 25350
10/00 20906 20334 20058 19766 23211
11/00 17536 17054 18510 18563 20066
12/00 18064 17562 18159 18861 21268
1/01 19283 18730 18707 19224 21770
2/01 16215 15744 16320 17597 19251
3/01 14579 14154 14998 16438 17049
4/01 15829 15363 16207 17650 18696
5/01 15879 15404 15880 17420 18802
6/01 15544 15073 15325 16872 18405
7/01 14853 14392 15097 16646 17327
8/01 14019 13576 14166 15845 16530
9/01 12201 11810 12988 14447 14106
10/01 12781 12367 13541 14723 15004
11/01 13197 12770 14569 15591 16004
12/01 13441 12998 14640 15688 16629
1/02 13228 12780 14162 15211 16143
2/02 13024 12584 14199 15077 15604
3/02 13613 13152 14549 15771 16649
4/02 13542 13070 13926 15206 16455
5/02 13471 12998 13850 15232 16252
6/02 12863 12409 13049 14305 15310
7/02 11705 11282 12129 13098 13653
8/02 11664 11240 12125 13120 13553
9/02 10912 10506 10921 11676 12527
10/02 11176 10765 11771 12536 12772
11/02 11541 11106 12198 13210 13465
12/02 11216 10786 11727 12568 12813
1/03 10982 10559 11304 12185 12541
2/03 10769 10352 11181 11972 12193
3/03 10779 10352 11277 11932 12164
4/03 11460 11013 12082 12990 13236
5/03 12273 11778 12579 13729 14493
6/03 12537 12025 12755 13965 14970
7/03 12933 12407 13002 14247 15655
8/03 13410 12861 13262 14553 16599
9/03 13563 12995 13337 14641 16696
10/03 14508 13894 14131 15508 18016
11/03 14854 14225 14331 15742 18432
12/03 15616 14948 15020 16729 19089
1/04 16215 15505 15327 16997 19810
2/04 16744 16011 15513 17282 20169
3/04 16754 16020 15357 17167 20346
4/04 16266 15545 15051 16816 19772
5/04 16489 15751 15199 16956 19719
6/04 16763 15999 15406 17317 20157
7/04 15717 14997 14667 16752 19038
8/04 15899 15162 14621 16825 18964
9/04 16570 15793 14915 17144 19840
10/04 17261 16454 15280 17563 20401
11/04 18480 17601 16052 18486 21883
12/04 19424 18490 16657 19191 22909
1/05 19179 18254 16208 18759 22737
2/05 19962 18987 16621 19354 23549
3/05 19373 18429 16303 18980 22988
4/05 18693 17758 15945 18564 22057
5/05 19151 18181 16359 18894 22792
6/05 19689 18686 16435 19058 23521
7/05 20593 19533 17116 19724 24695
8/05 21130 20039 17268 19872 25031
9/05 21771 20628 17650 20388 25664
10/05 19945 20044 17275 19894 24607
===================================================================================================================================
Source: Lipper, Inc.
The data shown in the chart include This chart, which is a logarithmic
reinvested distributions, applicable chart, presents the fluctuations in the
sales charges, Fund expenses and value of the Fund and its indexes. We
management fees. Results for Class B believe that a logarithmic chart is more
shares are calculated as if a effective than other types of charts in
hypothetical shareholder had liquidated illustrating changes in value during the
his entire investment in the Fund at the early years shown in the chart. The
close of the reporting period and paid vertical axis, the one that indicates
the applicable contingent deferred sales the dollar value of an investment, is
charges. Index results include constructed with each segment
reinvested dividends, but they do not representing a percent change in the
reflect sales charges. Performance of an value of the investment. In this chart,
index of funds reflects fund expenses each segment represents a doubling, or
and management fees; performance of a 100% change, in the value of the
market index does not. Performance shown investment. In other words, the space
in the chart and table(s) does not between $5,000 and $10,000 is the same
reflect deduction of taxes a shareholder size as the space between $10,000 and
would pay on Fund distributions or sale $20,000, and is the same size as the
of Fund shares. Performance of the space between $20,000 and $40,000.
indexes does not reflect the effects of
taxes.
6
</Table>
AIM GLOBAL AGGRESSIVE GROWTH FUND
<Table>
========================================= ======================================= ========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/05, including applicable
sales charges As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding
quarter-end, including applicable sales applicable sales charges
CLASS A SHARES charges
Inception (9/15/94) 9.01% Class A Shares 11.96%
10 Years 7.15 CLASS A SHARES Class B Shares 11.58
5 Years -0.95 Inception (9/15/94) 9.47% Class C Shares 11.57
1 Year 15.47 10 Years 7.39
5 Years -1.64 ========================================
CLASS B SHARES 1 Year 25.17
Inception (9/15/94) 9.06%
10 Years 7.20 CLASS B SHARES
5 Years -0.83 Inception (9/15/94) 9.52%
1 Year 15.40 10 Years 7.45
5 Years -1.52
CLASS C SHARES 1 Year 25.61
Inception (8/4/97) 4.15%
5 Years -0.52 CLASS C SHARES
1 Year 19.39 Inception (8/4/97) 4.71%
5 Years -1.21
1 Year 29.59
========================================= =======================================
THE PERFORMANCE DATA QUOTED REPRESENT CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE
PAST PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 4.75% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS SALES CHARGE STRUCTURES AND CLASS
PERFORMANCE MAY BE LOWER OR HIGHER. THE APPLICABLE CONTINGENT DEFERRED SALES EXPENSES.
PLEASE VISIT AIMINVESTMENTS.COM FOR THE CHARGE (CDSC) FOR THE PERIOD INVOLVED.
MOST RECENT MONTH-END PERFORMANCE. THE CDSC ON CLASS B SHARES DECLINES FROM A REDEMPTION FEE OF 2% WILL BE IMPOSED
5% BEGINNING AT THE TIME OF PURCHASE TO ON CERTAIN REDEMPTIONS OR EXCHANGES OUT
PERFORMANCE FIGURES REFLECT REINVESTED 0% AT THE BEGINNING OF THE SEVENTH YEAR. OF THE FUND WITHIN 30 DAYS OF PURCHASE.
DISTRIBUTIONS, CHANGES IN NET ASSET THE CDSC ON CLASS C SHARES IS 1% FOR THE EXCEPTIONS TO THE REDEMPTION FEE ARE
VALUE AND THE EFFECT OF THE MAXIMUM FIRST YEAR AFTER PURCHASE. LISTED IN THE FUND'S PROSPECTUS.
SALES CHARGE UNLESS OTHERWISE STATED.
INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL SHARES.
</Table>
7
AIM GLOBAL AGGRESSIVE GROWTH FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
<Table>
The Board of Trustees of AIM o The quality of services to be provided o Fees relative to those of comparable
International Mutual Funds (the "Board") by AIM. The Board reviewed the funds with other advisors. The Board
oversees the management of AIM Global credentials and experience of the reviewed the advisory fee rate for the
Aggressive Growth Fund (the "Fund") and, officers and employees of AIM who will Fund under the Advisory Agreement. The
as required by law, determines annually provide investment advisory services to Board compared effective contractual
whether to approve the continuance of the Fund. In reviewing the advisory fee rates at a common asset
the Fund's advisory agreement with A I M qualifications of AIM to provide level and noted that the Fund's rate was
Advisors, Inc. ("AIM"). Based upon the investment advisory services, the Board below the median rate of the funds
recommendation of the Investments reviewed the qualifications of AIM's advised by other advisors with
Committee of the Board, which is investment personnel and considered such investment strategies comparable to
comprised solely of independent issues as AIM's portfolio and product those of the Fund that the Board
trustees, at a meeting held on June 30, review process, various back office reviewed. The Board noted that AIM has
2005, the Board, including all of the support functions provided by AIM and agreed to waive advisory fees of the
independent trustees, approved the AIM's equity and fixed income trading Fund, as discussed below. Based on this
continuance of the advisory agreement operations. Based on the review of these review, the Board concluded that the
(the "Advisory Agreement") between the and other factors, the Board concluded advisory fee rate for the Fund under the
Fund and AIM for another year, effective that the quality of services to be Advisory Agreement was fair and
July 1, 2005. provided by AIM was appropriate and that reasonable.
AIM currently is providing satisfactory
The Board considered the factors services in accordance with the terms of o Expense limitations and fee waivers.
discussed below in evaluating the the Advisory Agreement. The Board noted that AIM has
fairness and reasonableness of the contractually agreed to waive advisory
Advisory Agreement at the meeting on o The performance of the Fund relative fees of the Fund through December 31,
June 30, 2005 and as part of the Board's to comparable funds. The Board reviewed 2009 to the extent necessary so that the
ongoing oversight of the Fund. In their the performance of the Fund during the advisory fees payable by the Fund do not
deliberations, the Board and the past one, three and five calendar years exceed a specified maximum advisory fee
independent trustees did not identify against the performance of funds advised rate, which maximum rate includes break
any particular factor that was by other advisors with investment points and is based on net asset levels.
controlling, and each trustee attributed strategies comparable to those of the The Board considered the contractual
different weights to the various Fund. The Board noted that the Fund's nature of this fee waiver and noted that
factors. performance for the one and three year it remains in effect until December 31,
periods was above the median performance 2009. The Board considered the effect
One of the responsibilities of the of such comparable funds and below such this fee waiver would have on the Fund's
Senior Officer of the Fund, who is median performance for the five year estimated expenses and concluded that
independent of AIM and AIM's affiliates, period. Based on this review, the Board the levels of fee waivers/expense
is to manage the process by which the concluded that no changes should be limitations for the Fund were fair and
Fund's proposed management fees are made to the Fund and that it was not reasonable.
negotiated to ensure that they are necessary to change the Fund's portfolio
negotiated in a manner which is at arm's management team at this time. o Breakpoints and economies of scale.
length and reasonable. To that end, the The Board reviewed the structure of the
Senior Officer must either supervise a o The performance of the Fund relative Fund's advisory fee under the Advisory
competitive bidding process or prepare to indices. The Board reviewed the Agreement, noting that it includes one
an independent written evaluation. The performance of the Fund during the past breakpoint. The Board reviewed the level
Senior Officer has recommended an one, three and five calendar years of the Fund's advisory fees, and noted
independent written evaluation in lieu against the performance of the MSCI that such fees, as a percentage of the
of a competitive bidding process and, World Growth Index. The Board noted that Fund's net assets, would decrease as net
upon the direction of the Board, has the Fund's performance for such periods assets increase because the Advisory
prepared such an independent written was above the performance of such Index. Agreement includes a breakpoint. The
evaluation. Such written evaluation also The Board noted that the performance of Board noted that AIM has contractually
considered certain of the factors such Index does not reflect fees, while agreed to waive advisory fees of the
discussed below. In addition, as the performance of the Fund does reflect Fund through December 31, 2009 to the
discussed below, the Senior Officer made fees. Based on this review, the Board extent necessary so that the advisory
certain recommendations to the Board in concluded that no changes should be made fees payable by the Fund do not exceed a
connection with such written evaluation. to the Fund and that it was not specified maximum advisory fee rate,
necessary to change the Fund's portfolio which maximum rate includes breakpoints
The discussion below serves as a summary management team at this time. and is based on net asset levels. The
of the Senior Officer's independent Board noted that, due to the Fund's
written evaluation and recommendations o Meeting with the Fund's portfolio current asset levels and the way in
to the Board in connection therewith, as managers and investment personnel. With which the advisory fee breakpoints have
well as a discussion of the material respect to the Fund, the Board is been structured, the Fund has yet to
factors and the conclusions with respect meeting periodically with such Fund's benefit from the breakpoint. The Board
thereto that formed the basis for the portfolio managers and/or other concluded that the Fund's fee levels
Board's approval of the Advisory investment personnel and believes that under the Advisory Agreement therefore
Agreement. After consideration of all of such individuals are competent and able would reflect economies of scale at
the factors below and based on its to continue to carry out their higher asset levels and that it was not
informed business judgment, the Board responsibilities under the Advisory necessary to change the advisory fee
determined that the Advisory Agreement Agreement. breakpoints in the Fund's advisory fee
is in the best interests of the Fund and schedule.
its shareholders and that the o Overall performance of AIM. The Board
compensation to AIM under the Advisory considered the overall performance of o Investments in affiliated money market
Agreement is fair and reasonable and AIM in providing investment advisory and funds. The Board also took into account
would have been obtained through arm's portfolio administrative services to the the fact that uninvested cash and cash
length negotiations. Fund and concluded that such performance collateral from securities lending
was satisfactory. arrangements (collectively, "cash
o The nature and extent of the advisory balances") of the Fund may be invested
services to be provided by AIM. The o Fees relative to those of clients of in money market funds advised by AIM
Board reviewed the services to be AIM with comparable investment pursuant to the terms of an SEC
provided by AIM under the Advisory strategies. The Board noted that AIM exemptive order. The Board found that
Agreement. Based on such review, the does not serve as an advisor to other the Fund may realize certain benefits
Board concluded that the range of mutual funds or other clients with upon investing cash balances in AIM
services to be provided by AIM under the investment strategies comparable to advised money market funds, including a
Advisory Agreement was appropriate and those of the Fund. higher net
that AIM currently is providing services
in accordance with the terms of the
Advisory Agreement.
(continued)
</Table>
8
AIM GLOBAL AGGRESSIVE GROWTH FUND
<Table>
return, increased liquidity, increased o AIM's financial soundness in light of
diversification or decreased transaction the Fund's needs. The Board considered
costs. The Board also found that the whether AIM is financially sound and
Fund will not receive reduced services has the resources necessary to perform
if it invests its cash balances in such its obligations under the Advisory
money market funds. The Board noted Agreement, and concluded that AIM has
that, to the extent the Fund invests in the financial resources necessary to
affiliated money market funds, AIM has fulfill its obligations under the
voluntarily agreed to waive a portion of Advisory Agreement.
the advisory fees it receives from the
Fund attributable to such investment. o Historical relationship between the
The Board further determined that the Fund and AIM. In determining whether to
proposed securities lending program and continue the Advisory Agreement for the
related procedures with respect to the Fund, the Board also considered the
lending Fund is in the best interests of prior relationship between AIM and the
the lending Fund and its respective Fund, as well as the Board's knowledge
shareholders. The Board therefore of AIM's operations, and concluded that
concluded that the investment of cash it was beneficial to maintain the
collateral received in connection with current relationship, in part, because of
the securities lending program in the such knowledge. The Board also reviewed
money market funds according to the the general nature of the non-investment
procedures is in the best interests of advisory services currently performed by
the lending Fund and its respective AIM and its affiliates, such as
shareholders. administrative, transfer agency and
distribution services, and the fees
o Independent written evaluation and received by AIM and its affiliates for
recommendations of the Fund's Senior performing such services. In addition to
Officer. The Board noted that, upon reviewing such services, the trustees
their direction, the Senior Officer of also considered the organizational
the Fund, who is independent of AIM and structure employed by AIM and its
AIM's affiliates, had prepared an affiliates to provide those services.
independent written evaluation in order Based on the review of these and other
to assist the Board in determining the factors, the Board concluded that AIM
reasonableness of the proposed and its affiliates were qualified to
management fees of the AIM Funds, continue to provide non-investment
including the Fund. The Board noted that advisory services to the Fund, including
the Senior Officer's written evaluation administrative, transfer agency and
had been relied upon by the Board in distribution services, and that AIM and
this regard in lieu of a competitive its affiliates currently are providing
bidding process. In determining whether satisfactory non-investment advisory
to continue the Advisory Agreement for services.
the Fund, the Board considered the
Senior Officer's written evaluation and o Other factors and current trends. In
the recommendation made by the Senior determining whether to continue the
Officer to the Board that the Board Advisory Agreement for the Fund, the
consider implementing a process to Board considered the fact that AIM,
assist them in more closely monitoring along with others in the mutual fund
the performance of the AIM Funds. The industry, is subject to regulatory
Board concluded that it would be inquiries and litigation related to a
advisable to implement such a process as wide range of issues. The Board also
soon as reasonably practicable. considered the governance and
compliance reforms being undertaken by
o Profitability of AIM and its AIM and its affiliates, including
affiliates. The Board reviewed maintaining an internal controls
information concerning the profitability committee and retaining an independent
of AIM's (and its affiliates') compliance consultant, and the fact that
investment advisory and other activities AIM has undertaken to cause the Fund to
and its financial condition. The Board operate in accordance with certain
considered the overall profitability of governance policies and practices. The
AIM, as well as the profitability of AIM Board concluded that these actions
in connection with managing the Fund. indicated a good faith effort on the
The Board noted that AIM's operations part of AIM to adhere to the highest
remain profitable, although increased ethical standards, and determined that
expenses in recent years have reduced the current regulatory and litigation
AIM's profitability. Based on the review environment to which AIM is subject
of the profitability of AIM's and its should not prevent the Board from
affiliates' investment advisory and continuing the Advisory Agreement for
other activities and its financial the Fund.
condition, the Board concluded that the
compensation to be paid by the Fund to
AIM under its Advisory Agreement was not
excessive.
o Benefits of soft dollars to
AIM. The Board considered the benefits
realized by AIM as a result of brokerage
transactions executed through "soft
dollar" arrangements. Under these
arrangements, brokerage commissions paid
by the Fund and/or other funds advised
by AIM are used to pay for research and
execution services. This research is
used by AIM in making investment
decisions for the Fund. The Board
concluded that such arrangements were
appropriate.
</Table>
9
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-64.27%
AUSTRALIA-1.86%
Brambles Industries Ltd. (Diversified
Commercial & Professional Services)(a)(b) 598,000 $ 3,790,240
- ------------------------------------------------------------------------
Computershare Ltd. (Data Processing &
Outsourced Services) 1,254,000 6,141,794
- ------------------------------------------------------------------------
CSL Ltd. (Biotechnology)(a)(b) 208,800 5,871,680
========================================================================
15,803,714
========================================================================
BRAZIL-1.37%
Lojas Americanas S.A.-Pfd. (General
Merchandise Stores) 225,300 4,702,505
- ------------------------------------------------------------------------
Perdigao S.A.-Pfd. (Packaged Foods & Meats) 257,300 6,970,113
========================================================================
11,672,618
========================================================================
CANADA-6.35%
Astral Media Inc. (Broadcasting & Cable TV) 173,900 4,630,757
- ------------------------------------------------------------------------
Brascan Corp.-Class A (Other Diversified
Financial Services) 169,700 7,740,349
- ------------------------------------------------------------------------
Canadian Oil Sands Trust (Oil & Gas
Exploration & Production) 70,000 6,578,892
- ------------------------------------------------------------------------
Power Financial Corp. (Other Diversified
Financial Services) 263,200 6,977,513
- ------------------------------------------------------------------------
Precision Drilling Corp. (Oil & Gas
Drilling)(c) 145,300 6,680,318
- ------------------------------------------------------------------------
Sherritt International Corp. (Diversified
Metals & Mining) 1,282,300 10,965,861
- ------------------------------------------------------------------------
Shoppers Drug Mart Corp. (Drug Retail)
(Acquired 05/16/03-11/18/03; Cost
$5,546,847)(c)(d)(e) 316,500 10,553,126
========================================================================
54,126,816
========================================================================
CHINA-0.67%
Shanghai Electric Group Co. Ltd.-Class H
(Heavy Electrical Equipment)(b)(c) 18,000,000 5,696,728
========================================================================
DENMARK-0.64%
DSV A.S. (Trucking)(b) 55,900 5,449,146
========================================================================
FRANCE-2.38%
Eiffage S.A. (Construction & Engineering)(b) 56,999 4,919,861
- ------------------------------------------------------------------------
Pernod Ricard S.A. (Distillers &
Vintners)(a)(c) 49,000 8,569,626
- ------------------------------------------------------------------------
Technip S.A. (Oil & Gas Equipment & Services)
(Acquired 08/03/04-11/09/04; Cost
$4,530,854)(b)(e) 124,000 6,752,941
========================================================================
20,242,428
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
GERMANY-4.84%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods) 50,000 $ 8,390,301
- ------------------------------------------------------------------------
Celesio A.G. (Health Care Distributors) 85,300 7,373,183
- ------------------------------------------------------------------------
Continental A.G. (Tires & Rubber)(b) 99,140 7,579,221
- ------------------------------------------------------------------------
Deutsche Boerse A.G. (Specialized
Finance)(b)(c) 75,200 7,076,923
- ------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)
(Acquired 10/29/02-06/02/03; Cost
$2,933,761)(a)(c)(e) 42,635 10,796,264
========================================================================
41,215,892
========================================================================
GREECE-1.95%
EFG Eurobank Ergasias (Diversified Banks) 139,520 4,197,790
- ------------------------------------------------------------------------
OPAP S.A. (Casinos & Gaming) (Acquired
07/14/03-01/30/04; Cost $5,368,735)(b)(e) 430,000 12,426,751
========================================================================
16,624,541
========================================================================
HONG KONG-1.42%
Esprit Holdings Ltd. (Apparel Retail)(b) 1,246,000 8,799,899
- ------------------------------------------------------------------------
Hongkong Land Holdings Ltd. (Real Estate
Management & Development)(b) 1,152,000 3,306,238
========================================================================
12,106,137
========================================================================
HUNGARY-2.89%
OTP Bank Rt. (Diversified Banks)(b) 681,700 24,627,115
========================================================================
INDIA-0.40%
Maruti Udyog Ltd. (Automobile Manufacturers) 283,000 3,451,633
========================================================================
IRELAND-3.10%
Anglo Irish Bank Corp. PLC (Diversified
Banks)(b) 1,554,172 21,041,868
- ------------------------------------------------------------------------
Independent News & Media PLC (Publishing) 1,970,400 5,337,936
========================================================================
26,379,804
========================================================================
ISRAEL-0.62%
Check Point Software Technologies Ltd.
(Systems Software)(c) 235,000 5,254,600
========================================================================
ITALY-0.54%
Lottomatica S.p.A. (Casinos & Gaming)(a)(b) 127,900 4,645,006
========================================================================
JAPAN-6.59%
Daiwa House Industry Co., Ltd.
(Homebuilding)(b) 335,000 4,499,406
- ------------------------------------------------------------------------
EXEDY Corp. (Auto Parts & Equipment)(b) 287,400 6,713,346
- ------------------------------------------------------------------------
FANUC Ltd. (Industrial Machinery)(b) 56,700 4,482,021
- ------------------------------------------------------------------------
JSR Corp. (Specialty Chemicals)(a)(b) 275,000 6,476,527
- ------------------------------------------------------------------------
Mars Engineering Corp. (Leisure Products)(a) 137,400 4,202,449
- ------------------------------------------------------------------------
NEOMAX Co., Ltd. (Electrical Components &
Equipment)(a)(b) 199,000 6,038,101
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
JAPAN-(CONTINUED)
Nidec Corp. (Electronic Equipment
Manufacturers)(a)(b) 38,100 $ 2,230,281
- ------------------------------------------------------------------------
Nidec Corp. (Electronic Equipment
Manufacturers)(a)(f) 53,100 2,942,523
- ------------------------------------------------------------------------
Nippon Electric Glass Co., Ltd. (Electronic
Equipment Manufacturers)(a)(b) 325,000 6,219,647
- ------------------------------------------------------------------------
OMRON Corp. (Electronic Equipment
Manufacturers)(b) 151,000 3,563,891
- ------------------------------------------------------------------------
Suzuki Motor Corp. (Automobile
Manufacturers)(a)(b) 248,000 4,274,550
- ------------------------------------------------------------------------
Yamaha Motor Co., Ltd. (Motorcycle
Manufacturers)(a)(b) 210,200 4,524,370
========================================================================
56,167,112
========================================================================
MEXICO-2.45%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services)(a) 261,300 6,859,125
- ------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V.-Series B
(Homebuilding)(c) 1,350,200 4,168,520
- ------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers)(a) 2,017,500 9,820,021
========================================================================
20,847,666
========================================================================
NORWAY-0.96%
Tomra Systems A.S.A. (Environmental &
Facilities Services)(a)(b) 1,196,600 8,199,031
========================================================================
RUSSIA-1.14%
AO VimpelCom-ADR (Wireless Telecommunication
Services)(c) 243,070 9,722,800
========================================================================
SINGAPORE-0.00%
Citiraya Industries Ltd. (Environmental &
Facilities Services)(c)(d)(g) 5,946,000 35
========================================================================
SOUTH AFRICA-3.10%
Standard Bank Group Ltd. (Diversified
Banks)(b) 1,338,442 13,794,459
- ------------------------------------------------------------------------
Telkom South Africa Ltd. (Integrated
Telecommunication Services) (Acquired
11/25/03-05/10/05; Cost $8,154,102)(a)(e) 667,400 12,606,997
========================================================================
26,401,456
========================================================================
SOUTH KOREA-2.20%
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. (Construction & Farm Machinery & Heavy
Trucks)(b) 175,000 3,513,938
- ------------------------------------------------------------------------
KT Freetel Co., Ltd. (Wireless
Telecommunication Services)(b) 133,000 2,869,902
- ------------------------------------------------------------------------
NHN Corp. (Internet Software & Services)(b) 23,000 3,846,666
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
SOUTH KOREA-(CONTINUED)
Shinsegae Co., Ltd. (Hypermarkets & Super
Centers)(b) 12,000 $ 4,317,878
- ------------------------------------------------------------------------
Woongjin Coway Co., Ltd. (Housewares &
Specialties)(b) 239,000 4,159,621
========================================================================
18,708,005
========================================================================
SPAIN-4.09%
Cintra Concesiones de Infraestructuras de
Transporte S.A. (Highways & Railtracks)
(Acquired 10/26/04-12/17/04; Cost
$6,936,449)(b)(e) 665,400 7,889,793
- ------------------------------------------------------------------------
Corporacion Mapfre S.A. (Multi-Line
Insurance)(b) 456,572 7,997,204
- ------------------------------------------------------------------------
Enagas (Gas Utilities) 373,000 6,594,948
- ------------------------------------------------------------------------
Grupo Ferrovial, S.A. (Construction &
Engineering)(b) 167,600 12,379,073
========================================================================
34,861,018
========================================================================
SWEDEN-1.30%
Gambro A.B.-Class A (Health Care
Services)(a)(b)(c) 359,100 5,074,769
- ------------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(b) 527,700 5,999,276
========================================================================
11,074,045
========================================================================
SWITZERLAND-2.28%
Baloise Holding A.G.-Class R (Multi-Line
Insurance)(b)(c) 70,300 3,583,410
- ------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(b)(c) 147,600 15,825,887
========================================================================
19,409,297
========================================================================
TAIWAN-0.43%
Novatek Microelectronics Corp., Ltd.
(Semiconductors)(b) 835,000 3,662,190
========================================================================
THAILAND-0.49%
Siam Commercial Bank PCL (Diversified
Banks)(b) 3,565,000 4,134,897
========================================================================
TURKEY-1.17%
Koc Holding A.S. (Industrial
Conglomerates)(b) 519,084 1,940,422
- ------------------------------------------------------------------------
Turkiye Petrol Rafinerileri A.S. (Oil & Gas
Refining & Marketing) 469,743 8,028,904
========================================================================
9,969,326
========================================================================
UNITED KINGDOM-9.04%
British Energy Group PLC (Electric
Utilities)(b)(c) 723,000 5,680,794
- ------------------------------------------------------------------------
Bunzl PLC (Trading Companies &
Distributors)(b) 692,533 6,923,738
- ------------------------------------------------------------------------
Capita Group PLC (Human Resource & Employment
Services) 885,000 6,110,708
- ------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(b) 1,488,600 20,528,703
- ------------------------------------------------------------------------
Filtrona PLC (Commodity Chemicals)(b) 843,714 4,027,929
- ------------------------------------------------------------------------
Inchcape PLC (Distributors)(b) 200,100 7,294,683
- ------------------------------------------------------------------------
Informa PLC (Publishing) 1,081,752 7,167,590
- ------------------------------------------------------------------------
International Power PLC (Independent Power
Producers & Energy Traders)(b) 1,690,000 6,942,615
- ------------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Shire Pharmaceuticals Group PLC
(Pharmaceuticals)(b) 789,500 $ 9,329,710
- ------------------------------------------------------------------------
William Hill PLC (Casinos & Gaming)(b) 311,460 2,945,592
========================================================================
76,952,062
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $351,708,849) 547,405,118
========================================================================
DOMESTIC COMMON STOCKS-31.54%
AEROSPACE & DEFENSE-1.73%
Precision Castparts Corp. 180,000 8,524,800
- ------------------------------------------------------------------------
Rockwell Collins, Inc. 135,000 6,185,700
========================================================================
14,710,500
========================================================================
APPLICATION SOFTWARE-2.05%
Amdocs Ltd.(c) 450,000 11,911,500
- ------------------------------------------------------------------------
Citrix Systems, Inc.(a)(c) 200,000 5,514,000
========================================================================
17,425,500
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.57%
Legg Mason, Inc. 45,000 4,828,950
========================================================================
AUTOMOTIVE RETAIL-0.53%
Advance Auto Parts, Inc.(c) 120,000 4,500,000
========================================================================
CASINOS & GAMING-1.00%
GTECH Holdings Corp. 266,900 8,498,096
========================================================================
COMMUNICATIONS EQUIPMENT-0.60%
Scientific-Atlanta, Inc. 145,000 5,138,800
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.61%
Oshkosh Truck Corp. 120,000 5,227,200
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.52%
Alliance Data Systems Corp.(a)(c) 125,000 4,445,000
========================================================================
DEPARTMENT STORES-0.81%
Nordstrom, Inc. 200,000 6,930,000
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.73%
Amphenol Corp.-Class A 155,000 6,195,350
========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.53%
Jabil Circuit, Inc.(c) 150,000 4,477,500
========================================================================
HEALTH CARE DISTRIBUTORS-0.67%
AmerisourceBergen Corp. 75,000 5,720,250
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-1.25%
Bard (C.R.), Inc. 80,000 4,990,400
- ------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)(c) 125,000 5,695,000
========================================================================
10,685,400
========================================================================
HEALTH CARE FACILITIES-0.46%
LifePoint Hospitals, Inc.(c) 100,000 $ 3,910,000
========================================================================
HEALTH CARE SERVICES-2.05%
Express Scripts, Inc.(a)(c) 90,000 6,786,900
- ------------------------------------------------------------------------
Laboratory Corp. of America Holdings(c) 115,000 5,548,750
- ------------------------------------------------------------------------
Omnicare, Inc. 95,000 5,139,500
========================================================================
17,475,150
========================================================================
HEALTH CARE SUPPLIES-0.52%
Bausch & Lomb Inc. 60,000 4,451,400
========================================================================
INDUSTRIAL CONGLOMERATES-0.89%
Textron Inc. 105,000 7,564,200
========================================================================
MANAGED HEALTH CARE-1.55%
Health Net, Inc.(c) 125,000 5,855,000
- ------------------------------------------------------------------------
Humana Inc.(c) 165,000 7,324,350
========================================================================
13,179,350
========================================================================
MULTI-LINE INSURANCE-1.40%
Assurant, Inc. 130,000 4,966,000
- ------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 232,500 6,975,000
========================================================================
11,941,000
========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.60%
BJ Services Co. 212,000 7,367,000
- ------------------------------------------------------------------------
National-Oilwell Varco Inc.(c) 100,000 6,247,000
========================================================================
13,614,000
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.75%
Newfield Exploration Co.(c) 140,000 6,346,200
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.62%
Alliance Capital Management Holding L.P. 100,000 5,293,000
========================================================================
PHARMACEUTICALS-0.56%
Barr Pharmaceuticals Inc.(c) 82,500 4,739,625
========================================================================
PROPERTY & CASUALTY INSURANCE-0.75%
Safeco Corp. 115,000 6,405,500
========================================================================
REGIONAL BANKS-0.60%
Bank of Hawaii Corp. 100,000 5,138,000
========================================================================
</Table>
F-3
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
RESTAURANTS-1.30%
Darden Restaurants, Inc. 170,000 $ 5,511,400
- ------------------------------------------------------------------------
YUM! Brands, Inc. 110,000 5,595,700
========================================================================
11,107,100
========================================================================
SEMICONDUCTORS-2.04%
Freescale Semiconductor Inc.-Class B(c) 200,000 4,776,000
- ------------------------------------------------------------------------
Microchip Technology Inc.(a) 225,000 6,788,250
- ------------------------------------------------------------------------
National Semiconductor Corp. 255,000 5,770,650
========================================================================
17,334,900
========================================================================
SPECIALIZED FINANCE-0.54%
Chicago Mercantile Exchange Holdings Inc.(a) 12,500 4,564,375
========================================================================
SPECIALTY CHEMICALS-0.58%
Ecolab Inc.(a) 150,000 4,962,000
========================================================================
SPECIALTY STORES-0.86%
Office Depot, Inc.(c) 265,000 7,295,450
========================================================================
SYSTEMS SOFTWARE-0.48%
McAfee Inc.(c) 136,000 4,084,080
========================================================================
TECHNOLOGY DISTRIBUTORS-1.03%
Arrow Electronics, Inc.(c) 145,000 4,278,950
- ------------------------------------------------------------------------
Ingram Micro Inc.-Class A(c) 250,000 4,525,000
========================================================================
8,803,950
========================================================================
THRIFTS & MORTGAGE FINANCE-1.13%
MGIC Investment Corp. 75,000 4,443,000
- ------------------------------------------------------------------------
Radian Group Inc. 100,000 5,210,000
========================================================================
9,653,000
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS-0.23%
WESCO International, Inc.(c) 50,000 $ 1,987,500
========================================================================
Total Domestic Common Stocks (Cost
$225,324,408) 268,632,326
========================================================================
MONEY MARKET FUNDS-2.99%
Liquid Assets Portfolio-Institutional
Class(h) 12,714,164 12,714,164
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(h) 12,714,164 12,714,164
========================================================================
Total Money Market Funds (Cost
$25,428,328) 25,428,328
========================================================================
TOTAL INVESTMENTS-98.80% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $602,461,585) 841,465,772
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-8.56%
Liquid Assets Portfolio-Institutional
Class(h)(i) 36,454,453 36,454,453
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(h)(i) 36,454,454 36,454,454
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $72,908,907) 72,908,907
========================================================================
TOTAL INVESTMENTS-107.36% (Cost $675,370,492) 914,374,679
========================================================================
OTHER ASSETS LESS LIABILITIES-(7.36%) (62,717,848)
========================================================================
NET ASSETS-100.00% $851,656,831
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2005 was $343,867,937,
which represented 40.38% of the Fund's Net Assets. See Note 1A.
(c) Non-income producing security.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of this security
at October 31, 2005 represented 1.24% of the Fund's Net Assets. See Note 1A.
(e) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2005 was $61,025,872,
which represented 7.17% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(f) Non-income producing security acquired through a corporate action.
(g) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The value of this
security considered illiquid at October 31, 2005 represented 0.00% of the
Fund's Net Assets.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(i) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
<Table>
ASSETS:
Investments, at value (cost $577,033,257)* $816,037,444
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $98,337,235) 98,337,235
===========================================================
Total investments (cost $675,370,492) 914,374,679
===========================================================
Foreign currencies, at market value (cost
$10,379,268) 10,514,128
- -----------------------------------------------------------
Receivables for:
Investments sold 4,911,074
- -----------------------------------------------------------
Fund shares sold 553,274
- -----------------------------------------------------------
Dividends 564,645
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 79,196
- -----------------------------------------------------------
Other assets 30,069
===========================================================
Total assets 931,027,065
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 4,238,131
- -----------------------------------------------------------
Fund shares reacquired 1,079,073
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 166,297
- -----------------------------------------------------------
Collateral upon return of securities loaned 72,908,907
- -----------------------------------------------------------
Accrued distribution fees 263,637
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,606
- -----------------------------------------------------------
Accrued transfer agent fees 366,843
- -----------------------------------------------------------
Accrued operating expenses 344,740
===========================================================
Total liabilities 79,370,234
===========================================================
Net assets applicable to shares outstanding $851,656,831
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $573,634,874
- -----------------------------------------------------------
Undistributed net investment income (loss) (149,711)
- -----------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 39,210,782
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 238,960,886
===========================================================
$851,656,831
___________________________________________________________
===========================================================
NET ASSETS:
Class A $676,290,779
___________________________________________________________
===========================================================
Class B $152,877,599
___________________________________________________________
===========================================================
Class C $ 22,488,453
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 32,832,494
___________________________________________________________
===========================================================
Class B 7,969,749
___________________________________________________________
===========================================================
Class C 1,171,999
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 20.60
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $20.60 divided
by 95.25%) $ 21.63
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 19.18
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 19.19
___________________________________________________________
===========================================================
</Table>
* At October 31, 2005 securities with an aggregate value of $70,113,007 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $653,792) $ 13,285,270
- --------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $353,436 after compensation
to counterparties of $2,590,020) 941,868
- --------------------------------------------------------------------------
Interest 29,850
==========================================================================
Total investment income 14,256,988
==========================================================================
EXPENSES:
Advisory fees 7,895,094
- --------------------------------------------------------------------------
Administrative services fees 221,764
- --------------------------------------------------------------------------
Custodian fees 745,260
- --------------------------------------------------------------------------
Distribution fees:
Class A 2,186,185
- --------------------------------------------------------------------------
Class B 2,077,701
- --------------------------------------------------------------------------
Class C 227,870
- --------------------------------------------------------------------------
Transfer agent fees 3,065,985
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 46,057
- --------------------------------------------------------------------------
Other 491,736
==========================================================================
Total expenses 16,957,652
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (969,218)
==========================================================================
Net expenses 15,988,434
==========================================================================
Net investment income (loss) (1,731,446)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $485,569) 190,123,662
- --------------------------------------------------------------------------
Foreign currencies 922,861
==========================================================================
191,046,523
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (21,783,573)
- --------------------------------------------------------------------------
Foreign currencies (531,466)
==========================================================================
(22,315,039)
==========================================================================
Net gain from investment securities and foreign currencies 168,731,484
==========================================================================
Net increase in net assets resulting from operations $167,000,038
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
<Table>
<Caption>
2005 2004
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,731,446) $ (8,818,644)
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 191,046,523 119,729,166
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (22,315,039) 38,340,359
============================================================================================
Net increase in net assets resulting from operations 167,000,038 149,250,881
============================================================================================
Share transactions-net:
Class A (10,578,408) 13,287,763
- --------------------------------------------------------------------------------------------
Class B (146,902,790) (175,103,307)
- --------------------------------------------------------------------------------------------
Class C (2,724,516) (2,607,686)
============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (160,205,714) (164,423,230)
============================================================================================
Net increase (decrease) in net assets 6,794,324 (15,172,349)
============================================================================================
NET ASSETS:
Beginning of year 844,862,507 860,034,856
============================================================================================
End of year (including undistributed net investment income
(loss) of $(149,711) and $(149,425), respectively) $ 851,656,831 $ 844,862,507
____________________________________________________________________________________________
============================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-7
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Aggressive Growth Fund (the "Fund") is a series portfolio of AIM
International Mutual Funds (the "Trust"). The Trust is a Delaware statutory
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of six
separate portfolios, each authorized to issue an unlimited number of shares of
beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is above-average long-term growth of
capital.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
is valued on the basis of prices furnished by independent pricing services,
which may be considered fair valued, or market makers. Each security
reported on the NASDAQ National Market System is valued at the NASDAQ
Official Closing Price ("NOCP") as of the close of the customary trading
session on the valuation date or absent a NOCP, at the closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices.
For purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not
ordinarily be reflected in the computation of the Fund's net asset value.
If the event is likely to have affected the closing price of the security,
the security will be valued at fair value in good faith using procedures
approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent
pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the
NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the
indication of fair value from the independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to
sector indices, ADRs and domestic and foreign index futures.
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of
F-8
brokers and information providers and other market data may be reviewed in
the course of making a good faith determination of a security's fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is accounted for as an
addition to shares of beneficial interest by the Fund and is allocated
among the share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F-9
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.90%
- -------------------------------------------------------------------
Over $1 billion 0.85%
__________________________________________________________________
===================================================================
</Table>
Effective January 1, 2005, AIM has contractually agreed to waive advisory
fees to the extent necessary so that the advisory fees payable by the Fund
(based on the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.80%
- -------------------------------------------------------------------
Next $250 million 0.78%
- -------------------------------------------------------------------
Next $500 million 0.76%
- -------------------------------------------------------------------
Next $1.5 billion 0.74%
- -------------------------------------------------------------------
Next $2.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.68%
- -------------------------------------------------------------------
Over $10 billion 0.66%
__________________________________________________________________
===================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). AIM is also voluntarily waiving a portion of the
advisory fee payable by the Fund equal to the difference between the income
earned from investing in the affiliated money market fund and the hypothetical
income earned from investing in an appropriate comparative benchmark. Voluntary
fee waivers or reimbursements may be modified or discontinued at any time upon
consultation with the Board of Trustees without further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $899,179.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement, are included in the Statement of Operations. For
the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the
amount of $43,356.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $221,764.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. For the year ended October 31, 2005, the
Fund paid AISI $3,065,985.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of Class B and Class
C shares. Effective January 1, 2005 through June 30, 2005, the Fund paid ADI
0.35% of the average daily net assets of Class A shares. Prior to January 1,
2005, the Fund paid ADI 0.50% of the average daily net assets of Class A shares.
Of these amounts, up to 0.25% of the average daily net assets of the Class A,
Class B or Class C shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts
not paid as a service fee under the Plans would constitute an asset-based sales
charge. National Association of Securities Dealers ("NASD") Rules also impose a
cap on the total sales charges, including asset-based sales charges that may be
paid by any class of shares of the Fund. Pursuant to the Plans, for the year
ended October 31, 2005, the Class A, Class B and Class C shares paid $2,186,185,
$2,077,701 and $227,870, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2005, ADI advised the Fund that it retained $73,411 in
front-end sales commissions for the sale of Class A shares and $279, $50,550 and
$1,414 from Class A, Class B and Class C shares, respectively, for CDSC imposed
upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
F-10
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market funds below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in affiliated money market
funds for the year ended October 31, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 1,521,179 $146,732,158 $(135,539,173) $ -- $12,714,164 $293,383 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,521,179 146,732,158 (135,539,173) -- 12,714,164 295,049 --
==================================================================================================================================
Subtotal $ 3,042,358 $293,464,316 $(271,078,346) $ -- $25,428,328 $588,432 $ --
==================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 76,343,445 $276,951,937 $(316,840,929) $ -- $36,454,453 $176,028 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 76,343,445 271,091,179 (310,980,170) -- 36,454,454 177,408 --
==================================================================================================================================
Subtotal $152,686,890 $548,043,116 $(627,821,099) $ -- $72,908,907 $353,436 $ --
==================================================================================================================================
Total $155,729,248 $841,507,432 $(898,899,445) $ -- $98,337,235 $941,868 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, during the year ended October 31, 2005, the Fund
engaged in securities purchases of $5,002,309 and sales of $3,629,347, which
resulted in net realized gains of $485,569.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended October 31, 2005, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $26,683.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $5,288
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
F-11
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to a loss on
the collateral invested.
At October 31, 2005, securities with an aggregate value of $70,113,007 were
on loan to brokers. The loans were secured by cash collateral of $72,908,907
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $353,436 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There were no ordinary income or long term capital gain distributions paid
during the years ended October 31, 2005 and 2004.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2005, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2005
- ----------------------------------------------------------------------------
Undistributed long-term gain $ 39,306,023
- ----------------------------------------------------------------------------
Unrealized appreciation -- investments 238,865,645
- ----------------------------------------------------------------------------
Temporary book/tax differences (149,711)
- ----------------------------------------------------------------------------
Shares of beneficial interest 573,634,874
============================================================================
Total net assets $851,656,831
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis unrealized appreciation on investments includes
appreciation (depreciation) on foreign currencies of $(43,302).
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
F-12
The Fund utilized $148,732,311 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund did not have a capital loss carryforward as of October 31, 2005.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $559,598,464 and $716,467,151, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $247,298,032
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,389,085)
==============================================================================
Net unrealized appreciation of investment securities $238,908,947
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $675,465,732.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2005, undistributed net
investment income (loss) was increased by $1,731,160, undistributed net realized
gain (loss) was decreased by $922,861 and shares of beneficial interest
decreased by $808,299. This reclassification had no effect on the net assets of
the Fund.
NOTE 12--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with CDSC. Under
certain circumstances, Class A shares are subject to CDSC. Generally, Class B
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2005(a) 2004
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,806,958 $ 34,695,693 4,622,748 $ 71,616,617
- -------------------------------------------------------------------------------------------------------------------------
Class B 702,915 12,661,037 775,098 11,562,193
- -------------------------------------------------------------------------------------------------------------------------
Class C 231,761 4,170,979 212,782 3,180,392
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 5,877,678 113,101,296 6,909,424 111,234,847
- -------------------------------------------------------------------------------------------------------------------------
Class B (6,287,823) (113,101,296) (7,355,880) (111,234,847)
=========================================================================================================================
Reacquired:(b)
Class A (8,196,078) (158,375,397) (10,817,220) (169,563,701)
- -------------------------------------------------------------------------------------------------------------------------
Class B (2,595,138) (46,462,531) (5,078,337) (75,430,653)
- -------------------------------------------------------------------------------------------------------------------------
Class C (381,426) (6,895,495) (388,928) (5,788,078)
=========================================================================================================================
(8,841,153) $(160,205,714) (11,120,313) $(164,423,230)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in aggregate they own 17% of the
outstanding shares of the Fund. ADI has an agreement with these entities
to sell Fund shares. The Fund, AIM and/or AIM affiliates may make
payments to these entities, which are considered to be related to the
Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(b) Amount is net of redemption fees of $7,020, $1,738 and $237 for Class A,
Class B and Class C shares, respectively, for the year ended October 31,
2005 and $6,487, $3,766 and $255 for Class A, Class B and Class C
shares, respectively, for the year ended October 31, 2004.
F-13
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.99 $ 14.28 $ 11.00 $ 12.58 $ 25.87
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.13)(a) (0.13) (0.15)(a) (0.13)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.61 2.84 3.41 (1.43) (8.42)
=========================================================================================================================
Total from investment operations 3.61 2.71 3.28 (1.58) (8.55)
=========================================================================================================================
Less distributions from net realized gains -- -- -- -- (4.74)
=========================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
=========================================================================================================================
Net asset value, end of period $ 20.60 $ 16.99 $ 14.28 $ 11.00 $ 12.58
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 21.25% 18.98% 29.82% (12.56)% (38.87)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $676,291 $566,573 $465,855 $405,360 $563,828
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 2.02% 2.10% 2.00% 1.87%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.76%(c) 2.03% 2.11% 2.00% 1.87%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.02)%(c) (0.81)% (0.97)% (1.19)% (0.75)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 67% 68% 64% 73% 87%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $646,675,575.
<Table>
<Caption>
CLASS B
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.93 $ 13.45 $ 10.42 $ 11.97 $ 24.98
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.19)(a) (0.19) (0.20)(a) (0.21)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.37 2.67 3.22 (1.35) (8.06)
=========================================================================================================================
Total from investment operations 3.25 2.48 3.03 (1.55) (8.27)
=========================================================================================================================
Less distributions from net realized gains -- -- -- -- (4.74)
=========================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
=========================================================================================================================
Net asset value, end of period $ 19.18 $ 15.93 $ 13.45 $ 10.42 $ 11.97
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 20.40% 18.44% 29.08% (12.95)% (39.19)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $152,878 $257,230 $374,027 $388,101 $583,933
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.31%(c) 2.52% 2.60% 2.51% 2.39%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.42%(c) 2.53% 2.61% 2.51% 2.39%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.68)%(c) (1.31)% (1.47)% (1.70)% (1.27)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 67% 68% 64% 73% 87%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $207,770,065.
F-14
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.93 $ 13.46 $ 10.42 $ 11.98 $ 24.99
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.19)(a) (0.19) (0.20)(a) (0.21)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.38 2.66 3.23 (1.36) (8.06)
======================================================================================================================
Total from investment operations 3.26 2.47 3.04 (1.56) (8.27)
======================================================================================================================
Less distributions from net realized gains -- -- -- -- (4.74)
======================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
======================================================================================================================
Net asset value, end of period $ 19.19 $ 15.93 $ 13.46 $ 10.42 $ 11.98
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 20.47% 18.35% 29.17% (13.02)% (39.17)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 22,488 $21,059 $20,153 $19,099 $ 28,260
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.31%(c) 2.52% 2.60% 2.51% 2.39%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.42%(c) 2.53% 2.61% 2.51% 2.39%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.68)%(c) (1.31)% (1.47)% (1.70)% (1.28)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 67% 68% 64% 73% 87%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $22,787,018.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. As the methodology is unknown at the present time, management
of AIM and the Fund are unable to estimate the impact, if any, that the
distribution of these two fair funds may have on the Fund or whether such
distribution will have an impact on the Fund's financial statements in the
future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue sharing
and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to Section
529 college savings plans and procedures for locating lost securityholders. IFG,
AIM and ADI are providing full cooperation with respect to these inquiries. As
described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities
and individuals are defendants in numerous civil lawsuits
F-15
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
related to one or more of these issues. Regulatory actions and/or additional
civil lawsuits related to these or other issues may be filed against the AIM
Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated
mutual fund complexes and financial institutions. None of the AIM Funds has been
named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit
Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in
substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or
deceptive trade practices by failing to disclose in the prospectuses for the AIM
Funds, including those formerly advised by IFG, that they had entered into
certain arrangements permitting market timing of such Funds. As a result of the
foregoing, the WVAG alleges violations of W. Va. Code sec.. 46A-1-101, et seq.
(the West Virginia Consumer Credit and Protection Act). The WVAG complaint is
seeking, among other things, injunctive relief, civil monetary penalties and a
writ of quo warranto against the defendants. If AIM is unsuccessful in its
defense of the WVAG lawsuit, it could be barred from serving as an investment
advisor for any investment company registered under the Investment Company Act
of 1940, as amended (a "registered investment company"). Such results could
affect the ability of AIM or any other investment advisor directly or indirectly
owned by AMVESCAP, from serving as an investment advisor to any registered
investment company, including the Fund. The Fund has been informed by AIM that,
if these results occur, AIM will seek exemptive relief from the SEC to permit it
to continue to serve as the Fund's investment advisor. There is no assurance
that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State Auditor-Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to AIM and ADI. The WVASC makes findings of fact that
essentially mirror the WVAG's allegations mentioned above and conclusions of law
to the effect that AIM and ADI violated the West Virginia securities laws. The
WVASC orders AIM and ADI to cease any further violations and seeks to impose
monetary sanctions to be determined by the Commissioner. Initial research
indicates that these damages could be limited or capped by statute. AIM and ADI
have the right to contest the WVASC's findings and conclusions, which they
intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and
failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans;
- that the defendants breached their fiduciary duties by charging distribution
fees while AIM Funds and/or specific share classes were closed generally to
new investors and/or while other share classes of the same AIM Fund were not
charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure
that the AIM Funds participated in class action settlements in which they
were eligible to participate (this lawsuit was dismissed by the Court on
August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the common
issues of law presented in defendants' motions to dismiss the shareholder class
and derivative complaints. These rulings were issued in the context of the Janus
lawsuits, but the Court's legal determinations apply at the omnibus level to all
cases within his track, including the AIM and IFG cases. The Court dismissed for
failure to make pre-suit demand on the fund board all derivative causes of
action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"), as to which the demand requirement does
not apply. The Court dismissed all claims asserted in the class complaint but
two: (i) the securities fraud claims under Section 10(b) of the Securities
Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of
the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on
the 36(b) claim to fees attributable to timing assets, as opposed to all fees on
funds in which any timing occurred. The question whether the duplicative Section
36(b) claim properly belongs in the derivative complaint or in the class action
complaint will be decided at a later date. The Court will subsequently issue an
order applying his legal rulings to the allegations in the AIM and IFG
complaints.
F-16
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds and Shareholders of
AIM Global Aggressive Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Aggressive Growth Fund
(one of the funds constituting AIM International Mutual Funds, hereafter
referred to as the "Fund") at October 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-18
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Group Inc. (financial services holding
Principal Executive Officer company); Director and Vice Chairman,
and President AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC -- Managed Products
- -------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice Officer, A I M Management Group Inc.
President (financial services holding company);
Director and President, A I M Advisors,
Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor) and
A I M Distributors, Inc. (registered
broker dealer); Director and Chairman,
AIM Investment Services, Inc.
(registered transfer agent), Fund
Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -- AIM
Division (parent of AIM and a global
investment management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO Distributors,
Inc.; Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and Chairman,
AIM Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None
Trustee & Bunch Ltd., (investment banking firm);
and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); and CompuDyne Corporation
(provider of products and services to
the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and director of various
affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, 2005 Retired None
Jr.(3) -- 1944
Trustee
Formerly: Partner, Deloitte & Touche
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Group Inc. (financial services holding
Chief Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc. and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and General Counsel, A I M
Secretary and Chief Legal Management Group Inc. and A I M
Officer Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President,
A I M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; Senior Vice President
and General Counsel, Liberty Funds
Group, LLC; Vice President, A I M
Distributors, Inc.; and Director and
General Counsel, Fund Management Company
- -------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.
Financial Officer and
Treasurer Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, and Senior
Investment Officer, A I M Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
</Table>
U.S. ESTATE TAX FOR NON-RESIDENT ALLEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and
October 31, 2005 are 70.18%, 68.94%, 67.50% and 68.63%, respectively.
<Table>
DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS
AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund
AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2)
AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund
AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund
AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation Fund
AIM Charter Fund AIM Gold & Precious Metals Fund
AIM Constellation Fund AIM Leisure Fund DIVERSIFIED PORTFOLIOS
AIM Diversified Dividend Fund AIM Multi-Sector Fund
AIM Dynamics Fund AIM Real Estate Fund(1) AIM Income Allocation Fund
AIM Large Cap Basic Value Fund AIM Technology Fund AIM International Allocation Fund
AIM Large Cap Growth Fund AIM Utilities Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund(1) FIXED INCOME
AIM Mid Cap Growth Fund
AIM Opportunities I Fund TAXABLE
AIM Opportunities II Fund
AIM Opportunities III Fund AIM Floating Rate Fund
AIM Premier Equity Fund AIM High Yield Fund
AIM S&P 500 Index Fund AIM Income Fund
AIM Select Equity Fund AIM Intermediate Government Fund
AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund
AIM Small Cap Growth Fund(1) AIM Money Market Fund
AIM Small Company Growth Fund AIM Short Term Bond Fund
AIM Summit Fund AIM Total Return Bond Fund
AIM Trimark Endeavor Fund Premier Portfolio
AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio
AIM Weingarten Fund
TAX-FREE
*Domestic equity and income fund
AIM High Income Municipal Fund(1)
AIM Municipal Bond Fund
INTERNATIONAL/GLOBAL EQUITY AIM Tax-Exempt Cash Fund
AIM Tax-Free Intermediate Fund
AIM Asia Pacific Growth Fund Premier Tax-Exempt Portfolio
AIM Developing Markets Fund
AIM European Growth Fund ==========================================================================================
AIM European Small Company Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS
AIM Global Aggressive Growth Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR
AIM Global Equity Fund AND READ IT CAREFULLY BEFORE INVESTING.
AIM Global Growth Fund ==========================================================================================
AIM Global Value Fund
AIM International Core Equity Fund
AIM International Growth Fund
AIM International Small Company Fund(1)
AIM Trimark Fund
</Table>
(1) This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
(2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of
AMVESCAP PLC, one of the world's largest independent financial services
companies with $381 billion in assets under management. Data as of September 30,
2005.
AIMinvestments.com GLA-AR-1 A I M Distributors, Inc.
<Table>
YOUR GOALS. OUR SOLUTIONS.--Registered Trademark--
- -----------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE]
Funds Products Savings Managed Products Management --Registered Trademark--
Plans Accounts
- -----------------------------------------------------------------------------------
</Table>
AIM GLOBAL GROWTH FUND
Annual Report to Shareholders o October 31, 2005
[COVER IMAGE]
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO]
- -- Registered Trademark -- -- Registered Trademark --
AIM GLOBAL GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October
31, 2005, and is based on total net assets.
<Table>
ABOUT SHARE CLASSES o The unmanaged MSCI EUROPE INDEX is a The Fund provides a complete list of its
group of European securities tracked by holdings four times in each fiscal year,
o Class B shares are not available as an Morgan Stanley Capital International. at the quarter-ends. For the second and
investment for retirement plans maintained fourth quarters, the lists appear in the
pursuant to Section 401 of the Internal o The unmanaged Standard & Poor's Fund's semiannual and annual reports to
Revenue Code, including 401(k) plans, Composite Index of 500 Stocks (the S&P 500 shareholders. For the first and third
money purchase pension plans and profit --Registered Trademark-- Index) is an quarters, the Fund files the lists with
sharing plans. Plans that had existing index of common stocks frequently used as the Securities and Exchange Commission
accounts invested in Class B shares prior a general measure of U.S. stock market (SEC) on Form N-Q. The most recent list of
to September 30, 2003, will continue to be performance. portfolio holdings is available at
allowed to make additional purchases. AIMinvestments.com. From our home page,
o The Fund is not managed to track the click on Products & Performance, then
PRINCIPAL RISKS OF INVESTING IN THE FUND performance of any particular index, Mutual Funds, then Fund Overview. Select
including the indexes defined here, and your Fund from the drop-down menu and
o International investing presents certain consequently, the performance of the Fund click on Complete Quarterly Holdings.
risks not associated with investing solely may deviate significantly from the Shareholders can also look up the Fund's
in the United States. These include risks performance of the indexes. Forms N-Q on the SEC's Web site at
relating to fluctuations in the value of sec.gov. And copies of the Fund's Forms
the U.S. dollar relative to the values of o A direct investment cannot be made in an N-Q may be reviewed and copied at the
other currencies, the custody arrangements index. Unless otherwise indicated, index SEC's Public Reference Room at 450 Fifth
made for the Fund's foreign holdings, results include reinvested dividends, and Street, N.W., Washington, D.C. 20549-0102.
differences in accounting, political risks they do not reflect sales charges. You can obtain information on the
and the lesser degree of public Performance of an index of funds reflects operation of the Public Reference Room,
information required to be provided by fund expenses; performance of a market including information about duplicating
non-U.S. companies. index does not. fee charges, by calling 202-942-8090 or
800-732-0330,or by electronic request at
o Investing in emerging markets involves OTHER INFORMATION the following e-mail address:
greater risk and potential reward than publicinfo@sec.gov. The SEC file numbers
investing in more established markets. o The returns shown in management's for the Fund are 811-06463 and 33-44611.
discussion of Fund performance are based
ABOUT INDEXES USED IN THIS REPORT on net asset values calculated for A description of the policies and
shareholder transactions. Generally procedures that the Fund uses to determine
o The unmanaged MSCI WORLD INDEX is a accepted accounting principles require how to vote proxies relating to portfolio
group of global securities tracked by adjustments to be made to the net assets securities is available without charge,
Morgan Stanley Capital International. of the Fund at period end for financial upon request, from our Client Services
reporting purposes, and as such, the net department at 800-959-4246 or on the AIM
o The unmanaged MSCI WORLD GROWTH INDEX is asset values for shareholder transactions Web site, AIMinvestments.com. On the home
a subset of the MSCI World Index, a group and the returns based on those net asset page, scroll down and click on AIM Funds
of global securities tracked by Morgan values may differ from the net asset Proxy Policy. The information is also
Stanley Capital International; the Growth values and returns reported in the available on the Securities and Exchange
subset measures performance of companies Financial Highlights. Commission's Web site, sec.gov.
with higher price/earnings ratios and
higher forecasted growth values. o Industry classifications used in this Information regarding how the Fund voted
report are generally according to the proxies related to its portfolio
o The unmanaged LIPPER GLOBAL LARGE-CAP Global Industry Classification Standard, securities during the 12 months ended June
GROWTH FUND INDEX represents an average of which was developed by and is the 30, 2005, is available at our Web site. Go
the performance of the largest global exclusive property and a service mark of to AIMinvestments.com, access the About Us
large-capitalization growth equity funds Morgan Stanley Capital International Inc. tab, click on Required Notices and then
tracked by Lipper, Inc., an independent and Standard & Poor's. click on Proxy Voting Activity. Next,
mutual fund performance monitor. select the Fund from the drop-down menu.
The information is also available on the
Securities and Exchange Commission's Web
site, sec.gov.
==========================================
FUND NASDAQ SYMBOLS
Class A Shares AGGAX
Class B Shares AGGBX
Class C Shares AGGCX
===================================================================================== ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS,
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.
=====================================================================================
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMINVESTMENTS.COM
AIM GLOBAL GROWTH FUND
Dear Fellow AIM Funds Shareholders:
The fiscal year covered by this report was quite good to
equity investors. Domestically, the broad-based S&P 500
[GRAHAM Index returned 8.72%. Globally, Morgan Stanley's MSCI World
PHOTO] Index rose 13.27%. Much of this good performance, though,
was attained early in the fiscal year as virtually every
equity index declined during October of 2005. Concern about
the inflationary potential of rising energy costs was
frequently cited as a major cause of market weakness.
Within the indexes, there was considerable variability in
the performance of different sectors and markets.
Domestically, energy sector performance far outpaced that of
ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising
oil and gas prices. Overseas, emerging markets produced more
attractive results than did developed markets, at least in
part because emerging markets tend to be more closely tied
to the performance of natural resources and commodities.
One could make a strong argument for global
diversification of a stock portfolio using the performance
data for the fiscal year ended October 31, 2005. Of course,
your financial advisor is the person most qualified to help
you decide whether such diversification is appropriate for
you.
[WILLIAMSON
PHOTO] For a discussion of the specific market conditions that
affected your Fund and how your Fund was managed during the
fiscal year, please turn to Page 3.
NEW INFORMATION IN THIS REPORT
We would like to call your attention to two new elements in
this report. First, on Page 2, is a message from Bruce
MARK H. WILLIAMSON Crockett, the independent Chair of the Board of Trustees of
the AIM Funds. We first introduced you to Mr. Crockett in
the annual report on your Fund dated October 31, 2004. Mr.
Crockett has been on our Funds' Board since 1992; he assumed
his responsibilities as Chair in October 2004.
Mr. Crockett plans to keep AIM shareholders informed of
the work of the Board regularly via letters in the Fund
reports. We certainly think this is a valuable addition to
the reports. The Board is charged with looking out for the
interests of shareholders, and Mr. Crockett's letter
provides insight into some of the many issues the Board
addresses in governing your Fund.
One of the most important decisions the Board makes each
year is whether to approve the advisory agreement your Fund
has with AIM. Essentially, this agreement hires AIM to
manage the assets in your Fund. A discussion of the factors
the Board considered in reviewing the agreement is the
second new element in the report, and we encourage you to
read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and
investing in general is always available on our widely
acclaimed Web site, AIMinvestments.com. We invite you to
visit it frequently.
We at AIM remain committed to building solutions to help
you meet your investment goals. We thank you for your
continued participation in AIM Investments--Registered
Trademark--. If you have any questions, please contact our
award-winning Client Service representatives at
800-959-4246. We are happy to be of help.
Sincerely,
/S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, President, A I M Advisors, Inc.
AIM Funds
December 15, 2005
AIM Investments is a registered service mark of A I M
Management Group Inc. A I M Advisors, Inc. and A I M Capital
Management, Inc. are the investment advisors. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
1
AIM GLOBAL GROWTH FUND
DEAR AIM FUNDS SHAREHOLDERS:
As independent Chair of the Board of Trustees of the AIM
Funds, I'm writing to report on the work being done by your
Board.
[CROCKETT
PHOTO] At our most recent meeting in June 2005, your Board
approved voluntary fee reductions from A I M Advisors, Inc.
(AIM) that save shareholders approximately $20.8 million
annually, based on asset levels as of March 31, 2005. The
majority of these expense reductions, which took effect July
1, 2005, will be achieved by a permanent reduction to 0.25%
of the Rule 12b-1 fees on Class A and Class A3 shares of
those AIM Funds that previously charged these fees at a
higher rate.
BRUCE L. CROCKETT Our June meeting, which was the culmination of more than
two and one-half months of review and discussions, took
place over a three-day period. The meeting included your
Board's annual comprehensive evaluation of each fund's
advisory agreement with AIM. After this evaluation, in which
questions about fees, performance and operations were
addressed by AIM, your Board approved all advisory
agreements for the year beginning July 1, 2005. You can find
information on the factors considered and conclusions
reached by your Board in its evaluation of each fund's
advisory agreement at AIMinvestments.com. (Go to "Products &
Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your
Fund is also included in this annual report on Pages 8 and
9. I encourage you to review it.
Together with monitoring fund expenses, fund performance
is your Board's priority. Our initial goal is to work with
AIM to bring about improvement in every AIM Fund that has
been underperforming its category.
Your Board has a well-defined process and structure for
monitoring all funds and identifying and assisting AIM in
improving underperforming funds. Our Investments
Committee--which functions along with Audit, Governance,
Valuation and Compliance Committees--is the only one of
these five standing committees to include all 14 independent
Board members. Further, our Investments Committee is divided
into three underlying subcommittees, each responsible for,
among other things, reviewing the performance, fees and
expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the
performance of every AIM Fund is evaluated. If a fund has
underperformed its peer group for a meaningful period, we
work closely with AIM to discover the causes and help
develop the right responses. In some cases, AIM may
determine that a change in portfolio management strategy or
portfolio managers is required. In other cases, where a fund
no longer seems viable, it may be merged with a similar
fund, being careful to consider the needs of all
shareholders affected by the decision. Following AIM's
recommendation and your Board's approval, eight funds were
recently merged.
Be assured that your Board is working closely with the
management of AIM to help you reach your investment goals.
Should you or your advisor have questions or comments about
the governance of AIM Funds, I invite you to write to me at
AIM Investments, AIM Investments Tower, 11 Greenway Plaza,
Suite 100, Houston, TX 77046. Your Board looks forward to
keeping you informed about the governance of your funds.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
December 15, 2005
2
AIM GLOBAL GROWTH FUND
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
<Table>
======================================================================================= We consider selling a stock for any one of
PERFORMANCE SUMMARY the following reasons:
==========================================
Despite higher oil prices, most world FUND VS. INDEXES o a stock's price seems overvalued
equity markets posted positive returns for
the fiscal year. Given this environment, Total returns,10/31/04-10/31/05,excluding o a more attractive opportunity is
we are pleased to once again reward applicable sales charges. If sales charges presented
shareholders with double-digit Fund were included, returns would be lower.
performance. Turn to Pages 6 and 7 for MARKET CONDITIONS AND YOUR FUND
long-term performance. Class A Shares 14.17%
Class B Shares 13.39 Despite widespread concern about the
As the table illustrates, your Fund Class C Shares 13.38 potential impact of rising short-term
modestly outperformed all of its benchmark MSCI World Index interest rates in some countries and
indexes. We attribute our comparative (Broad Market Index) 13.27 historically high energy prices, the
success to strong stock selection, an MSCI World Growth Index majority of world markets rose during the
overweight position to European equities (Style-specific Index) 11.68 fiscal year. For the third consecutive
and exposure to select stocks in Lipper Global Large-Cap Growth year, foreign markets outperformed U.S.
out-performing Latin American markets. Fund Index (Peer Group Index) 13.93 markets, with Latin American markets (many
of which are exporters of materials and
SOURCE: LIPPER, INC. oil) the top performers.
==========================================
======================================================================================= o In Europe, markets rallied amid a low
interest rate environment (the European
HOW WE INVEST companies, rather than sector or country Central Bank has kept rates at 2% for
trends. Our goal is a well-diversified, several years) and corporate profits
We believe that earnings drive stock reasonably priced, quality portfolio. We buoyed by restructuring and cost cutting
prices and that companies generating adhere to our investment process measures.
substantial, repeatable, above-average regardless of the macroeconomic
earnings growth should provide long-term environment. o In Asia, Japanese stocks climbed to
growth for companies, both in the U.S. and levels not witnessed in many years as
abroad, with the following attributes: We do not hedge currencies because we corporate earnings continued to improve
believe currency exposure increases the and Prime Minister Junichiro Koizumi's
o accelerating earnings and revenues diversification benefit of international dramatic election victory resonated well
investing. with investors.
o strong cash flow generation (dividends,
share buybacks) We seek to minimize stock-specific risk o In the United States, equity markets
by building a portfolio that holds a also posted positive returns for the
o high return on invested capital variety of companies. fiscal year but gains were muted compared
to overseas markets. There was wide
o reasonable prices with low valuations We believe disciplined sell decisions variance in U.S. corporate profits during
are a key determinant of successful the year.
We use a systematic, stock-by-stock investing.
approach, focusing on strengths of During the fiscal year, our largest
individual regional allocation was to European
stocks. We continued
(continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector
1. United States 28.3% 1. Eni S.p.A. (Italy) 2.1%
[PIE CHART] 2. France 12.9 2. Total S.A. (France) 2.0
3. Switzerland 9.0 3. Imperial Tobacco Group PLC
Financials 21.0% 4. United Kingdom 7.9 (United Kingdom) 2.0
Health Care 14.8% 5. Japan 7.2 4. Vinci S.A. (France) 2.0
Consumer Discretionary 13.7% 5. BNP Paribas S.A. (France) 1.8
Information Technology 12.7% TOTAL NET ASSETS $413.1 MILLION 6. Johnson & Johnson 1.8
Consumer Staples 10.7% 7. Syngenta A.G. (Switzerland) 1.8
Energy 8.5% TOTAL NUMBER OF HOLDINGS* 116 8. Roche Holding A.G. (Switzerland) 1.7
Industrials 7.2% 9. Anglo Irish Bank Corp. PLC
Materials 5.5% (Ireland) 1.6
Telecommunications Services 3.2% 10. UBS A.G. (Switzerland) 1.6
Money Market Funds and
Other Assets Less Liabilities 2.2%
Utilities 0.5%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
</Table>
AIM GLOBAL GROWTH FUND
<Table>
to significantly overweight the region since 2000. The company emphasized market KIRK L. ANDERSON,
compared to our style-specific benchmark share over profitability in its consumer [ANDERSON portfolio manager, is
as we believed European stocks, in pricing strategy and subsequently missed PHOTO] lead manager of AIM
general, offered more attractive its revenue estimates. While the shortfall Global Growth Fund
valuations than their U.S. counterparts. was slight, the impact on the stock was with respect to the
Valuation measures including price/ deep. While, this has shaken our domestic portion of the Fund's portfolio.
earnings, price/book and price/cash flow confidence in Dell's management, we still He joined AIM in 1994. Mr. Anderson earned
were lower for European stocks (MSCI believe in Dell's long-term prospects. a B.A. in political science from Texas A&M
Europe Index) than U.S. stocks (S&P 500 Accordingly, we reduced our position to University. He also received an M.S. in
Index) as of the close of the fiscal year. reflect our reduced expectations. finance from the University of Houston.
Although European stocks contributed Foreign currency exchange also proved a MATTHEW W. DENNIS,
the most to Fund performance during the drag on Fund performance. During the [DENNIS Chartered Financial
fiscal year, all regions posted fiscal year, the U.S. dollar strengthened PHOTO] Analyst, portfolio
double-digit gains. While not a large against many foreign currencies, most manager, is lead
weighting in the portfolio, Latin American notably against European currencies and manager of AIM Global
holdings had some of the strongest the Japanese yen. Given our large Growth Fund with respect to the Fund's
returns. Mexico's WAL-MART DE MEXICO S.A. allocation to foreign holdings, foreign investments in Europe and Canada. He has
DE C.V. (Wal-Mex) has been able to pioneer currency depreciation had a negative been in the investment business since
a centralized distribution system in impact on Fund returns. 1994. Mr. Dennis received a B.A. in
Mexico by leveraging off its parent economics from The University of Texas at
company's name (Wal-Mart) and know-how. A IN CLOSING Austin. He also earned an M.S. in finance
market leader in the from Texas A&M University.
supermarket/hypermarket area, Wal-Mex The performance of global markets over the
continues to gain market share from its last several years underscores the BARRETT K. SIDES,
less efficient competitors. investment opportunities beyond U.S. [SIDES senior portfolio
borders. We believe our bottom-up PHOTO] manager, is lead
On a world-wide basis, energy was the investment process allows us to build a manager of AIM Global
top performing sector. As oil prices strong portfolio based on world class Growth Fund with
approached $70 per barrel, energy companies from around the world. Given our respect to the Fund's investments in Asia
companies benefited from rising commodity global reach, we believe we can provide Pacific and Latin America. He joined AIM
prices. Our energy exposure is diversified investors diversification opportunities by in 1990. Mr. Sides graduated with a B.S.
worldwide including TOTAL S.A. (France), including both U.S. and international in economics from Bucknell University. He
ENI S.P.A. (Italy), SUNCOR ENERGY (Canada) equities in our portfolio. We are pleased also received a master's in international
and VALERO ENERGY CORP. (U.S.). We find to once again provide shareholders with business from the University of St.
these companies attractive as they have positive Fund returns for the fiscal year Thomas.
strong earnings growth and underlying and thank you for your continued
return on capital coupled with attractive participation in AIM Global Growth Fund. SHUXIN CAO, Chartered
valuations characteristics which we [CAO Financial Analyst,
believe can lead to strong long-term THE VIEWS AND OPINIONS EXPRESSED IN PHOTO] portfolio manager, is
performance. MANAGEMENT'S DISCUSSION OF FUND manager of AIM Global
PERFORMANCE ARE THOSE OF A I M ADVISORS, Growth Fund. He joined
Our largest sector exposure was in INC. THESE VIEWS AND OPINIONS ARE SUBJECT AIM in 1997. Mr. Cao graduated from
financials. We continue to find attractive TO CHANGE AT ANY TIME BASED ON FACTORS Tianjin Foreign Language Institute with a
opportunities here particularly in SUCH AS MARKET AND ECONOMIC CONDITIONS. B.A. in English. He also received an
European banks. Two holdings that continue THESE VIEWS AND OPINIONS MAY NOT BE RELIED M.B.A. from Texas A&M University and is a
to perform well for the Fund include UPON AS INVESTMENT ADVICE OR Certified Public Accountant. He left the
long-time holding ANGLO IRISH BANK and BNP RECOMMENDATIONS, OR AS AN OFFER FOR A management team after the close of the
PARIBAS, a French bank specializing in PARTICULAR SECURITY. THE INFORMATION IS fiscal year.
corporate, retail and investment banking. NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF
Our overweight position in financials ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR CLAS G. OLSSON, senior
proved beneficial to Fund performance, THE FUND. STATEMENTS OF FACT ARE FROM [OLSSON portfolio manager and
however our sector return slightly lagged SOURCES CONSIDERED RELIABLE, BUT A I M PHOTO] head of AIM's
our benchmark as we did not own select ADVISORS, INC. MAKES NO REPRESENTATION OR International
Japanese banks that performed well during WARRANTY AS TO THEIR COMPLETENESS OR Investment Management
the fiscal year. ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE Unit, is manager of AIM Global Growth
IS NO GUARANTEE OF FUTURE RESULTS, THESE Fund. Mr. Olsson joined AIM in 1994. Mr.
Given the Fund's strong performance, we INSIGHTS MAY HELP YOU UNDERSTAND OUR Olsson became a commissioned naval officer
have few detractors to report. Information INVESTMENT MANAGEMENT PHILOSOPHY. at the Royal Swedish Naval Academy in
technology was the only Fund sector to 1988. He also received a B.B.A. from The
post a negative return, albeit very See important Fund and index disclosures University of Texas at Austin.
slight. During the fiscal year, DELL INC., inside front cover.
a well-known U.S. computer company, had Assisted by Asia Pacific/Latin America
its first misstep Team, Europe/Canada Team and Large
Multi-Cap Growth Team
[RIGHT ARROW GRAPHIC]
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE,PLEASE SEE PAGES 6
AND 7.
</Table>
4
AIM GLOBAL GROWTH FUND
CALCULATING YOUR ONGOING FUND EXPENSES
<Table>
EXAMPLE to estimate the expenses that you paid The hypothetical account values and
over the period. Simply divide your expenses may not be used to estimate the
As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or expenses
two types of costs: (1) transaction costs, $8,600 account value divided by $1,000 = you paid for the period. You may use this
which may include sales charges (loads) on 8.6), then multiply the result by the information to compare the ongoing costs
purchase payments; contingent deferred number in the table under the heading of investing in the Fund and other funds.
sales charges on redemptions; and entitled "Actual Expenses Paid During To do so, compare this 5% hypothetical
redemption fees, if any; and (2) ongoing Period" to estimate the expenses you paid example with the 5% hypothetical examples
costs, including management fees; on your account during this period. that appear in the shareholder reports of
distribution and/or service fees (12b-1); the other funds.
and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR COMPARISON
intended to help you understand your PURPOSES Please note that the expenses shown in
ongoing costs (in dollars) of investing in the table are meant to highlight your
the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any
ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges
funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent
investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and
beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the
entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in
31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not
net asset value after expenses for the six help you determine the relative total
ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In
the table "Cumulative Total Returns" on addition, if these transactional costs
The table below provides information about Page 7. were included, your costs would have been
actual account values and actual expenses. higher.
You may use the information in this table,
together with the amount you invested,
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO
A $1,000.00 $1,085.00 $9.03 $1,016.54 $8.74 1.72%
B 1,000.00 1,081.10 12.77 1,012.93 12.35 2.44
C 1,000.00 1,081.00 12.78 1,012.93 12.36 2.44
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31,
2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value
after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor
contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if
this agreement had been in effect throughout the entire most recent fiscal half year is 1.69% for Class A shares.
(3) The actual expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal
half year are $8.86 for Class A shares.
(4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the entire most recent
fiscal half year are $8.57 for Class A shares.
====================================================================================================================================
</Table>
[ARROW
BUTTON For More Information Visit
IMAGE] AIMinvestments.com
5
AIM GLOBAL GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 9/15/94, INDEX DATA FROM 8/31/94
<Table>
[MOUNTAIN CHART]
====================================================================================================================
DATE AIM GLOBAL GROWTH FUND- AIM GLOBAL GROWTH FUND- MSCI WORLD MSCI WORLD
CLASS A SHARES CLASS B SHARES GROWTH INDEX INDEX
8/31/94 $9525 $10000 $10000 $10000
9/94 9363 9830 9770 9735
10/94 9744 10220 10004 10010
11/94 9335 9790 9605 9573
12/94 9300 9750 9749 9664
1/95 9062 9490 9600 9516
2/95 9406 9849 9747 9653
3/95 9787 10239 10222 10116
4/95 10092 10549 10601 10466
5/95 10369 10840 10685 10553
6/95 10835 11330 10698 10548
7/95 11578 12109 11222 11073
8/95 11474 11989 10906 10824
9/95 11751 12270 11288 11137
10/95 11741 12260 11165 10959
11/95 11970 12490 11520 11337
12/95 12101 12616 11782 11666
1/96 12314 12840 11991 11875
2/96 12576 13104 12077 11945
3/96 12799 13339 12253 12141
4/96 13245 13796 12508 12424
5/96 13497 14050 12581 12432
6/96 13536 14081 12667 12493
7/96 12847 13359 12195 12049
8/96 13197 13715 12296 12185
9/96 13720 14254 12856 12659
10/96 13768 14296 12894 12745
11/96 14467 15018 13547 13457
12/96 14506 15048 13281 13239
1/97 14797 15343 13466 13396
2/97 14807 15343 13615 13547
3/97 14439 14967 13296 13277
4/97 14632 15149 13906 13708
5/97 15582 16127 14717 14552
6/97 16319 16880 15528 15275
7/97 17327 17918 16245 15976
8/97 16222 16767 15036 14905
9/97 17424 18008 15901 15712
10/97 16143 16676 14884 14883
11/97 16327 16859 15261 15144
12/97 16513 17044 15400 15326
1/98 16712 17232 16002 15750
2/98 17975 18538 17131 16813
3/98 18921 19498 17722 17520
4/98 19180 19760 17824 17689
5/98 19090 19655 17624 17465
6/98 19437 19999 18377 17876
7/98 19686 20249 18345 17845
8/98 16772 17242 16195 15463
9/98 17031 17502 16556 15734
10/98 17826 18306 17994 17153
11/98 18842 19340 19152 18171
12/98 20161 20682 20549 19055
1/99 20969 21509 21271 19470
2/99 20162 20673 20423 18949
3/99 20827 21338 21175 19735
4/99 21073 21575 21137 20511
5/99 20338 20814 20398 19758
6/99 21709 22210 21649 20677
7/99 21761 22252 21407 20612
8/99 21791 22275 21668 20573
9/99 22231 22716 21702 20371
10/99 23970 24476 23121 21427
11/99 26424 26968 24474 22027
12/99 30692 31310 27274 23807
1/00 29077 29657 25562 22441
2/00 32026 32646 26448 22499
3/00 31875 32476 28022 24051
4/00 29357 29894 26140 23031
5/00 27355 27847 24588 22445
6/00 29508 30019 26089 23198
7/00 28626 29100 24775 22543
8/00 31059 31568 25652 23273
9/00 28767 29225 23378 22033
10/00 26721 27142 22395 21661
11/00 22793 23135 20666 20343
12/00 23894 24237 20275 20670
1/01 23603 23931 20887 21068
2/01 19614 19882 18221 19285
3/01 17705 17944 16745 18015
4/01 19032 19282 18095 19343
5/01 18837 19078 17730 19091
6/01 18461 18692 17110 18490
7/01 17986 18193 16856 18243
8/01 17177 17366 15816 17365
9/01 15183 15358 14501 15832
10/01 15722 15880 15118 16134
11/01 16509 16674 16266 17086
12/01 16714 16868 16345 17192
1/02 16239 16380 15811 16670
2/02 16056 16198 15853 16523
3/02 16833 16970 16244 17284
4/02 16510 16628 15548 16664
5/02 16348 16470 15464 16692
6/02 15691 15802 14570 15677
7/02 14246 14339 13542 14354
8/02 14181 14271 13538 14378
9/02 12909 12978 12194 12795
10/02 13653 13727 13142 13738
11/02 13912 13977 13619 14477
12/02 13395 13455 13093 13773
1/03 12996 13046 12620 13354
2/03 12877 12921 12484 13120
3/03 12888 12921 12591 13077
4/03 13631 13669 13489 14235
5/03 14419 14453 14044 15046
6/03 14657 14691 14241 15304
7/03 14818 14838 14516 15613
8/03 15045 15065 14807 15949
9/03 15153 15167 14891 16045
10/03 16081 16087 15777 16995
11/03 16372 16370 16000 17252
12/03 16997 16982 16769 18333
1/04 17256 17243 17112 18627
2/04 17525 17504 17320 18939
3/04 17525 17493 17146 18814
4/04 17265 17220 16804 18428
5/04 17481 17436 16970 18582
6/04 17784 17730 17200 18978
7/04 16985 16925 16376 18358
8/04 16975 16903 16324 18439
9/04 17547 17471 16652 18788
10/04 17968 17880 17060 19248
11/04 19014 18924 17922 20259
12/04 19651 19549 18597 21032
1/05 19230 19117 18096 20558
2/05 19921 19786 18557 21210
3/05 19500 19366 18202 20800
4/05 18908 18754 17802 20345
5/05 19187 19026 18264 20706
6/05 19587 19413 18349 20885
7/05 20384 20195 19110 21615
8/05 20620 20411 19280 21778
9/05 20977 20752 19706 22344
10/05 $20498 $20619 $19287 $21801
====================================================================================================================
SOURCE: LIPPER,INC.
The data shown in the chart include This chart, which is a logarithmic chart,
reinvested distributions, applicable sales presents the fluctuations in the value of
charges, Fund expenses and management the Fund and its indexes. We believe that
fees. Results for Class B shares are a logarithmic chart is more effective than
calculated as if a hypothetical other types of charts in illustrating
shareholder had liquidated his entire changes in value during the early years
investment in the Fund at the close of the shown in the chart. The vertical axis, the
reporting period and paid the applicable one that indicates the dollar value of an
contingent deferred sales charges. Index investment, is constructed with each
results include reinvested dividends, but segment representing a percent change in
they do not reflect sales charges. the value of the investment. In this
Performance of an index of funds reflects chart, each segment represents a doubling,
fund expenses and management fees; or 100% change, in the value of the
performance of a market index does not. investment. In other words, the space
Performance shown in the chart and between $5,000 and $10,000 is the same
table(s) does not reflect deduction of size as the space between $10,000 and
taxes a shareholder would pay on Fund $20,000, is the same space between $20,000
distributions or sale of Fund shares. and $40,000.
Performance of the indexes does not
reflect the effects of taxes.
</Table>
AIM GLOBAL GROWTH FUND
<Table>
========================================== ========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding
charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 8.50%
Inception (9/15/94) 6.66% CLASS A SHARES Class B Shares 8.11
10 Years 5.22 Inception (9/15/94) 6.93% Class C Shares 8.10
5 Years -6.07 10 Years 5.45
1 Year 8.75 5 Years -7.03 ==========================================
1 Year 13.88
CLASS B SHARES
Inception (9/15/94) 6.72% CLASS B SHARES
10 Years 5.28 Inception (9/15/94) 6.99%
5 Years -6.05 10 Years 5.52
1 Year 8.39 5 Years -7.00
1 Year 13.77
CLASS C SHARES
Inception (8/4/97) 1.67% CLASS C SHARES
5 Years -5.66 Inception (8/4/97) 1.98%
1 Year 12.38 5 Years -6.62
1 Year 17.75
========================================== ==========================================
THE PERFORMANCE DATA QUOTED REPRESENT PAST WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
PERFORMANCE AND CANNOT GUARANTEE OR LOSS WHEN YOU SELL SHARES. YEAR AFTER PURCHASE.
COMPARABLE FUTURE RESULTS; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE
VISIT AIMINVESTMENTS.COM FOR THE MOST MAXIMUM 4.75% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT SALES
RECENT MONTH-END PERFORMANCE. PERFORMANCE AND CLASS C SHARE PERFORMANCE REFLECTS THE CHARGE STRUCTURES AND CLASS EXPENSES.
FIGURES REFLECT REINVESTED DISTRIBUTIONS, APPLICABLE CONTINGENT DEFERRED SALES
CHANGES IN NET ASSET VALUE AND THE EFFECT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE A REDEMPTION FEE OF 2% WILL BE IMPOSED
OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS B SHARES DECLINES FROM 5% ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
OTHERWISE STATED. INVESTMENT RETURN AND BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE FUND WITHIN 30 DAYS OF PURCHASE.
PRINCIPAL VALUE THE BEGINNING OF THE SEVENTH YEAR. THE EXCEPTIONS TO THE REDEMPTION FEE ARE
LISTED IN THE FUND'S PROSPECTUS.
</Table>
7
AIM GLOBAL GROWTH FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
<Table>
The Board of Trustees of AIM International o The quality of services to be provided o Fees relative to those of comparable
Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials funds with other advisors. The Board
management of AIM Global Growth Fund (the and experience of the officers and reviewed the advisory fee rate for the
"Fund") and, as required by law, employees of AIM who will provide Fund under the Advisory Agreement. The
determines annually whether to approve the investment advisory services to the Fund. Board compared effective contractual
continuance of the Fund's advisory In reviewing the qualifications of AIM to advisory fee rates at a common asset level
agreement with A I M Advisors, Inc. provide investment advisory services, the and noted that the Fund's rate was below
("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's the median rate of the funds advised by
the Investments Committee of the Board, investment personnel and considered such other advisors with investment strategies
which is comprised solely of independent issues as AIM's portfolio and product comparable to those of the Fund that the
trustees, at a meeting held on June 30, review process, various back office Board reviewed. The Board noted that AIM
2005, the Board, including all of the support functions provided by AIM and has agreed to waive advisory fees of the
independent trustees, approved the AIM's equity and fixed income trading Fund, as discussed below. Based on this
continuance of the advisory agreement (the operations. Based on the review of these review, the Board concluded that the
"Advisory Agreement") between the Fund and and other factors, the Board concluded advisory fee rate for the Fund under the
AIM for another year, effective July 1, that the quality of services to be Advisory Agreement was fair and
2005. provided by AIM was appropriate and that reasonable.
AIM currently is providing satisfactory
The Board considered the factors services in accordance with the terms of o Expense limitations and fee waivers. The
discussed below in evaluating the fairness the Advisory Agreement. Board noted that AIM has contractually
and reasonableness of the Advisory agreed to waive advisory fees of the Fund
Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to through December 31, 2009 to the extent
and as part of the Board's ongoing comparable funds. The Board reviewed the necessary so that the advisory fees
oversight of the Fund. In their performance of the Fund during the past payable by the Fund do not exceed a
deliberations, the Board and the one, three and five calendar years against specified maximum advisory fee rate, which
independent trustees did not identify any the performance of funds advised by other maximum rate includes breakpoints and is
particular factor that was controlling, advisors with investment strategies based on net asset levels. The Board
and each trustee attributed different comparable to those of the Fund. The Board considered the contractual nature of this
weights to the various factors. noted that the Fund's performance for the fee waiver and noted that it remains in
one and three year periods was above the effect until December 31, 2009. The Board
One of the responsibilities of the median performance of such comparable considered the effect this fee waiver
Senior Officer of the Fund, who is funds and below such median performance would have on the Fund's estimated
independent of AIM and AIM's affiliates, for the five year period. Based on this expenses and concluded that the levels of
is to manage the process by which the review, the Board concluded that no fee waivers/expense limitations for the
Fund's proposed management fees are changes should be made to the Fund and Fund were fair and reasonable.
negotiated to ensure that they are that it was not necessary to change the
negotiated in a manner which is at arm's Fund's portfolio management team at this o Breakpoints and economies of scale. The
length and reasonable. To that end, the time. Board reviewed the structure of the Fund's
Senior Officer must either supervise a advisory fee under the Advisory Agreement,
competitive bidding process or prepare an o The performance of the Fund relative to noting that it includes one breakpoint.
independent written evaluation. The Senior indices. The Board reviewed the The Board reviewed the level of the Fund's
Officer has recommended an independent performance of the Fund during the past advisory fees, and noted that such fees,
written evaluation in lieu of a one, three and five calendar years against as a percentage of the Fund's net assets,
competitive bidding process and, upon the the performance of the Lipper Global would decrease as net assets increase
direction of the Board, has prepared such Large-Cap Growth Index. The Board noted because the Advisory Agreement includes a
an independent written evaluation. Such that the Fund's performance for the one breakpoint. The Board noted that, due to
written evaluation also considered certain and three year periods was above the the Fund's current asset levels and the
of the factors discussed below. In performance of such Index and below such way in which the advisory fee breakpoints
addition, as discussed below, the Senior Index for the five year period. Based on have been structured, the Fund has yet to
Officer made certain recommendations to this review, the Board concluded that no benefit from the breakpoint. The Board
the Board in connection with such written changes should be made to the Fund and noted that AIM has contractually agreed to
evaluation. that it was not necessary to change the waive advisory fees of the Fund through
Fund's portfolio management team at this December 31, 2009 to the extent necessary
The discussion below serves as a time. so that the advisory fees payable by the
summary of the Senior Officer's Fund do not exceed a specified maximum
independent written evaluation and o Meeting with the Fund's portfolio advisory fee rate, which maximum rate
recommendations to the Board in connection managers and investment personnel. With includes breakpoints and is based on net
therewith, as well as a discussion of the respect to the Fund, the Board is meeting asset levels. The Board concluded that the
material factors and the conclusions with periodically with such Fund's portfolio Fund's fee levels under the Advisory
respect thereto that formed the basis for managers and/or other investment personnel Agreement therefore would reflect
the Board's approval of the Advisory and believes that such individuals are economies of scale at higher asset levels
Agreement. After consideration of all of competent and able to continue to carry and that it was not necessary to change
the factors below and based on its out their responsibilities under the the advisory fee breakpoints in the Fund's
informed business judgment, the Board Advisory Agreement. advisory fee schedule.
determined that the Advisory Agreement is
in the best interests of the Fund and its o Overall performance of AIM. The Board o Investments in affiliated money market
shareholders and that the compensation to considered the overall performance of AIM funds. The Board also took into account
AIM under the Advisory Agreement is fair in providing investment advisory and the fact that uninvested cash and cash
and reasonable and would have been portfolio administrative services to the collateral from securities lending
obtained through arm's length Fund and concluded that such performance arrangements (collectively, "cash
negotiations. was satisfactory. balances") of the Fund may be invested in
money market funds advised by AIM pursuant
o The nature and extent of the advisory o Fees relative to those of clients of AIM to the terms of an SEC exemptive order.
services to be provided by AIM. The Board with comparable investment strategies. The The Board found that the Fund may realize
reviewed the services to be provided by Board noted that AIM does not serve as an certain benefits upon investing cash
AIM under the Advisory Agreement. Based on advisor to other mutual funds or other balances in AIM advised money market
such review, the Board concluded that the clients with investment strategies funds, including a higher net
range of services to be provided by AIM comparable to those of the Fund.
under the Advisory Agreement was
appropriate and that AIM currently is
providing services in accordance with the
terms of the Advisory Agreement.
</Table>
8
AIM GLOBAL GROWTH FUND
<Table>
return, increased liquidity, increased o AIM's financial soundness in light of
diversification or decreased transaction the Fund's needs. The Board considered
costs. The Board also found that the Fund whether AIM is financially sound and has
will not receive reduced services if it the resources necessary to perform its
invests its cash balances in such money obligations under the Advisory Agreement,
market funds. The Board noted that, to the and concluded that AIM has the financial
extent the Fund invests in affiliated resources necessary to fulfill its
money market funds, AIM has voluntarily obligations under the Advisory Agreement.
agreed to waive a portion of the advisory
fees it receives from the Fund o Historical relationship between the Fund
attributable to such investment. The Board and AIM. In determining whether to
further determined that the proposed continue the Advisory Agreement for the
securities lending program and related Fund, the Board also considered the prior
procedures with respect to the lending relationship between AIM and the Fund, as
Fund is in the best interests of the well as the Board's knowledge of AIM's
lending Fund and its respective operations, and concluded that it was
shareholders. The Board therefore beneficial to maintain the current
concluded that the investment of cash relationship, in part, because of such
collateral received in connection with the knowledge. The Board also reviewed the
securities lending program in the money general nature of the non-investment
market funds according to the procedures advisory services currently performed by
is in the best interests of the lending AIM and its affiliates, such as
Fund and its respective shareholders. administrative, transfer agency and
distribution services, and the fees
o Independent written evaluation and received by AIM and its affiliates for
recommendations of the Fund's Senior performing such services. In addition to
Officer. The Board noted that, upon their reviewing such services, the trustees also
direction, the Senior Officer of the Fund, considered the organizational structure
who is independent of AIM and AIM's employed by AIM and its affiliates to
affiliates, had prepared an independent provide those services. Based on the
written evaluation in order to assist the review of these and other factors, the
Board in determining the reasonableness of Board concluded that AIM and its
the proposed management fees of the AIM affiliates were qualified to continue to
Funds, including the Fund. The Board noted provide non-investment advisory services
that the Senior Officer's written to the Fund, including administrative,
evaluation had been relied upon by the transfer agency and distribution services,
Board in this regard in lieu of a and that AIM and its affiliates currently
competitive bidding process. In are providing satisfactory non-investment
determining whether to continue the advisory services.
Advisory Agreement for the Fund, the Board
considered the Senior Officer's written o Other factors and current trends. In
evaluation and the recommendation made by determining whether to continue the
the Senior Officer to the Board that the Advisory Agreement for the Fund, the Board
Board consider implementing a process to considered the fact that AIM, along with
assist them in more closely monitoring the others in the mutual fund industry, is
performance of the AIM Funds. The Board subject to regulatory inquiries and
concluded that it would be advisable to litigation related to a wide range of
implement such a process as soon as issues. The Board also considered the
reasonably practicable. governance and compliance reforms being
undertaken by AIM and its affiliates,
o Profitability of AIM and its affiliates. including maintaining an internal controls
The Board reviewed information concerning committee and retaining an independent
the profitability of AIM's (and its compliance consultant, and the fact that
affiliates') investment advisory and other AIM has undertaken to cause the Fund to
activities and its financial condition. operate in accordance with certain
The Board considered the overall governance policies and practices. The
profitability of AIM, as well as the Board concluded that these actions
profitability of AIM in connection with indicated a good faith effort on the part
managing the Fund. The Board noted that of AIM to adhere to the highest ethical
AIM's operations remain profitable, standards, and determined that the current
although increased expenses in recent regulatory and litigation environment to
years have reduced AIM's profitability. which AIM is subject should not prevent
Based on the review of the profitability the Board from continuing the Advisory
of AIM's and its affiliates' investment Agreement for the Fund.
advisory and other activities and its
financial condition, the Board concluded
that the compensation to be paid by the
Fund to AIM under its Advisory Agreement
was not excessive.
o Benefits of soft dollars to AIM. The
Board considered the benefits realized by
AIM as a result of brokerage transactions
executed through "soft dollar"
arrangements. Under these arrangements,
brokerage commissions paid by the Fund
and/or other funds advised by AIM are used
to pay for research and execution
services. This research is used by AIM in
making investment decisions for the Fund.
The Board concluded that such arrangements
were appropriate.
</Table>
9
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-69.57%
AUSTRALIA-1.65%
BHP Billiton Ltd. (Diversified Metals &
Mining)(a) 246,900 $ 3,831,509
- ------------------------------------------------------------------------
QBE Insurance Group Ltd. (Property & Casualty
Insurance)(a)(b) 224,300 2,995,966
========================================================================
6,827,475
========================================================================
BELGIUM-2.11%
InBev N.V. (Brewers) 118,900 4,753,223
- ------------------------------------------------------------------------
KBC Group N.V. (Diversified Banks)(a)(b) 48,450 3,947,772
========================================================================
8,700,995
========================================================================
BRAZIL-0.90%
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers)(b) 105,300 3,738,150
========================================================================
CANADA-2.87%
Manulife Financial Corp. (Life & Health
Insurance)(b) 101,100 5,261,942
- ------------------------------------------------------------------------
Power Corp. of Canada (Other Diversified
Financial Services) 110,000 2,722,408
- ------------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 72,300 3,868,896
========================================================================
11,853,246
========================================================================
FRANCE-12.90%
Axa (Multi-Line Insurance)(a)(b) 115,800 3,354,307
- ------------------------------------------------------------------------
BNP Paribas S.A. (Diversified Banks)(a)(b) 100,630 7,630,824
- ------------------------------------------------------------------------
Bouygues S.A. (Wireless Telecommunication
Services)(b) 93,600 4,619,205
- ------------------------------------------------------------------------
Pernod Ricard S.A. (Distillers & Vintners)(b) 21,870 3,824,851
- ------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(a)(b) 53,600 4,292,612
- ------------------------------------------------------------------------
Societe Generale (Diversified Banks)(a)(b) 47,370 5,409,461
- ------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(a)(b) 32,659 8,225,593
- ------------------------------------------------------------------------
Veolia Environnement (Multi-Utilities)(a)(b) 53,400 2,226,876
- ------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering)(b) 104,260 8,148,465
- ------------------------------------------------------------------------
Vivendi Universal S.A. (Movies &
Entertainment)(a)(b) 176,400 5,544,032
========================================================================
53,276,226
========================================================================
GERMANY-3.58%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods)(b) 24,150 4,052,515
- ------------------------------------------------------------------------
Henkel KGaA-Pfd. (Household Products)(a)(b) 22,200 1,913,550
- ------------------------------------------------------------------------
MAN A.G. (Industrial Machinery)(a) 47,100 2,187,127
- ------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(a) 40,700 3,368,107
- ------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 4,540 3,273,422
========================================================================
14,794,721
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
GREECE-1.33%
OPAP S.A. (Casinos & Gaming)(a) 190,400 $ 5,502,450
========================================================================
HONG KONG-1.31%
Cheung Kong (Holdings) Ltd. (Real Estate
Management & Development)(a) 323,000 3,369,967
- ------------------------------------------------------------------------
China Construction Bank-Class H (Diversified
Banks)(c) 6,731,000 2,040,460
========================================================================
5,410,427
========================================================================
HUNGARY-0.53%
OTP Bank Rt. (Diversified Banks)(a) 60,600 2,189,237
========================================================================
INDIA-0.97%
Infosys Technologies Ltd.-ADR (IT Consulting
& Other Services) 58,700 3,991,600
========================================================================
IRELAND-3.18%
Allied Irish Banks PLC (Diversified Banks)(a) 137,300 2,895,933
- ------------------------------------------------------------------------
Anglo Irish Bank Corp. PLC (Diversified
Banks)(a) 502,260 6,800,077
- ------------------------------------------------------------------------
CRH PLC (Construction Materials)(a) 138,134 3,458,604
========================================================================
13,154,614
========================================================================
ISRAEL-0.86%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals)(b) 93,260 3,555,071
========================================================================
ITALY-2.95%
Eni S.p.A. (Integrated Oil & Gas)(a)(b) 324,600 8,683,858
- ------------------------------------------------------------------------
Mediaset S.p.A. (Broadcasting & Cable
TV)(a)(b) 320,000 3,514,821
========================================================================
12,198,679
========================================================================
JAPAN-7.16%
Canon Inc. (Office Electronics)(a) 40,100 2,122,307
- ------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment
Manufacturers)(a)(b) 12,600 442,933
- ------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment
Manufacturers)(c) 129,300 4,476,816
- ------------------------------------------------------------------------
Keyence Corp. (Electronic Equipment
Manufacturers)(b) 22,200 5,081,043
- ------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks) (Acquired 10/24/05; Cost
$2,013,641)(a)(d) 335 2,250,395
- ------------------------------------------------------------------------
Nitto Denko Corp. (Specialty Chemicals)(a) 59,000 3,572,320
- ------------------------------------------------------------------------
Orix Corp. (Consumer Finance)(a)(b) 12,300 2,306,059
- ------------------------------------------------------------------------
SMC Corp. (Industrial Machinery)(a)(b) 21,000 2,805,141
- ------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd.
(Pharmaceuticals)(a) 50,500 2,777,239
- ------------------------------------------------------------------------
Toyota Motor Corp. (Automobile
Manufacturers)(a) 80,500 3,737,807
========================================================================
29,572,060
========================================================================
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
MEXICO-1.64%
Grupo Televisa, S.A.-ADR (Broadcasting &
Cable TV) 26,900 $ 1,966,390
- ------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers) 989,200 4,814,853
========================================================================
6,781,243
========================================================================
NETHERLANDS-0.74%
Royal DSM N.V. (Specialty Chemicals)(a) 84,800 3,045,263
========================================================================
RUSSIA-0.53%
OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 40,100 2,211,761
========================================================================
SINGAPORE-1.08%
DBS Group Holdings Ltd. (Diversified
Banks)(a) 238,000 2,153,546
- ------------------------------------------------------------------------
Marvell Technology Group Ltd.
(Semiconductors)(c) 50,000 2,320,500
========================================================================
4,474,046
========================================================================
SOUTH KOREA-1.99%
Hyundai Motor Co. (Automobile
Manufacturers)(a) 31,560 2,332,524
- ------------------------------------------------------------------------
LG.Philips LCD Co., Ltd.-ADR (Electronic
Equipment Manufacturers)(b)(c) 112,073 2,130,508
- ------------------------------------------------------------------------
Samsung Electronics Co., Ltd. (Electronic
Equipment Manufacturers)(a) 7,000 3,739,321
========================================================================
8,202,353
========================================================================
SPAIN-2.60%
ACS, Actividades de Construccion y Servicios,
S.A. (Construction & Engineering)(a) 115,200 3,293,699
- ------------------------------------------------------------------------
Banco Santander Central Hispano S.A.
(Diversified Banks)(a) 298,300 3,805,040
- ------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 122,800 3,634,540
========================================================================
10,733,279
========================================================================
SWEDEN-1.28%
Atlas Copco A.B.-Class A (Industrial
Machinery) 112,900 2,063,376
- ------------------------------------------------------------------------
Volvo A.B.-Class B (Construction & Farm
Machinery & Heavy Trucks)(a)(b) 78,700 3,237,982
========================================================================
5,301,358
========================================================================
SWITZERLAND-9.01%
Alcon, Inc. (Health Care Supplies) 47,953 6,372,954
- ------------------------------------------------------------------------
Compagnie Financiere Richemont A.G.-Class A
(Apparel, Accessories & Luxury Goods)(a) 142,400 5,420,382
- ------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)(a) 7,165 2,133,184
- ------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals) 48,050 7,179,264
- ------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology)(a) 3,330 2,156,825
- ------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(a)(c) 68,110 7,302,853
- ------------------------------------------------------------------------
UBS A.G. (Diversified Capital Markets)(a) 78,530 6,667,623
========================================================================
37,233,085
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
TAIWAN-0.47%
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(a) 1,233,747 $ 1,929,782
========================================================================
UNITED KINGDOM-7.93%
Aviva PLC (Multi-Line Insurance) 354,984 4,191,971
- ------------------------------------------------------------------------
BP PLC (Integrated Oil & Gas)(a) 198,700 2,199,719
- ------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco) 285,370 8,184,780
- ------------------------------------------------------------------------
O2 PLC (Wireless Telecommunication Services) 1,201,458 4,360,599
- ------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products)(a) 142,680 4,312,709
- ------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 959,269 5,108,241
- ------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services)(a) 1,670,930 4,386,392
========================================================================
32,744,411
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $196,793,368) 287,421,532
========================================================================
DOMESTIC COMMON STOCKS-28.31%
AEROSPACE & DEFENSE-1.36%
General Dynamics Corp. 29,500 3,430,850
- ------------------------------------------------------------------------
Lockheed Martin Corp. 36,000 2,180,160
========================================================================
5,611,010
========================================================================
APPAREL RETAIL-0.54%
Chico's FAS, Inc.(c) 56,000 2,214,240
========================================================================
APPLICATION SOFTWARE-0.56%
Amdocs Ltd.(c) 88,000 2,329,360
========================================================================
BIOTECHNOLOGY-1.23%
Amgen Inc.(c) 30,500 2,310,680
- ------------------------------------------------------------------------
Gilead Sciences, Inc.(c) 58,838 2,780,095
========================================================================
5,090,775
========================================================================
COMMUNICATIONS EQUIPMENT-1.44%
Cisco Systems, Inc.(c) 110,000 1,919,500
- ------------------------------------------------------------------------
Motorola, Inc. 96,000 2,127,360
- ------------------------------------------------------------------------
QUALCOMM Inc. 47,450 1,886,612
========================================================================
5,933,472
========================================================================
COMPUTER HARDWARE-0.92%
Apple Computer, Inc.(c) 30,000 1,727,700
- ------------------------------------------------------------------------
Dell Inc.(c) 64,454 2,054,794
========================================================================
3,782,494
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.61%
EMC Corp.(c) 180,000 2,512,800
========================================================================
DEPARTMENT STORES-1.10%
Federated Department Stores, Inc. 44,500 2,730,965
- ------------------------------------------------------------------------
Nordstrom, Inc. 52,000 1,801,800
========================================================================
4,532,765
========================================================================
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DRUG RETAIL-0.44%
CVS Corp. 74,000 $ 1,806,340
========================================================================
FOOTWEAR-0.51%
NIKE, Inc.-Class B 25,000 2,101,250
========================================================================
GENERAL MERCHANDISE STORES-0.52%
Target Corp. 38,500 2,144,065
========================================================================
HEALTH CARE FACILITIES-0.52%
HCA Inc. 44,500 2,144,455
========================================================================
HEALTH CARE SERVICES-0.85%
Medco Health Solutions, Inc.(c) 40,129 2,267,288
- ------------------------------------------------------------------------
Quest Diagnostics Inc. 27,000 1,261,170
========================================================================
3,528,458
========================================================================
HOME IMPROVEMENT RETAIL-0.54%
Home Depot, Inc. (The) 54,000 2,216,160
========================================================================
HOUSEHOLD PRODUCTS-0.89%
Procter & Gamble Co. (The) 66,000 3,695,340
========================================================================
HOUSEWARES & SPECIALTIES-0.64%
Fortune Brands, Inc. 35,000 2,658,950
========================================================================
INTERNET SOFTWARE & SERVICES-0.54%
Yahoo! Inc.(c) 60,000 2,218,200
========================================================================
INVESTMENT BANKING & BROKERAGE-1.50%
Goldman Sachs Group, Inc. (The) 49,000 6,192,130
========================================================================
MANAGED HEALTH CARE-2.68%
Aetna Inc. 40,269 3,566,223
- ------------------------------------------------------------------------
CIGNA Corp. 28,537 3,306,582
- ------------------------------------------------------------------------
Humana Inc.(c) 40,000 1,775,600
- ------------------------------------------------------------------------
UnitedHealth Group Inc. 42,195 2,442,669
========================================================================
11,091,074
========================================================================
MULTI-LINE INSURANCE-0.52%
Hartford Financial Services Group, Inc. (The) 27,000 2,153,250
========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.38%
BJ Services Co. 164,597 5,719,746
========================================================================
OIL & GAS REFINING & MARKETING-1.02%
Valero Energy Corp. 40,000 4,209,600
========================================================================
PHARMACEUTICALS-2.31%
Allergan, Inc. 23,375 2,087,387
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
PHARMACEUTICALS-(CONTINUED)
Johnson & Johnson 119,246 $ 7,467,184
========================================================================
9,554,571
========================================================================
PROPERTY & CASUALTY INSURANCE-1.49%
Allstate Corp. (The) 116,915 6,171,943
========================================================================
RAILROADS-0.62%
Burlington Northern Santa Fe Corp. 41,000 2,544,460
========================================================================
RESTAURANTS-0.47%
YUM! Brands, Inc. 38,000 1,933,060
========================================================================
SEMICONDUCTORS-0.51%
Analog Devices, Inc. 61,000 2,121,580
========================================================================
STEEL-0.36%
Nucor Corp. 25,000 1,496,250
========================================================================
SYSTEMS SOFTWARE-1.73%
Microsoft Corp. 90,000 2,313,000
- ------------------------------------------------------------------------
Oracle Corp.(c) 245,000 3,106,600
- ------------------------------------------------------------------------
Symantec Corp.(c) 73,000 1,741,050
========================================================================
7,160,650
========================================================================
THRIFTS & MORTGAGE FINANCE-0.51%
MGIC Investment Corp. 35,400 2,097,096
========================================================================
Total Domestic Common Stocks (Cost
$102,834,852) 116,965,544
========================================================================
MONEY MARKET FUNDS-0.97%
Liquid Assets Portfolio-Institutional
Class(e) 1,997,903 1,997,903
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 1,997,903 1,997,903
========================================================================
Total Money Market Funds (Cost
$3,995,806) 3,995,806
========================================================================
TOTAL INVESTMENTS--98.85% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $303,624,026) 408,382,882
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-17.96%
STIC Prime Portfolio-Institutional
Class(e)(f) 74,176,177 74,176,177
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $74,176,177) 74,176,177
========================================================================
TOTAL INVESTMENTS--116.81% (Cost
$377,800,203) 482,559,059
========================================================================
OTHER ASSETS LESS LIABILITIES-(16.81%) (69,450,278)
========================================================================
NET ASSETS-100.00% $413,108,781
________________________________________________________________________
========================================================================
</Table>
F-3
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2005 was $180,428,270,
which represented 43.68% of the Fund's Net Assets. See Note 1A.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
(c) Non-income producing security.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of this security. The
value of this security at October 31, 2005 represented 0.54% of the Fund's
Net Assets. Unless otherwise indicated, this security is not considered to
be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(f) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
<Table>
ASSETS:
Investments, at value (cost $299,628,220)* $ 404,387,076
- ------------------------------------------------------------
Investments in affiliated money market funds
(cost $78,171,983) 78,171,983
============================================================
Total investments (cost $377,800,203) 482,559,059
============================================================
Foreign currencies, at value (cost
$6,328,165) 6,304,385
- ------------------------------------------------------------
Receivables for:
Investments sold 2,799,623
- ------------------------------------------------------------
Fund shares sold 246,757
- ------------------------------------------------------------
Dividends and interest 333,679
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 57,008
- ------------------------------------------------------------
Other assets 20,552
============================================================
Total assets 492,321,063
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 3,639,711
- ------------------------------------------------------------
Fund shares reacquired 772,040
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 94,843
- ------------------------------------------------------------
Collateral upon return of securities loaned 74,176,177
- ------------------------------------------------------------
Accrued distribution fees 154,004
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,699
- ------------------------------------------------------------
Accrued transfer agent fees 221,779
- ------------------------------------------------------------
Accrued operating expenses 152,029
============================================================
Total liabilities 79,212,282
============================================================
Net assets applicable to shares outstanding $ 413,108,781
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 635,434,854
- ------------------------------------------------------------
Undistributed net investment income 971,774
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (328,024,922)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 104,727,075
============================================================
$ 413,108,781
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 284,121,565
____________________________________________________________
============================================================
Class B $ 105,367,749
____________________________________________________________
============================================================
Class C $ 23,619,467
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 14,941,044
____________________________________________________________
============================================================
Class B 5,895,053
____________________________________________________________
============================================================
Class C 1,320,755
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 19.02
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $19.02 divided by
95.25%) $ 19.97
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 17.87
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 17.88
____________________________________________________________
============================================================
* At October 31, 2005, securities with an aggregate value of
$72,080,567 were on loan to brokers.
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $688,036) $ 9,295,481
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $270,428 after compensation
to counterparties of $1,808,378) 456,643
- -------------------------------------------------------------------------
Interest 8,476
=========================================================================
Total investment income 9,760,600
=========================================================================
EXPENSES:
Advisory fees 3,760,099
- -------------------------------------------------------------------------
Administrative services fees 121,744
- -------------------------------------------------------------------------
Custodian fees 298,126
- -------------------------------------------------------------------------
Distribution fees:
Class A 997,105
- -------------------------------------------------------------------------
Class B 1,250,351
- -------------------------------------------------------------------------
Class C 258,923
- -------------------------------------------------------------------------
Transfer agent fees 1,996,274
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 30,655
- -------------------------------------------------------------------------
Other 360,975
=========================================================================
Total expenses 9,074,252
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (252,895)
=========================================================================
Net expenses 8,821,357
=========================================================================
Net investment income 939,243
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains (losses) from
securities sold to affiliates of $(46,844)) 59,314,284
- -------------------------------------------------------------------------
Foreign currencies 128,933
=========================================================================
59,443,217
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (1,548,599)
- -------------------------------------------------------------------------
Foreign currencies (48,522)
=========================================================================
(1,597,121)
=========================================================================
Net gain from investment securities and foreign currencies 57,846,096
=========================================================================
Net increase in net assets resulting from operations $58,785,339
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to financial statements which are an integral part of the
financial statements.
F-6
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
<Table>
<Caption>
2005 2004
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 939,243 $ (2,212,745)
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and futures contracts 59,443,217 65,312,164
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and futures
contracts (1,597,121) (7,636,388)
===========================================================================================
Net increase in net assets resulting from operations 58,785,339 55,463,031
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (40,745,440) (77,829,276)
- -------------------------------------------------------------------------------------------
Class B (50,289,812) (60,815,446)
- -------------------------------------------------------------------------------------------
Class C (7,418,997) (8,514,512)
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (98,454,249) (147,159,234)
===========================================================================================
Net increase (decrease) in net assets (39,668,910) (91,696,203)
===========================================================================================
NET ASSETS:
Beginning of year 452,777,691 544,473,894
===========================================================================================
End of year (including undistributed net investment income
(loss) of $971,774 and $(100,003), respectively) $413,108,781 $ 452,777,691
___________________________________________________________________________________________
===========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-7
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth Fund (the "Fund") is a series portfolio of AIM International
Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six separate
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently offers multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued on the basis of prices furnished
by independent pricing services, which may be considered fair valued, or
market makers. Each security reported on the NASDAQ National Market System
is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of
the customary trading session on the valuation date or absent a NOCP, at
the closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices.
For purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not
ordinarily be reflected in the computation of the Fund's net asset value.
If the event is likely to have affected the closing price of the security,
the security will be valued at fair value in good faith using procedures
approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent
pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the
NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the
indication of fair value from the independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to
sector indices, ADRs and domestic and foreign index futures.
F-8
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is accounted for as an
addition to shares of beneficial interest by the Fund and is allocated
among the share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
J. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are received or
made depending upon whether unrealized gains or losses are incurred. When
the contracts
F-9
are closed, the Fund recognizes a realized gain or loss equal to the
difference between the proceeds from, or cost of, the closing transaction
and the Fund's basis in the contract. If the Fund were unable to liquidate
a futures contract and/or enter into an offsetting closing transaction, the
Fund would continue to be subject to market risk with respect to the value
of the contracts and continue to be required to maintain the margin
deposits on the futures contracts.
K. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.85%
- -------------------------------------------------------------------
Over $1 billion 0.80%
__________________________________________________________________
===================================================================
</Table>
Effective January 1, 2005 through December 31, 2009, AIM has contractually
agreed to waive advisory fees to the extent necessary so that the advisory fees
payable by the Fund (based on the Fund's average daily net assets) do not exceed
the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.80%
- -------------------------------------------------------------------
Next $250 million 0.78%
- -------------------------------------------------------------------
Next $500 million 0.76%
- -------------------------------------------------------------------
Next $1.5 billion 0.74%
- -------------------------------------------------------------------
Next $2.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.68%
- -------------------------------------------------------------------
Over $10 billion 0.66%
__________________________________________________________________
===================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). AIM is also voluntarily waiving a portion of the
advisory fee payable by the Fund equal to the difference between the income
earned from investing in the affiliated money market fund and the hypothetical
income earned from investing in an appropriate comparative benchmark. Voluntary
fee waivers or reimbursements may be modified or discontinued at any time upon
consultation with the Board of Trustees without further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $214,777.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement, are included in the Statement of Operations. For
the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the
amount of $25,109.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $121,744.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. For the year ended October 31, 2005, the
Fund paid AISI $1,996,274.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of Class B and Class
C shares. Effective January 1, 2005 through June 30, 2005, the Fund paid ADI
0.35% of the average daily net assets of Class A shares. Prior to January 1,
2005, the Fund paid ADI 0.50% of the average daily net assets of Class A shares.
Of these amounts, up to 0.25% of the average daily net assets of the Class A,
Class B or Class C shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts
not paid as a service fee under the Plans would constitute an asset-based sales
charge. National Association of Securities Dealers ("NASD") Rules also impose a
cap on the total sales
F-10
charges, including asset-based sales charges that may be paid by any class of
shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005,
the Class A, Class B and Class C shares paid $997,105, $1,250,351 and $258,923,
respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended
October 31, 2005, ADI advised the Fund that it retained $38,301 in front-end
sales commissions from the sale of Class A shares and $652, $40,954 and $2,054
from Class A, Class B and Class C shares, respectively, for CDSC imposed upon
redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market funds below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in affiliated money market
funds for the year ended October 31, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,732,411 $ 63,694,905 $ (67,429,413) $ -- $ 1,997,903 $ 92,724 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 5,732,411 63,694,905 (67,429,413) -- 1,997,903 93,491 --
==================================================================================================================================
Subtotal $11,464,822 $127,389,810 $(134,858,826) $ -- $ 3,995,806 $186,215 $ --
==================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $76,311,756 $ 19,447,605 $ (95,759,361) $ -- $ -- $ 48,097 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class $ -- $289,133,674 (214,957,497) -- 74,176,177 222,331 --
==================================================================================================================================
Subtotal $76,311,756 $308,581,279 $(310,716,858) $ -- $74,176,177 $270,428 $ --
==================================================================================================================================
Total $87,776,578 $435,971,089 $(445,575,684) $ -- $78,171,983 $456,643 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, during the year ended October 31, 2005, the Fund
engaged in securities purchases of $1,224,404 and sales of $132,510, which
resulted in net realized gains (losses) of $(46,844).
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2005, the
Fund received credits from this arrangement, which resulted in the reduction of
the Fund's total expenses of $13,009.
F-11
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $4,131
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the market value of the securities
on loan. Lending securities entails a risk of loss to the Fund if and to the
extent that the value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to a loss on
the collateral invested.
At October 31, 2005, securities with an aggregate value of $72,080,567 were
on loan to brokers. The loans were secured by cash collateral of $74,176,177
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $270,428 for securities lending transactions, which are net of
compensation to counterparties.
F-12
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS
There were no ordinary income or long-term capital gain distributions paid
during the years ended October 31, 2005 and 2004.
TAX COMPONENTS OF NET ASSETS
As of October 31, 2005, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2005
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 1,934,437
- ----------------------------------------------------------------------------
Unrealized appreciation -- investments 103,628,943
- ----------------------------------------------------------------------------
Temporary book/tax differences (85,014)
- ----------------------------------------------------------------------------
Capital loss carryforward (327,804,439)
- ----------------------------------------------------------------------------
Shares of beneficial interest 635,434,854
============================================================================
Total net assets $413,108,781
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation difference is attributable primarily to losses on wash sales and
the recognition of income for tax purposes on certain passive foreign investment
companies. The tax-basis unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of $(31,781).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund utilized $58,942,010 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2005 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2009 $215,440,562
- -----------------------------------------------------------------------------
October 31, 2010 101,042,257
- -----------------------------------------------------------------------------
October 31, 2011 11,321,620
=============================================================================
Total capital loss carryforward $327,804,439
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $219,691,782 and $308,822,461, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 107,027,891
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,367,167)
===============================================================================
Net unrealized appreciation of investment securities $ 103,660,724
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $378,898,335.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on October 31, 2005, undistributed net investment income (loss)
was increased by $132,534, undistributed net realized gain (loss) was decreased
by $125,694 and shares of beneficial interest decreased by $6,840. This
reclassification had no effect on the net assets of the Fund.
F-13
NOTE 12--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with CDSC. Under
certain circumstances, Class A shares are subject to CDSC. Generally, Class B
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
2005(A) 2004
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 818,989 $ 14,908,841 1,232,139 $ 19,652,547
- -----------------------------------------------------------------------------------------------------------------------
Class B 432,979 7,415,155 565,634 8,560,279
- -----------------------------------------------------------------------------------------------------------------------
Class C 174,146 2,989,787 221,675 3,352,828
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,378,417 25,054,414 1,762,944 28,418,398
- -----------------------------------------------------------------------------------------------------------------------
Class B (1,461,084) (25,054,414) (1,859,129) (28,418,398)
=======================================================================================================================
Reacquired:(b)
Class A (4,433,381) (80,708,695) (7,934,725) (125,900,221)
- -----------------------------------------------------------------------------------------------------------------------
Class B (1,902,178) (32,650,553) (2,711,929) (40,957,327)
- -----------------------------------------------------------------------------------------------------------------------
Class C (607,182) (10,408,784) (783,613) (11,867,340)
=======================================================================================================================
(5,599,294) $(98,454,249) (9,507,004) $(147,159,234)
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) There are two entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 13% of the
outstanding shares of the Fund. ADI has an agreement with these entities
to sell Fund shares. The Fund, AIM and/or AIM affiliates may make
payments to these entities, which are considered to be related to the
Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these shareholders are also owned beneficially.
(b) Amount is net of redemption fees of $1,339, $566 and $118 for Class A,
Class B and Class C shares, respectively, for the year ended October 31,
2005 and $1,549, $802 and $149 for Class A, Class B and Class C shares,
respectively, for the year ended October 31, 2004.
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.65 $ 14.91 $ 12.66 $ 14.58 $ 24.83
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.08(a)(b) (0.04)(b) (0.08) (0.11)(b) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.29 1.78 2.33 (1.81) (10.08)
===========================================================================================================================
Total from investment operations 2.37 1.74 2.25 (1.92) (10.21)
===========================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
===========================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
===========================================================================================================================
Net asset value, end of period $ 19.02 $ 16.65 $ 14.91 $ 12.66 $ 14.58
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 14.23% 11.67% 17.77% (13.17)% (41.17)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $284,122 $286,068 $329,739 $335,954 $439,612
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.77%(d) 1.96% 2.04% 1.95% 1.68%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.82%(d) 1.97% 2.04% 1.95% 1.79%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.44%(a)(d) (0.24)% (0.58)% (0.75)% (0.66)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 51% 56% 75% 98% 134%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend of $3.00 per share
owned of Microsoft Corp. on December 2, 2004. Net investment income per
share and the ratio of net investment income to average net assets
excluding the special dividend are $0.05 and 0.27%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustment in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $291,437,236.
F-14
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.76 $ 14.18 $ 12.09 $ 14.00 $ 23.98
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a)(b) (0.11)(b) (0.15) (0.17)(b) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.15 1.69 2.24 (1.74) (9.70)
===========================================================================================================================
Total from investment operations 2.11 1.58 2.09 (1.91) (9.94)
===========================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
===========================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
===========================================================================================================================
Net asset value, end of period $ 17.87 $ 15.76 $ 14.18 $ 12.09 $ 14.00
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 13.39% 11.14% 17.29% (13.64)% (41.50)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,368 $139,061 $181,891 $206,189 $369,171
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.43%(d) 2.46% 2.54% 2.45% 2.19%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.48%(d) 2.47% 2.54% 2.45% 2.30%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.22)%(a)(d) (0.74)% (1.08)% (1.25)% (1.16)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 51% 56% 75% 98% 134%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.07) and (0.39)%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustment in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $125,035,084.
<Table>
<Caption>
CLASS C
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.77 $ 14.18 $ 12.10 $ 14.01 $ 23.98
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a)(b) (0.11)(b) (0.15) (0.17)(b) (0.22)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.15 1.70 2.23 (1.74) (9.71)
======================================================================================================================
Total from investment operations 2.11 1.59 2.08 (1.91) (9.93)
======================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.04)
======================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- --
======================================================================================================================
Net asset value, end of period $ 17.88 $ 15.77 $ 14.18 $ 12.10 $ 14.01
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(c) 13.38% 11.21% 17.19% (13.63)% (41.46)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $23,619 $27,649 $32,844 $34,778 $51,624
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.43%(d) 2.46% 2.54% 2.45% 2.19%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.48%(d) 2.47% 2.54% 2.45% 2.30%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.22)%(a)(d) (0.74)% (1.08)% (1.25)% (1.16)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 51% 56% 75% 98% 134%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.07) and (0.39)%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustment in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(d) Ratios are based on average daily net assets of $25,892,319.
F-15
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. As the methodology is unknown at the present time, management
of AIM and the Fund are unable to estimate the impact, if any, that the
distribution of these two fair funds may have on the Fund or whether such
distribution will have an impact on the Fund's financial statements in the
future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue sharing
and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to Section
529 college savings plans and procedures for locating lost securityholders. IFG,
AIM and ADI are providing full cooperation with respect to these inquiries. As
described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities
and individuals are defendants in numerous civil lawsuits related to one or more
of these issues. Regulatory actions and/or additional civil lawsuits related to
these or other issues may be filed against the AIM Funds, IFG, AIM and/or
related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated
mutual fund complexes and financial institutions. None of the AIM Funds has been
named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit
Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in
substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or
deceptive trade practices by failing to disclose in the prospectuses for the AIM
Funds, including those formerly advised by IFG, that they had entered into
certain arrangements permitting market timing of such Funds. As a result of the
foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq.
(the West Virginia Consumer Credit and Protection Act). The WVAG complaint is
seeking, among other things, injunctive relief, civil monetary penalties and a
writ of quo warranto against the defendants. If AIM is unsuccessful in its
defense of the WVAG lawsuit, it could be barred from serving as an investment
advisor for any investment company registered under the Investment Company Act
of 1940, as amended (a "registered investment company"). Such results could
affect the ability of AIM or any other investment advisor directly or indirectly
owned by AMVESCAP, from serving as an investment advisor to any registered
investment company, including the Fund. The Fund has been informed by AIM that,
if these results occur, AIM will seek exemptive relief from the SEC to permit it
to continue to serve as the Fund's investment advisor. There is no assurance
that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings
of fact that essentially mirror the WVAG's allegations mentioned above and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. AIM and ADI have the right to contest the WVASC's findings and
conclusions, which they intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans;
F-16
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
- that the defendants breached their fiduciary duties by charging
distribution fees while AIM Funds and/or specific share classes were
closed generally to new investors and/or while other share classes of the
same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure
that the AIM Funds participated in class action settlements in which they
were eligible to participate (this lawsuit was dismissed by the Court on
August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the common
issues of law presented in defendants' motions to dismiss the shareholder class
and derivative complaints. These rulings were issued in the context of the Janus
lawsuits, but the Court's legal determinations apply at the omnibus level to all
cases within his track, including the AIM and IFG cases. The Court dismissed for
failure to make pre-suit demand on the fund board all derivative causes of
action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"), as to which the demand requirement does
not apply. The Court dismissed all claims asserted in the class complaint but
two: (i) the securities fraud claims under Section 10(b) of the Securities
Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of
the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on
the 36(b) claim to fees attributable to timing assets, as opposed to all fees on
funds in which any timing occurred. The question whether the duplicative Section
36(b) claim properly belongs in the derivative complaint or in the class action
complaint will be decided at a later date. The Court will subsequently issue an
order applying his legal rulings to the allegations in the AIM and IFG
complaints.
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds
and Shareholders of AIM Global Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Growth Fund (one of the
funds constituting AIM International Mutual Funds, hereafter referred to as the
"Fund") at October 31, 2005, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2005 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-18
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Group Inc. (financial services holding
Principal Executive Officer company); Director and Vice Chairman,
and President AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC -- Managed Products
- -------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice Officer, A I M Management Group Inc.
President (financial services holding company);
Director and President, A I M Advisors,
Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor) and
A I M Distributors, Inc. (registered
broker dealer); Director and Chairman,
AIM Investment Services, Inc.
(registered transfer agent), Fund
Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -- AIM
Division (parent of AIM and a global
investment management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO Distributors,
Inc.; Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and Chairman,
AIM Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None
Trustee & Bunch Ltd., (investment banking firm);
and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); and CompuDyne Corporation
(provider of products and services to
the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and director of various
affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, 2005 Retired None
Jr.(3) -- 1944
Trustee
Formerly: Partner, Deloitte & Touche
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Group Inc. (financial services holding
Chief Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc. and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and General Counsel, A I M
Secretary and Chief Legal Management Group Inc. and A I M
Officer Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President,
A I M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; Senior Vice President
and General Counsel, Liberty Funds
Group, LLC; Vice President, A I M
Distributors, Inc.; and Director and
General Counsel, Fund Management Company
- -------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.
Financial Officer and
Treasurer Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, and Senior
Investment Officer, A I M Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
</Table>
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets are not subject to the U.S. estate tax for
the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and
October 31, 2005 are 70.37%, 72.42%, 71.28% and 71.62%, respectively.
<Table>
DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS
AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund
AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2)
AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund
AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund
AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation
AIM Charter Fund AIM Gold & Precious Metals Fund Fund
AIM Constellation Fund AIM Leisure Fund
AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS
AIM Dynamics Fund AIM Real Estate Fund(1)
AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund
AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund(1) FIXED INCOME
AIM Mid Cap Growth Fund
AIM Opportunities I Fund TAXABLE
AIM Opportunities II Fund
AIM Opportunities III Fund AIM Floating Rate Fund
AIM Premier Equity Fund AIM High Yield Fund
AIM S&P 500 Index Fund AIM Income Fund
AIM Select Equity Fund AIM Intermediate Government Fund
AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund
AIM Small Cap Growth Fund(1) AIM Money Market Fund
AIM Small Company Growth Fund AIM Short Term Bond Fund
AIM Summit Fund AIM Total Return Bond Fund
AIM Trimark Endeavor Fund Premier Portfolio
AIM Trimark Small Companies Fund Premier U.S.Government Money Portfolio
AIM Weingarten Fund
*Domestic equity and income fund TAX-FREE
INTERNATIONAL/GLOBAL EQUITY
AIM High Income Municipal Fund(1)
AIM Asia Pacific Growth Fund AIM Municipal Bond Fund
AIM Developing Markets Fund AIM Tax-Exempt Cash Fund
AIM European Growth Fund AIM Tax-Free Intermediate Fund
AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio
AIM Global Aggressive Growth Fund
AIM Global Equity Fund =======================================================================================
AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS
AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR
AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING.
AIM International Growth Fund =======================================================================================
AIM International Small Company Fund(1)
AIM Trimark Fund
</Table>
(1) This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
(2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment
management industry since 1976 and manages $129 billion in assets. AIM is a
subsidiary of AMVESCAP PLC, one of the world's largest independent financial
services companies with $381 billion in assets under management. Data as of
September 30, 2005.
AIMinvestments.com GLG-AR-1 A I M Distributors, Inc.
<Table>
YOUR GOALS. OUR SOLUTIONS.--Registered Trademark--
- ---------------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE]
Funds Products Savings Managed Products Management --Registered Trademark--
Plans Accounts
- ---------------------------------------------------------------------------------------
</Table>
AIM INTERNATIONAL GROWTH FUND
Annual Report to Shareholders o October 31,2005
[COVER IMAGE]
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
AIM INTERNATIONAL GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October
31, 2005, and is based on total net assets.
ABOUT SHARE CLASSES
o Class B shares are not available as an o The unmanaged LIPPER INTERNATIONAL by and is the exclusive property and a
investment for retirement plans MULTI-CAP GROWTH FUND INDEX represents service mark of Morgan Stanley Capital
maintained pursuant to Section 401 of an average of the performance of the 10 International Inc. and Standard &
the Internal Revenue Code, including largest international Poor's.
401(k) plans, money purchase pension multi-capitalization growth funds
plans and profit sharing plans. Plans tracked by Lipper, Inc., an independent The Fund provides a complete list of its
that had existing accounts invested in mutual fund performance monitor. holdings four times in each fiscal
Class B shares prior to September 30, year, at the quarter-ends. For the second
2003, will continue to be allowed to o The unmanaged Standard & Poor's and fourth quarters, the lists appear in
make additional purchases. Composite Index of 500 Stocks (the S&P the Fund's semiannual and annual reports
500--Registered Trademark-- INDEX) is to shareholders. For the first and third
o Class R shares are available only to an index of common stocks frequently quarters,the Fund files the lists with
certain retirement plans. Please see the used as a general measure of U.S. stock the Securities and Exchange Commission
prospectus for more information. market performance. (SEC) on Form N-Q. The most recent list
of portfolio holdings is available at
PRINCIPAL RISKS OF INVESTING IN THE FUND o The unmanaged MSCI WORLD INDEX is a AIMinvestments.com. From our home
group of global securities tracked by page, click on Products &
o International investing presents Morgan Stanley Capital International. Performance, then Mutual Funds, then Fund
certain risks not associated with Overview. Select your Fund from the
investing solely in the United States. o The Fund is not managed to track the drop-down menu and click on Complete
These include risks relating to performance of any particular index, Quarterly Holdings. Shareholders can
fluctuations in the value of the U.S. including the indexes defined here, and also look up the Fund's Forms N-Q on the
dollar relative to the values of other consequently, the performance of the SEC's Web site at sec.gov. And copies of
currencies, the custody arrangements Fund may deviate significantly from the the Fund's Forms N-Q may be reviewed and
made for the Fund's foreign holdings, performance of the indexes. copied at the SEC's Public Reference
differences in accounting, political Room at 450 Fifth Street, N.W.,
risks and the lesser degree of public o A direct investment cannot be made in Washington, D.C. 20549-0102. You can
information required to be provided by an index. Unless otherwise indicated, obtain information on the operation of
non-U.S. companies. index results include reinvested the Public Reference Room, including
dividends, and they do not reflect sales information about duplicating fee
o Investing in emerging markets involves charges. Performance of an index of charges, by calling 202-942-8090 or
greater risk and potential reward than funds reflects fund expenses; 800-732-0330, or by electronic request at
investing in more established markets. performance of a market index does not. the following e-mail address:
publicinfo@sec.gov. The SEC file numbers
ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION for the Fund are 811-06463 and 33-44611.
o The unmanaged MSCI Europe, Australasia o The returns shown in management's A description of the policies and
and the Far East Index (the MSCI discussion of Fund performance are based procedures that the Fund uses to
EAFE--Registered Trademark-- INDEX) is a on net asset values calculated for determine how to vote proxies relating
group of foreign securities tracked by shareholder transactions. Generally to portfolio securities is available
Morgan Stanley Capital International. accepted accounting principles require without charge, upon request, from our
adjustments to be made to the net assets Client Services department at
o The unmanaged MSCI EUROPE, AUSTRALASIA of the Fund at period end for financial 800-959-4246 or on the AIM Web site,
AND THE FAR EAST GROWTH INDEX is a reporting purposes, and as such, the net AIMinvestments.com. On the home page,
subset of the unmanaged MSCI EAFE, which asset values for shareholder scroll down and click on AIM Funds Proxy
represents the performance of foreign transactions and the returns based on Policy. The information is also
stocks tracked by Morgan Stanley Capital those net asset values may differ from available on the Securities and Exchange
International. The Growth portion the net asset values and returns Commission's Web site, sec.gov.
measures performance of companies with reported in the Financial Highlights.
higher price/earnings ratios and higher Information regarding how the Fund voted
forecasted growth values. o Industry classifications used in this proxies related to its portfolio
report are generally according to the securities during the 12 months ended
Global Industry Classification Standard, June 30, 2005, is available at our Web
which was developed site. Go to AIMinvestments.com, access
the About Us tab, click on Required
Notices and then click on Proxy Voting
Activity. Next, select the Fund from the
drop-down menu. The information is also
available on the Securities and Exchange
Commission's Web site,sec.gov.
========================================
FUND NASDAQ SYMBOLS
Class A Shares AIIEX
Class B Shares AIEBX
Class C Shares AIECX
Class R Shares AIERX
========================================
=====================================================================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND
EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.
=====================================================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMINVESTMENTS.COM
AIM INTERNATIONAL GROWTH FUND
Dear Fellow AIM Funds Shareholders:
The fiscal year covered by this report was quite good to
equity investors. Domestically, the broad-based S&P 500
Index returned 8.72%. Globally, Morgan Stanley's MSCI World
[GRAHAM Index rose 13.27%. Much of this good performance, though,
PHOTO] was attained early in the fiscal year as virtually every
equity index declined during October of 2005. Concern about
the inflationary potential of rising energy costs was
frequently cited as a major cause of market weakness.
Within the indexes, there was considerable variability in
the performance of different sectors and markets.
Domestically, energy sector performance far outpaced that of
the other sectors in the S&P 500 Index, reflecting rising
oil and gas prices. Overseas, emerging markets produced more
ROBERT H. GRAHAM attractive results than did developed markets, at least in
part because emerging markets tend to be more closely tied
to the performance of natural resources and commodities.
One could make a strong argument for global
diversification of a stock portfolio using the performance
data for the fiscal year ended October 31, 2005. Of course,
your financial advisor is the person most qualified to help
you decide whether such diversification is appropriate for
you.
For a discussion of the specific market conditions that
[WILLIAMSON affected your Fund and how your Fund was managed during the
PHOTO] fiscal year, please turn to Page 3.
NEW INFORMATION IN THIS REPORT
We would like to call your attention to two new elements in
this report. First, on Page 2, is a message from Bruce
Crockett, the independent Chair of the Board of Trustees of
the AIM Funds. We first introduced you to Mr. Crockett in
MARK H. WILLIAMSON the annual report on your Fund dated October 31, 2004. Mr.
Crockett has been on our Funds' Board since 1992; he assumed
his responsibilities as Chair in October 2004.
Mr. Crockett plans to keep AIM shareholders informed of
the work of the Board regularly via letters in the Fund
reports. We certainly think this is a valuable addition to
the reports. The Board is charged with looking out for the
interests of shareholders, and Mr. Crockett's letter
provides insight into some of the many issues the Board
addresses in governing your Fund.
One of the most important decisions the Board makes each
year is whether to approve the advisory agreement your Fund
has with AIM. Essentially, this agreement hires AIM to
manage the assets in your Fund. A discussion of the factors
the Board considered in reviewing the agreement is the
second new element in the report, and we encourage you to
read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and
investing in general is always available on our widely
acclaimed Web site, AIMinvestments.com. We invite you to
visit it frequently.
We at AIM remain committed to building solutions to help
you meet your investment goals. We thank you for your
continued participation in AIM Investments --Registered
Trademark--. If you have any questions, please contact our
award-winning Client Service representatives at
800-959-4246. We are happy to be of help.
Sincerely,
/s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, President, A I M Advisors,
AIM Funds Inc.
December 15, 2005
AIM Investments is a registered service mark of A I M
Management Group Inc. A I M Advisors, Inc. and A I M Capital
Management, Inc. are the investment advisors. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
1
AIM INTERNATIONAL GROWTH FUND
Dear AIM Funds Shareholders:
As independent Chair of the Board of Trustees of the AIM
Funds, I'm writing to report on the work being done by your
Board.
At our most recent meeting in June 2005, your Board
approved voluntary fee reductions from A I M Advisors, Inc.
[CROCKETT (AIM) that save shareholders approximately $20.8 million
PHOTO] annually, based on asset levels as of March 31, 2005. The
majority of these expense reductions, which took effect July
1, 2005, will be achieved by a permanent reduction to 0.25%
of the Rule 12b-1 fees on Class A and Class A3 shares of
those AIM Funds that previously charged these fees at a
higher rate.
Our June meeting, which was the culmination of more than
two and one-half months of review and discussions, took
place over a three-day period. The meeting included your
BRUCE L. CROCKETT Board's annual comprehensive evaluation of each fund's
advisory agreement with AIM. After this evaluation, in which
questions about fees, performance and operations were
addressed by AIM, your Board approved all advisory
agreements for the year beginning July 1, 2005. You can find
information on the factors considered and conclusions
reached by your Board in its evaluation of each fund's
advisory agreement at AIMinvestments.com. (Go to "Products &
Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your
Fund is also included in this annual report on Pages 8 and
9. I encourage you to review it.
Together with monitoring fund expenses, fund performance
is your Board's priority. Our initial goal is to work with
AIM to bring about improvement in every AIM Fund that has
been underperforming its category.
Your Board has a well-defined process and structure for
monitoring all funds and identifying and assisting AIM in
improving underperforming funds. Our Investments
Committee--which functions along with Audit, Governance,
Valuation and Compliance Committees--is the only one of
these five standing committees to include all 14 independent
Board members. Further, our Investments Committee is divided
into three underlying subcommittees, each responsible for,
among other things, reviewing the performance, fees and
expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the
performance of every AIM Fund is evaluated. If a fund has
underperformed its peer group for a meaningful period, we
work closely with AIM to discover the causes and help
develop the right responses. In some cases, AIM may
determine that a change in portfolio management strategy or
portfolio managers is required. In other cases, where a fund
no longer seems viable, it may be merged with a similar
fund, being careful to consider the needs of all
shareholders affected by the decision. Following AIM's
recommendation and your Board's approval, eight funds were
recently merged.
Be assured that your Board is working closely with the
management of AIM to help you reach your investment goals.
Should you or your advisor have questions or comments about
the governance of AIM Funds, I invite you to write to me at
AIM Investments, AIM Investments Tower, 11 Greenway Plaza,
Suite 100, Houston, TX 77046. Your Board looks forward to
keeping you informed about the governance of your funds.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
December 15, 2005
2
AIM INTERNATIONAL GROWTH FUND
MANAGEMENT'S DISCUSSION diversification benefit of international
OF FUND PERFORMANCE investing.
=====================================================================================
PERFORMANCE SUMMARY We seek to minimize stock-specific
======================================== risk by building a portfolio that holds
Foreign stocks outperformed U.S. equities FUND VS. INDEXES a variety of companies.
for the third consecutive year. Given
this environment, we are pleased to once Total returns, 10/31/04-10/31/05, We believe disciplined sell decisions
again reward shareholders with excluding applicable sales charges. If are a key determinant of successful
double-digit Fund performance. For sales charges were included, returns investing. We consider selling a stock
long-term Fund performance, please turn would be lower. for any one of the following reasons:
to Pages 6 and 7.
Class A Shares 19.04% o a company's fundamentals deteriorate
As the table to the right or it posts disappointing earnings
illustrates, your Fund modestly Class B Shares 18.19
outperformed both its broad market and o a stock's price seems overvalued
style specific benchmarks. We attribute Class C Shares 18.17
this success to strong stock selection o a more attractive opportunity is
in outperforming markets/countries, such Class R Shares 18.79 presented
as Canada and Mexico, which are not
included in MSCI EAFE Index benchmarks. MSCI EAFE Index MARKET CONDITIONS AND YOUR FUND
(Broad Market Index) 18.09
Although most world markets posted
MSCI EAFE Growth Index positive returns for the fiscal year,
(Style-specific Index) 17.65 foreign equities were once again the
performance leaders. Despite a
Lipper International Multi-Cap strengthening U.S. dollar, international
Growth Fund Index stocks outperformed U.S. equities by
(Peer Group Index) 22.15 more than a two-to-one margin when
calculated in U.S. dollars. In local
SOURCE: LIPPER, INC. currency terms, foreign stocks outpaced
======================================== U.S. stocks three-to-one.
=====================================================================================
HOW WE INVEST
We believe that earnings drive stock o high return on invested capital In Europe, markets rallied amid low
prices and that companies generating interest rates (the European Central
substantial, repeatable, above average o reasonable prices with low valuations Bank has kept rates at 2% for several
earnings growth should provide long-term years), attractive valuations compared
growth of capital. We use a systematic, stock-by stock to U.S. stocks and corporate profits
approach, focusing on strengths of buoyed by restructuring and cost
Therefore, when selecting stocks for individual companies, rather than sector cutting. In Japan, stocks climbed to
your Fund we look for large- and mid-cap or country trends. Our goal is a levels not witnessed in several years as
foreign companies with the following well-diversified, reasonably priced, Japan's economy finally regained
attributes: quality portfolio. We adhere to our momentum. Japanese corporate earnings
investment process regardless of the also continued to
o accelerating earnings and revenues macroeconomic environment.
o strong cash flow generation We do not hedge currencies because we
(dividends, share buybacks) believe currency exposure increases the
(continued)
======================================== ======================================== ========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Japan 14.1% 1. Total S.A. (France) 2.2%
2. France 13.8 2. Eni S.p.A. (Italy) 2.0
[PIE CHART] 3. United Kingdom 11.3 3. BNP Paribas S.A. (France) 1.8
Consumer Discretionary 15.6% 4. Switzerland 7.7 4. Anglo Irish Bank Corp. PLC
Industrials 11.3% 5. Canada 6.8 (Ireland) 1.8
Consumer Staples 10.9% 5. Imperial Tobacco Group PLC
Energy 9.9% (United Kingdom) 1.8
Information Technology 8.1% TOTAL NET ASSETS $1.9 BILLION 6. Vinci S.A. (France) 1.8
Health Care 8.0% 7. Syngenta A.G. (Switzerland) 1.7
Financials 21.2% TOTAL NUMBER OF HOLDINGS* 114 8. Infosys Technologies Ltd.
Money Market Funds Plus (India) 1.7
Other Assets Less Liabilities 2.4% 9. Roche Holding A.G.
Utilities 1.5% (Switzerland) 1.7
Telecommunications Services 4.6% 10. UBS A.G. (Switzerland) 1.6
Materials 6.5%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
======================================== ======================================== ========================================
3
AIM INTERNATIONAL GROWTH FUND
improve, while Prime Minister Junichiro Given strong Fund performance, we had
Koizumi's dramatic election victory few detractors to report. Although U.K. CLAS G. OLSSON,
resonated well with investors. holdings posted positive returns for the [OLSSON senior portfolio
Fund, during the fiscal year U.K. PHOTO] manager and head of
Fund performance was broad-based with markets were hindered by higher oil AIM's International
all regions registering positive prices and a slowdown in private Investment
returns. Our largest regional allocation consumption. NEXT PLC, a long-time Fund Management Unit, is lead manager of AIM
was in Europe. Strong stock selection holding, declined due to slower retail International Growth Fund with respect
helped us outperform our style-specific growth in the U.K. as consumers to the Fund's investments in Europe and
benchmark in Europe, although we responded to interest rate hikes by the Canada. Mr. Olsson joined AIM in 1994.
continued to be underweight in our Bank of England in 2004. The downdraft Mr. Olsson became a commissioned naval
exposure to the region. This allocation in consumer spending finally caught up officer at the Royal Swedish Naval
should not be construed as a bias to the stock. Though we still believe Academy in 1988. He also received a
against European stocks--we continue to this is a top European company, we sold B.B.A. from The University of Texas at
find very compelling investment our position. Austin.
opportunities there--but rather as an
indication of our flexibility in seeking Foreign currency exchange
investment opportunities elsewhere. also hindered Fund returns. Though some
foreign currencies, including the BARRETT K. SIDES,
For instance, our holdings in Mexico, Canadian dollar, Mexican peso and [SIDES senior portfolio
Brazil and Canada, countries not part of Brazilian real appreciated against the PHOTO] manager, is lead
our MSCI EAFE benchmarks, gave the Fund dollar during the fiscal year, most did manager of AIM
a competitive edge. Latin American and not. Most notably the euro, British International Growth
Canadian markets were supported by pound and Japanese yen depreciated Fund with respect to the Fund's
strong domestic demand and higher against the dollar. As we do not hedge investments in Asia Pacific and Latin
commodity prices. Canadian holdings in currencies, Fund returns were dampened America. He joined AIM in 1990. Mr.
particular benefited the portfolio; two by this negative currency effect. Sides graduated with a B.S. in economics
of our top performers were Canadian from Bucknell University. He also
energy companies. IN CLOSING received a master's in international
business from the University of St.
Sector performance was also Performance of international stocks over Thomas.
broad-based with every sector the last several years underscores the
registering double-digit returns. With investment opportunities beyond U.S. SHUXIN CAO,
oil prices approaching $70 per barrel borders. We believe our bottom-up [CAO Chartered Financial
during the fiscal year, the energy investment process allows us to build a PHOTO] Analyst, portfolio
sector benefited from a dramatic rise in strong portfolio based on world class manager, is manager
commodity prices. Many of our top companies from around the world. Given of AIM International
performing stocks were oil companies our international focus, we believe your Growth Fund. He
including SUNCOR ENERGY INC. (Canada), Fund can provide diversification joined AIM in 1997. Mr. Cao graduated
CANADIAN NATURAL RESOURCES (Canada), ENI opportunities beyond U.S. stocks as from Tianjin Foreign Language Institute
S.p.A. (Italy) and TOTAL S.A. (France). international stocks often trade at a with a B.A. in English. He also received
These companies have strong earnings discount to their U.S. peers. We are an M.B.A. from Texas A&M University and
growth and underlying return on capital pleased to again provide shareholders is a Certified Public Accountant.
coupled with attractive valuations- with positive Fund returns for the
- -characteristics we believe can lead to fiscal year. Thank you for your MATTHEW W. DENNIS,
strong long-term performance. continued participation in AIM [DENNIS Chartered Financial
International Growth Fund. PHOTO] Analyst, portfolio
Our bottom-up investment approach, manager, is manager
focusing on individual companies, THE VIEWS AND OPINIONS EXPRESSED IN of AIM International
enabled us to outperform our benchmark MANAGEMENT'S DISCUSSION OF FUND Growth Fund. He has been in the
in most sectors including energy, PERFORMANCE ARE THOSE OF A I M ADVISORS, investment business since 1994. Mr.
consumer discretionary, consumer INC. THESE VIEWS AND OPINIONS ARE Dennis received a B.A. in economics from
staples, industrials, information SUBJECT TO CHANGE AT ANY TIME BASED ON The University of Texas at Austin. He
technology and telecommunication FACTORS SUCH AS MARKET AND ECONOMIC also earned an M.S. in finance from
services. CONDITIONS. THESE VIEWS AND OPINIONS MAY Texas A&M University.
NOT BE RELIED UPON AS INVESTMENT ADVICE
Although our financial holdings OR RECOMMENDATIONS, OR AS AN OFFER FOR A JASON T. HOLZER,
performed well, our lack of exposure to PARTICULAR SECURITY. THE INFORMATION IS [HOLZER Chartered Financial
select banks in Japan--many of which NOT A COMPLETE ANALYSIS OF EVERY ASPECT PHOTO] Analyst, senior
were restructuring candidates that did OF ANY MARKET, COUNTRY, INDUSTRY, portfolio manager,
not fit our investment criteria--held SECURITY OR THE FUND. STATEMENTS OF FACT is portfolio manager
back comparative sector returns. We also ARE FROM SOURCES CONSIDERED RELIABLE, of AIM International Growth Fund. Mr.
had less exposure to Japanese BUT A I M ADVISORS, INC. MAKES NO Holzer joined AIM in 1996. He received a
investments than our style-specific REPRESENTATION OR WARRANTY AS TO THEIR B.A. in quantitative economics and an
benchmark, hindering comparative COMPLETENESS OR ACCURACY. ALTHOUGH M.S. in engineering-economic systems
performance. HISTORICAL PERFORMANCE IS NO GUARANTEE from Stanford University.
OF FUTURE RESULTS, THESE INSIGHTS MAY
HELP YOU UNDERSTAND OUR INVESTMENT Assisted by Asia/Latin America Team and
MANAGEMENT PHILOSOPHY. EUROPE/CANADA TEAM
SEE important Fund and index [RIGHT ARROW GRAPHIC]
disclosures inside front cover.
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE,PLEASE SEE
PAGES 6 AND 7.
4
AIM INTERNATIONAL GROWTH FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur to estimate the expenses that you paid The hypothetical account values and
two types of costs: (1) transaction over the period. Simply divide your expenses may not be used to estimate the
costs, which may include sales charges account value by $1,000 (for example, an actual ending account balance or
(loads) on purchase payments; contingent $8,600 account value divided by $1,000 = expenses you paid for the period. You
deferred sales charges on redemptions; 8.6), then multiply the result by the may use this information to compare the
and redemption fees, if any; and (2) number in the table under the heading ongoing costs of investing in the Fund
ongoing costs, including management entitled "Actual Expenses Paid During and other funds. To do so, compare this
fees; distribution and/or service fees Period" to estimate the expenses you 5% hypothetical example with the 5%
(12b-1); and other Fund expenses. This paid on your account during this period. hypothetical examples that appear in the
example is intended to help you shareholder reports of the other funds.
understand your ongoing costs (in HYPOTHETICAL EXAMPLE FOR COMPARISON
dollars) of investing in the Fund and to PURPOSES Please note that the expenses shown
compare these costs with ongoing costs in the table are meant to highlight your
of investing in other mutual funds. The The table below also provides ongoing costs only and do not reflect
example is based on an investment of information about hypothetical account any transactional costs, such as sales
$1,000 invested at the beginning of the values and hypothetical expenses based charges (loads) on purchase payments,
period and held for the entire period on the Fund's actual expense ratio and contingent deferred sales charges on
May 1, 2005, through October 31, 2005. an assumed rate of return of 5% per year redemptions, and redemption fees, if
before expenses, which is not the Fund's any. Therefore, the hypothetical
ACTUAL EXPENSES actual return. The Fund's actual information is useful in comparing
cumulative total returns at net asset ongoing costs only, and will not help
The table below provides information value after expenses for the six months you determine the relative total costs
about actual account values and actual ended October 31, 2005, appear in the of owning different funds. In addition,
expenses. You may use the information in table "Cumulative Total Returns" on Page if these transactional costs were
this table, together with the amount you 7. included, your costs would have been
invested, higher.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/01/05) (10/31/05)(1) PERIOD(2),(3) (10/31/05) PERIOD(2),(4) RATIO
A $ 1,000.00 $ 1,103.00 $ 8.69 $ 1,016.94 $ 8.34 1.64%
B 1,000.00 1,099.10 12.54 1,013.26 12.03 2.37
C 1,000.00 1,099.00 12.54 1,013.26 12.03 2.37
R 1,000.00 1,101.80 9.91 1,015.78 9.50 1.87
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31,
2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value
after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor
contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if
this agreement had been in effect throughout the entire most recent fiscal half year is 1.62% for the Class A shares.
(3) The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal
half year are $8.59 for Class A shares.
(4) The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent
fiscal half year are $8.24 for Class A shares.
====================================================================================================================================
[ARROW
BUTTON For More Information Visit
IMAGE] AIMinvestments.com
5
AIM INTERNATIONAL GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
Fund data from 4/7/92,index data from 3/31/92
[MOUNTAIN CHART]
===========================================================================
DATE AIM INTERNATIONAL GROWTH MSCI EAFE MSCI EAFE
FUND-CLASS A SHARES GROWTH INDEX INDEX
3/31/92 $9450 $10000 $10000
4/92 9710 9777 10047
5/92 10293 10508 10720
6/92 10185 10042 10211
7/92 9796 9884 9950
8/92 9959 10658 10574
9/92 9775 10437 10365
10/92 9602 9895 9822
11/92 9634 10034 9914
12/92 9702 10046 9965
1/93 9723 9955 9964
2/93 9940 10239 10265
3/93 10524 10966 11160
4/93 11034 11852 12219
5/93 11369 12201 12477
6/93 11142 12091 12282
7/93 11445 12444 12712
8/93 12289 13079 13399
9/93 12420 12760 13097
10/93 13189 13163 13501
11/93 12810 11872 12320
12/93 14144 12572 13210
1/94 14739 13517 14327
2/94 14284 13415 14287
3/94 13525 12755 13672
4/94 13981 13281 14252
5/94 13851 13126 14170
6/94 13633 13251 14370
7/94 14154 13367 14509
8/94 14555 13670 14852
9/94 14197 13214 14384
10/94 14630 13584 14863
11/94 13762 12973 14149
12/94 13670 13140 14238
1/95 12892 12636 13691
2/95 13220 12632 13651
3/95 13705 13426 14503
4/95 14134 14020 15048
5/95 14460 13859 14869
6/95 14709 13572 14608
7/95 15521 14437 15518
8/95 15204 13830 14926
9/95 15486 14146 15217
10/95 15396 13764 14808
11/95 15453 14143 15220
12/95 15913 14635 15833
1/96 16295 14645 15898
2/96 16631 14696 15952
3/96 16920 15049 16291
4/96 17465 15413 16764
5/96 17545 15091 16456
6/96 17905 15144 16549
7/96 17024 14654 16065
8/96 17419 14668 16100
9/96 17895 15070 16528
10/96 17825 14945 16359
11/96 18659 15423 17010
12/96 18929 15142 16791
1/97 18882 14511 16203
2/97 19097 14735 16468
3/97 18943 14823 16528
4/97 18895 14971 16615
5/97 20029 15851 17697
6/97 21069 16773 18673
7/97 21892 17174 18975
8/97 20007 15849 17558
9/97 21726 16897 18541
10/97 19864 15298 17116
11/97 19876 15265 16942
12/97 20011 15461 17089
1/98 20203 16160 17871
2/98 21581 17232 19018
3/98 22960 17465 19603
4/98 23295 17640 19758
5/98 23715 17516 19662
6/98 23739 17758 19811
7/98 24147 17838 20012
8/98 20802 15922 17533
9/98 20264 15474 16995
10/98 21078 17044 18767
11/98 21953 17868 19728
12/98 22697 18894 20507
1/99 22965 18993 20446
2/99 21916 18376 19959
3/99 22282 18625 20792
4/99 23001 18815 21634
5/99 22159 17998 20520
6/99 23573 18695 21320
7/99 24049 19054 21954
8/99 24073 19161 22034
9/99 24598 19465 22256
10/99 26502 20508 23090
11/99 30003 22010 23892
12/99 35200 24460 26036
1/00 32771 23084 24382
2/00 36074 24364 25038
3/00 34959 24821 26009
4/00 32138 23181 24640
5/00 30200 21745 24038
6/00 31580 22521 24978
7/00 30794 21110 23931
8/00 31998 21334 24139
9/00 29352 19922 22963
10/00 27338 19001 22421
11/00 25034 18124 21580
12/00 26153 18464 22347
1/01 26535 18412 22336
2/01 23536 16542 20661
3/01 21886 15397 19284
4/01 23140 16452 20624
5/01 22800 15789 19896
6/01 22554 15022 19083
7/01 22035 14658 18735
8/01 21244 13989 18261
9/01 19228 12665 16411
10/01 19691 13169 16831
11/01 19910 13845 17452
12/01 20304 13926 17555
1/02 19486 13175 16623
2/02 19732 13352 16739
3/02 20562 13922 17726
4/02 20589 13933 17762
5/02 20820 13961 17987
6/02 20384 13601 17271
7/02 18395 12151 15566
8/02 18408 12057 15530
9/02 16473 11008 13863
10/02 17290 11630 14608
11/02 17589 11972 15271
12/02 17412 11694 14757
1/03 16745 11115 14141
2/03 16514 10876 13816
3/03 16268 10761 13545
4/03 17236 11693 14873
5/03 18258 12297 15774
6/03 18639 12511 16155
7/03 18747 12675 16546
8/03 19047 12907 16946
9/03 19483 13344 17468
10/03 20750 14111 18557
11/03 21132 14441 18969
12/03 22252 15435 20451
1/04 22962 15736 20740
2/04 23588 16034 21219
3/04 23520 16047 21339
4/04 23014 15648 20856
5/04 23191 15608 20900
6/04 23532 15817 21385
7/04 22782 15174 20691
8/04 22959 15191 20782
9/04 23846 15566 21325
10/04 24788 16087 22052
11/04 26314 17195 23559
12/04 27459 17924 24592
1/05 27009 17510 24141
2/05 28222 18212 25184
3/05 27581 17765 24551
4/05 26748 17422 23974
5/05 26967 17474 23986
6/05 27636 17614 24304
7/05 28808 18151 25049
8/05 29776 18672 25682
9/05 30484 19458 26826
10/05 29518 18926 26042
===========================================================================
SOURCE: LIPPER,INC.
The data shown in the chart include This chart, which is a logarithmic
reinvested distributions, applicable chart, presents the fluctuations in the
sales charges, Fund expenses and value of the Fund and its indexes. We
management fees. Index results include believe that a logarithmic chart is more
reinvested dividends, but they do not effective than other types of charts in
reflect sales charges. Performance of an illustrating changes in value during the
index of funds reflects fund expenses early years shown in the chart. The
and management fees; performance of a vertical axis, the one that indicates
market index does not. Performance shown the dollar value of an investment, is
in the chart and table(s) does not constructed with each segment
reflect deduction of taxes a shareholder representing a percent change in the
would pay on Fund distributions or sale value of the investment. In this chart,
of Fund shares. Performance of the each segment represents a doubling, or
indexes does not reflect the effects of 100% change, in the value of the
taxes. investment. In other words, the space
between $5,000 and $10,000 is the same
size as the space between $10,000 and
$20,000, is the same space between
$20,000 and $40,000.
6
AIM INTERNATIONAL GROWTH FUND
======================================== ======================================== ========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/05, including applicable As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 10.30%
Inception (4/7/92) 8.31% CLASS A SHARES Class B Shares 9.91
10 Years 6.13 Inception (4/7/92) 8.62% Class C Shares 9.90
5 Years 0.40 10 Years 6.41 Class R Shares 10.18
1 Year 12.48 5 Years -0.36 ========================================
1 Year 20.81
CLASS B SHARES
Inception (9/15/94) 5.99% CLASS B SHARES
10 Years 6.09 Inception (9/15/94) 6.35%
5 Years 0.45 10 Years 6.37
1 Year 13.19 5 Years -0.31
1 Year 22.03
CLASS C SHARES
Inception (8/4/97) 3.18% CLASS C SHARES
5 Years 0.84 Inception (8/4/97) 3.64%
1 Year 17.17 5 Years 0.07
1 Year 26.00
CLASS R SHARES
10 Years 6.47% CLASS R SHARES
5 Years 1.27 10 Years 6.76%
1 Year 18.79 5 Years 0.50
1 Year 27.59
======================================== ========================================
CLASS R SHARES' INCEPTION DATE IS JUNE PERFORMANCE FIGURES REFLECT REINVESTED SHARES IS 1% FOR THE FIRST YEAR AFTER
3, 2002. RETURNS SINCE THAT DATE ARE DISTRIBUTIONS, CHANGES IN NET ASSET PURCHASE. CLASS R SHARES DO NOT HAVE A
HISTORICAL RETURNS. ALL OTHER RETURNS VALUE AND THE EFFECT OF THE MAXIMUM FRONT-END SALES CHARGE; RETURNS SHOWN
ARE BLENDED RETURNS OF HISTORICAL CLASS SALES CHARGE UNLESS OTHERWISE STATED. ARE AT NET ASSET VALUE AND DO NOT
R SHARE PERFORMANCE AND RESTATED CLASS A INVESTMENT RETURN AND PRINCIPAL VALUE REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
SHARE PERFORMANCE (FOR PERIODS PRIOR TO WILL FLUCTUATE SO THAT YOU MAY HAVE A ON A TOTAL REDEMPTION OF RETIREMENT PLAN
THE INCEPTION DATE OF CLASS R SHARES) AT GAIN OR LOSS WHEN YOU SELL SHARES. ASSETS WITHIN THE FIRST YEAR.
NET ASSET VALUE, ADJUSTED TO REFLECT THE
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS A SHARE PERFORMANCE REFLECTS THE PERFORMANCE OF THE FUND'S SHARE
CLASS R SHARES. THE MAXIMUM 5.50% SALES CHARGE, AND CLASSES WILL DIFFER DUE TO DIFFERENT
CLASS B AND CLASS C SHARE PERFORMANCE SALES CHARGE STRUCTURES AND CLASS
THE PERFORMANCE DATA QUOTED REPRESENT REFLECTS THE APPLICABLE CONTINGENT EXPENSES.
PAST PERFORMANCE AND CANNOT GUARANTEE DEFERRED SALES CHARGE (CDSC) FOR THE
COMPARABLE FUTURE RESULTS; CURRENT PERIOD INVOLVED. THE CDSC ON CLASS B A REDEMPTION FEE OF 2% WILL BE
PERFORMANCE MAY BE LOWER OR HIGHER. SHARES DECLINES FROM 5% BEGINNING AT THE IMPOSED ON CERTAIN REDEMPTIONS OR
PLEASE VISIT AIMINVESTMENTS.COM FOR THE TIME OF PURCHASE TO 0% AT THE BEGINNING EXCHANGES OUT OF THE FUND WITHIN 30 DAYS
MOST RECENT MONTH-END PERFORMANCE. OF THE SEVENTH YEAR. THE CDSC ON CLASS C OF PURCHASE. EXCEPTIONS TO THE
REDEMPTION FEE ARE LISTED IN THE FUND'S
PROSPECTUS.
7
AIM INTERNATIONAL GROWTH FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
The Board of Trustees of AIM o The quality of services to be provided company separate accounts with
International Mutual Funds (the "Board") by AIM. The Board reviewed the investment strategies comparable to
oversees the management of AIM credentials and experience of the those of the Fund; (ii) was lower than
International Growth Fund (the "Fund") officers and employees of AIM who will the advisory fee rates for a offshore
and, as required by law, determines provide investment advisory services to fund for which an AIM affiliate serves
annually whether to approve the the Fund. In reviewing the as advisor with investment strategies
continuance of the Fund's advisory qualifications of AIM to provide comparable to those of the Fund; and
agreement with A I M Advisors, Inc. investment advisory services, the (iii) was higher than the advisory fee
("AIM"). Based upon the recommendation Board reviewed the qualifications of rates for nine separately managed wrap
of the Investments Committee of the AIM's investment personnel and accounts managed by an AIM affiliate
Board, which is comprised solely of considered such issues as AIM's with investment strategies comparable to
independent trustees, at a meeting held portfolio and product review process, those of the Fund. The Board noted that
on June 30, 2005, the Board, including various back office support functions AIM has agreed to waive advisory fees of
all of the independent trustees, provided by AIM and AIM's equity and the Fund and to limit the Fund's total
approved the continuance of the advisory fixed income trading operation. Based on operating expenses, as discussed below.
agreement (the "Advisory Agreement") the review of these and other factors, Based on this review, the Board
between the Fund and AIM for another the Board concluded that the quality of concluded that the advisory fee rate for
year, effective July 1, 2005. services to be provided by AIM was the Fund under the Advisory Agreement
appropriate and that AIM currently is was fair and reasonable.
The Board considered the factors providing satisfactory services in
discussed below in evaluating the accordance with the terms of the
fairness and reasonableness of the Advisory Agreement. o Fees relative to those of comparable
Advisory Agreement at the meeting on funds with other advisors. The Board
June 30, 2005 and as part of the Board's o The performance of the Fund relative reviewed the advisory fee rate for the
ongoing oversight of the Fund. In their to comparable funds. The Board Fund under the Advisory Agreement. The
deliberations, the Board and the inde- reviewed the performance of the Fund Board compared effective contractual
pendent trustees did not identify any during the past one, three and five advisory fee rates at a common asset
particular factor that was controlling, calendar years against the performance level and noted that the Fund's rate was
and each trustee attributed different of funds advised by other advisors with comparable to the median rate of the
weights to the various factors. investment strategies comparable to funds advised by other advisors with
those of the Fund. The Board noted that investment strategies comparable to
One of the responsibilities of the the Fund's performance for the one and those of the Fund that the Board
Senior Officer of the Fund, who is three year periods was above the median reviewed. The Board noted that AIM has
independent of AIM and AIM's affili- performance of such comparable funds and agreed to waive advisory fees of the
ates, is to manage the process by which below such median performance for the Fund and to limit the Fund's total
the Fund's proposed management fees are five year period. Based on this review, operating expenses, as discussed below.
negotiated to ensure that they are the Board concluded that no changes Based on this review, the Board
negotiated in a manner which is at arm's should be made to the Fund and that it concluded that the advisory fee rate for
length and reasonable. To that end, the was not necessary to change the Fund's the Fund under the Advisory Agreement
Senior Officer must either supervise a portfolio management team at this time. was fair and reasonable.
competitive bidding process or prepare
an independent written evaluation. The o The performance of the Fund relative o Expense limitations and fee waivers.
Senior Officer has recommended an to indices. The Board reviewed the The Board noted that AIM has
independent written evaluation in lieu performance of the Fund during the past contractually agreed to waive advisory
of a competitive bidding process and, one, three and five calendar years fees of the Fund through December 31,
upon the direction of the Board, has against the performance of the Lipper 2009 to the extent necessary so that the
prepared such an independent written International Multi-Cap Growth Index. advisory fees payable by the Fund do not
evaluation. Such written evaluation also The Board noted that the Fund's exceed a specified maximum advisory
considered certain of the factors performance in for the one and three fee rate, which maximum rate includes
discussed below. In addition, as year periods was above the performance breakpoints and is based on net asset
discussed below, the Senior Officer made of such Index and comparable to such levels. The Board considered the
certain recommendations to the Board in Index for the five year period. Based on contractual nature of this fee waiver
connection with such written evaluation. this review, the Board concluded that no and noted that it remains in effect
changes should be made to the Fund and until December 31, 2009. The Board noted
The discussion below serves as a that it was not necessary to change the that AIM has contractually agreed to
summary of the Senior Officer's Fund's portfolio management team at waive fees and/or limit expenses of the
independent written evaluation and this time. Fund through October 31, 2005 in an
recommendations to the Board in amount equal to 0.05% of assets in
connection therewith, as well as a o Meeting with the Fund's portfolio excess of $500 million. The Board
discussion of the material factors and managers and investment personnel. With considered the contractual nature of
the conclusions with respect thereto respect to the Fund, the Board is this fee waiver/expense limitation and
that formed the basis for the Board's meeting periodically with such Fund's noted that it remains in effect until
approval of the Advisory Agreement. portfolio managers and/or other October 31, 2005. The Board considered
After consideration of all of the investment personnel and believes that the effect this fee waiver/expense
factors below and based on its informed such individuals are competent and able limitation would have on the Fund's
business judgment, the Board determined to continue to carry out their estimated expenses and concluded that
that the Advisory Agreement is in the responsibilities under the Advisory the levels of fee waivers/expense limi-
best interests of the Fund and its Agreement. tations for the Fund were fair and
shareholders and that the compensation reasonable.
to AIM under the Advisory Agreement is o Overall performance of AIM. The Board
fair and reasonable and would have been considered the overall performance of o Breakpoints and economies of scale.
obtained through arm's length AIM in providing investment advisory and The Board reviewed the structure of the
negotiations. portfolio administrative services to the Fund's advisory fee under the Advisory
Fund and concluded that such performance Agreement, noting that it includes one
o The nature and extent of the advisory was satisfactory. breakpoint. The Board reviewed the level
services to be provided by AIM. The of the Fund's advisory fees, and noted
Board reviewed the services to be o Fees relative to those of clients of that such fees, as a percentage of the
provided by AIM under the Advisory AIM with comparable investment Fund's net assets, have decreased as net
Agreement. Based on such review, the strategies. The Board reviewed the assets increased because the Advisory
Board concluded that the range of advisory fee rate for the Fund under the Agreement includes a breakpoint. The
services to be provided by AIM under the Advisory Agreement. The Board noted that Board noted that AIM has contractually
Advisory Agreement was appropriate and this rate (i) was higher than the agreed to waive advisory fees of the
that AIM currently is providing services advisory fee rate for a variable insur- Fund through December 31, 2009 to the
in accordance with the terms of the ance fund advised by AIM and offered to extent necessary so that the
Advisory Agreement. insurance
8
AIM INTERNATIONAL GROWTH FUND
advisory fees payable by the Fund do not o Profitability of AIM and its o Other factors and current trends. In
exceed a specified maximum advisory fee affiliates. The Board reviewed determining whether to continue the
rate, which maximum rate includes information concerning the profitability Advisory Agreement for the Fund, the
breakpoints and is based on net asset of AIM's (and its affiliates') Board considered the fact that AIM,
levels. The Board concluded that the investment advisory and other activities along with others in the mutual fund
Fund's fee levels under the Advisory and its financial condition. The Board industry, is subject to regulatory
Agreement therefore reflect economies of considered the overall profitability of inquiries and litigation related to a
scale and that it was not necessary to AIM, as well as the profitability of AIM wide range of issues. The Board also
change the advisory fee breakpoints in in connection with managing the Fund. considered the governance and
the Fund's advisory fee schedule. The Board noted that AIM's operations compliance reforms being undertaken by
remain profitable, although increased AIM and its affiliates, including
o Investments in affiliated money market expenses in recent years have reduced maintaining an internal controls
funds. The Board also took into account AIM's profitability. Based on the review committee and retaining an independent
the fact that uninvested cash and cash of the profitability of AIM's and its compliance consultant, and the fact that
collateral from securities lending affiliates' investment advisory and AIM has undertaken to cause the Fund to
arrangements (collectively, "cash other activities and its financial operate in accordance with certain
balances") of the Fund may be invested condition, the Board concluded that the governance policies and practices. The
in money market funds advised by AIM compensation to be paid by the Fund to Board concluded that these actions
pursuant to the terms of an SEC AIM under its Advisory Agreement was not indicated a good faith effort on the
exemptive order. The Board found that excessive. part of AIM to adhere to the highest
the Fund may realize certain benefits ethical standards, and determined that
upon investing cash balances in AIM o Benefits of soft dollars to AIM. The the current regulatory and litigation
advised money market funds, including a Board considered the benefits realized environment to which AIM is subject
higher net return, increased liquidity, by AIM as a result of brokerage should not prevent the Board from
increased diversification or decreased transactions executed through "soft continuing the Advisory Agreement for
transaction costs. The Board also found dollar" arrangements. Under these the Fund.
that the Fund will not receive reduced arrangements, brokerage commissions paid
services if it invests its cash balances by the Fund and/or other funds advised
in such money market funds. The Board by AIM are used to pay for research and
noted that, to the extent the Fund execution services. This research is
invests in affiliated money market used by AIM in making investment
funds, AIM has voluntarily agreed to decisions for the Fund. The Board
waive a portion of the advisory fees it concluded that such arrangements were
receives from the Fund attributable to appropriate.
such investment. The Board noted that,
to the extent the Fund invests in o AIM's financial soundness in light of
affiliated money market funds, AIM has the Fund's needs. The Board considered
voluntarily agreed to waive a portion whether AIM is financially sound and has
of the advisory fees it receives from the resources necessary to perform its
the Fund attributable to such invest- obligations under the Advisory
ment. The Board further determined that Agreement, and concluded that AIM has
the proposed securities lending program the financial resources necessary to
and related procedures with respect to fulfill its obligations under the
the lending Fund is in the best Advisory Agreement.
interests of the lending Fund and its
respective shareholders. The Board o Historical relationship between the
therefore concluded that the investment Fund and AIM. In determining whether to
of cash collateral received in continue the Advisory Agreement for the
connection with the securities lending Fund, the Board also considered the
program in the money market funds prior relationship between AIM and the
according to the procedures is in the Fund, as well as the Board's knowledge
best interests of the lending Fund and of AIM's operations, and concluded that
its respective shareholders. it was beneficial to maintain the cur-
rent relationship, in part, because of
o Independent written evaluation and such knowledge. The Board also reviewed
recommendations of the Fund's Senior the general nature of the non-investment
Officer. The Board noted that, upon advisory services currently performed by
their direction, the Senior Officer of AIM and its affiliates, such as
the Fund, who is independent of AIM and administrative, transfer agency and
AIM's affiliates, had prepared an distribution services, and the fees
independent written evaluation in order received by AIM and its affiliates for
to assist the Board in determining the performing such services. In addition to
reasonableness of the proposed management reviewing such services, the trustees
fees of the AIM Funds, including the Fund. also considered the organizational
The Board noted that the Senior Officer's structure employed by AIM and its
written evaluation had been relied upon affiliates to provide those services.
by the Board in this regard in lieu of a Based on the review of these and other
competitive bidding process. In factors, the Board concluded that AIM
determining whether to continue the and its affiliates were qualified to
Advisory Agreement for the Fund, the continue to provide non-investment
Board considered the Senior Officer's advisory services to the Fund, including
written evaluation and the recommendation administrative, transfer agency and
made by the Senior Officer to the Board distribution services, and that AIM and
that the Board consider implementing a its affiliates currently are providing
process to assist them in more closely satisfactory non-investment advisory
monitoring the performance of the AIM services.
Funds. The Board concluded that it would
be advisable to implement such a process
as soon as reasonably practicable.
9
SUPPLEMENT TO ANNUAL REPORT DATED 10/31/05
AIM INTERNATIONAL GROWTH FUND
===============================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT
For periods ended 10/31/05 INDICATIVE OF FUTURE RESULTS. MORE RECENT
The following information has been RETURNS MAY BE MORE OR LESS THAN THOSE
prepared to provide Institutional Inception (3/15/02) 11.11% SHOWN. ALL RETURNS ASSUME REINVESTMENT OF
Class shareholders with a 1 Year 19.79 DISTRIBUTIONS AT NET ASSET VALUE.
performance overview specific to 6 Months* 10.62 INVESTMENT RETURN AND PRINCIPAL VALUE WILL
their holdings. Institutional Class =============================================== FLUCTUATE SO YOUR SHARES, WHEN REDEEMED,
shares are offered exclusively to MAY BE WORTH MORE OR LESS THAN THEIR
institutional investors, including AVERAGE ANNUAL TOTAL RETURNS ORIGINAL COST. SEE FULL REPORT FOR
defined contribution plans that meet For periods ended 9/30/05, most recent calendar INFORMATION ON COMPARATIVE BENCHMARKS.
certain criteria. quarter-end PLEASE CONSULT YOUR FUND PROSPECTUS FOR
MORE INFORMATION. FOR THE MOST CURRENT
Inception (3/15/02) 12.41% MONTH-END PERFORMANCE, PLEASE CALL
1 Year 28.70 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
6 Months* 10.85
* Cumulative total return that has not been
annualized
===============================================
INSTITUTIONAL CLASS SHARES HAVE NO SALES
CHARGE; THEREFORE, PERFORMANCE IS AT NET ASSET
VALUE (NAV). PERFORMANCE OF INSTITUTIONAL CLASS
SHARES WILL DIFFER FROM PERFORMANCE OF OTHER
SHARE CLASSES DUE TO DIFFERING SALES CHARGES
AND CLASS EXPENSES.
====================================
NASDAQ SYMBOL AIEVX
====================================
Over for information on your Fund's expenses.
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written
form as sales literature for public use.
[YOUR GOALS.
OUR SOLUTIONS.]
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AIMINVESTMENTS.COM IGR-INS-1 - REGISTERED TRADEMARK -
INFORMATION ABOUT YOUR FUND'S EXPENSES
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE divide your account value by $1,000 (for The hypothetical account values and
example, an $8,600 account value divided by expenses may not be used to estimate the
As a shareholder of the Fund, you $1,000 = 8.6), then multiply the result by the actual ending account balance or expenses
incur ongoing costs, including number in the table under the heading entitled you paid for the period. You may use this
management fees and other Fund "Actual Expenses Paid During Period" to information to compare the ongoing costs of
expenses. This example is intended estimate the expenses you paid on your account investing in the Fund and other funds. To
to help you understand your ongoing during this period. do so, compare this 5% hypothetical example
costs (in dollars) of investing in with the 5% hypothetical examples that
the Fund and to compare these costs HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES appear in the shareholder reports of the
with ongoing costs of investing in other funds.
other mutual funds. The example is The table below also provides information about
based on an investment of $1,000 hypothetical account values and hypothetical Please note that the expenses shown in
invested at the beginning of the expenses based on the Fund's actual expense the table are meant to highlight your
period and held for the entire ratio and an assumed rate of return of 5% per ongoing costs only. Therefore, the
period May 1, 2005, through October year before expenses, which is not the Fund's hypothetical information is useful in
31, 2005. actual return. The Fund's actual cumulative comparing ongoing costs only, and will not
total return after expenses for the six months help you determine the relative total costs
ACTUAL EXPENSES ended October 31, 2005, appears in the table on of owning different funds.
the front of this supplement.
The table below provides information
about actual account values and
actual expenses. You may use the
information in this table, together
with the amount you invested, to
estimate the expenses that you paid
over the period. Simply
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/05) (10/31/05)(1) PERIOD(2) (10/31/05) PERIOD(2) RATIO
Institutional $ 1,000.00 $ 1,106.20 $ 5.73 $1,019.76 $5.50 1.08%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, to October 31,
2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the
six months ended October 31, 2005, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
====================================================================================================================================
AIMINVESTMENTS.COM IGR-INS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-97.62%
AUSTRALIA-2.97%
BHP Billiton Ltd. (Diversified Metals &
Mining)(a) 1,829,300 $ 28,387,929
- -----------------------------------------------------------------------------
Brambles Industries Ltd. (Diversified
Commercial & Professional Services)(a)(b) 1,586,000 10,052,377
- -----------------------------------------------------------------------------
Coca-Cola Amatil Ltd. (Soft Drinks)(a) 1,214,000 6,946,843
- -----------------------------------------------------------------------------
QBE Insurance Group Ltd. (Property & Casualty
Insurance)(a) 908,000 12,128,120
=============================================================================
57,515,269
=============================================================================
AUSTRIA-0.53%
OMV A.G. (Integrated Oil & Gas)(a) 190,900 10,304,404
=============================================================================
BELGIUM-2.33%
InBev N.V. (Brewers) 547,300 21,879,218
- -----------------------------------------------------------------------------
KBC Groep N.V. (Diversified Banks)(a) 285,200 23,238,484
=============================================================================
45,117,702
=============================================================================
BRAZIL-1.25%
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers)(b) 408,700 14,508,850
- -----------------------------------------------------------------------------
Petroleo Brasileiro S.A.-ADR (Integrated Oil
& Gas) 168,700 9,678,319
=============================================================================
24,187,169
=============================================================================
CANADA-6.79%
Canadian National Railway Co. (Railroads) 260,650 18,869,290
- -----------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas
Exploration & Production) 410,700 16,882,846
- -----------------------------------------------------------------------------
EnCana Corp. (Oil & Gas Exploration &
Production) 350,200 16,088,948
- -----------------------------------------------------------------------------
Manulife Financial Corp. (Life & Health
Insurance) 518,350 26,978,515
- -----------------------------------------------------------------------------
Power Corp. of Canada (Other Diversified
Financial Services) 413,000 10,221,405
- -----------------------------------------------------------------------------
Shoppers Drug Mart Corp. (Drug Retail) 354,300 11,784,271
- -----------------------------------------------------------------------------
Shoppers Drug Mart Corp. (Drug Retail)
(Acquired 11/18/03; Cost $2,955,117)(c)(d) 138,500 4,619,937
- -----------------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 487,900 26,108,361
=============================================================================
131,553,573
=============================================================================
CHINA-0.80%
Ping An Insurance (Group) Co. of China,
Ltd.-Class H (Life & Health Insurance)(a) 3,350,000 5,435,496
- -----------------------------------------------------------------------------
Shanghai Electric Group Co. Ltd.-Class H
(Heavy Electrical Equipment)(a)(e) 32,000,000 10,127,517
=============================================================================
15,563,013
=============================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------------
<Caption>
FRANCE-13.79%
AXA (Multi-Line Insurance)(a) 572,500 $ 16,583,255
- -----------------------------------------------------------------------------
BNP Paribas S.A. (Diversified Banks)(a) 470,998 35,716,020
- -----------------------------------------------------------------------------
Bouygues S.A. (Wireless Telecommunication
Services) 412,600 20,362,008
- -----------------------------------------------------------------------------
Pernod Ricard S.A. (Distillers & Vintners)(b) 128,738 22,515,031
- -----------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(a) 236,580 18,946,758
- -----------------------------------------------------------------------------
Societe Generale (Diversified Banks)(a) 219,600 25,077,426
- -----------------------------------------------------------------------------
Technip S.A. (Oil & Gas Equipment &
Services)(a) 9,700 528,254
- -----------------------------------------------------------------------------
Technip S.A. (Oil & Gas Equipment & Services)
(Acquired 12/16/04; Cost $8,703,354)(a)(d) 195,400 10,641,328
- -----------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(a) 167,449 42,174,201
- -----------------------------------------------------------------------------
Veolia Environnement (Multi-Utilities)(a) 345,200 14,395,458
- -----------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 441,760 34,525,859
- -----------------------------------------------------------------------------
Vivendi Universal S.A. (Movies &
Entertainment)(a) 812,900 25,548,432
=============================================================================
267,014,030
=============================================================================
GERMANY-4.99%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods) 115,650 19,406,765
- -----------------------------------------------------------------------------
Continental A.G. (Tires & Rubber)(a) 142,100 10,863,500
- -----------------------------------------------------------------------------
Henkel KGaA-Pfd. (Household Products)(a)(b) 99,600 8,585,114
- -----------------------------------------------------------------------------
MAN A.G. (Industrial Machinery)(a) 208,700 9,691,155
- -----------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(a)(b) 175,250 14,502,720
- -----------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile
Manufacturers)(b) 21,235 15,310,818
- -----------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear) 72,102 18,258,056
=============================================================================
96,618,128
=============================================================================
GREECE-1.17%
OPAP S.A. (Casinos & Gaming)(a) 784,600 22,674,485
=============================================================================
HONG KONG-3.31%
Cheung Kong (Holdings) Ltd. (Real Estate
Management & Development)(a) 1,332,000 13,897,202
- -----------------------------------------------------------------------------
China Construction Bank-Class H (Diversified
Banks) (Acquired 10/20/05; Cost
$12,818,584)(d)(e) 41,898,000 12,701,113
- -----------------------------------------------------------------------------
Esprit Holdings Ltd. (Apparel Retail)(a) 1,948,000 13,757,787
- -----------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Industrial
Conglomerates)(a) 1,469,000 13,942,910
- -----------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate
Management & Development)(a) 1,038,000 9,839,368
=============================================================================
64,138,380
=============================================================================
HUNGARY-1.25%
OTP Bank Rt. (Diversified Banks)(a) 672,100 24,280,305
=============================================================================
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
INDIA-2.32%
Housing Development Finance Corp. Ltd.
(Thrifts & Mortgage Finance)(a) 554,736 $ 11,942,078
- -----------------------------------------------------------------------------
Infosys Technologies Ltd. (IT Consulting &
Other Services)(a) 589,288 33,047,782
=============================================================================
44,989,860
=============================================================================
IRELAND-3.27%
Allied Irish Banks PLC (Diversified Banks)(a) 597,800 12,608,804
- -----------------------------------------------------------------------------
Anglo Irish Bank Corp. PLC (Diversified
Banks)(a) 2,583,002 34,971,154
- -----------------------------------------------------------------------------
CRH PLC (Construction Materials)(a) 627,811 15,719,152
=============================================================================
63,299,110
=============================================================================
ISRAEL-0.82%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 418,700 15,960,844
=============================================================================
ITALY-2.83%
Eni S.p.A. (Integrated Oil & Gas)(a)(b) 1,449,249 38,771,018
- -----------------------------------------------------------------------------
Mediaset S.p.A. (Broadcasting & Cable TV)(a) 1,451,900 15,947,400
=============================================================================
54,718,418
=============================================================================
JAPAN-14.10%
Astellas Pharma Inc. (Pharmaceuticals)(a) 581,000 20,777,880
- -----------------------------------------------------------------------------
Canon Inc. (Office Electronics)(a) 179,800 9,515,982
- -----------------------------------------------------------------------------
Daiwa House Industry Co., Ltd.
(Homebuilding)(a) 987,000 13,256,458
- -----------------------------------------------------------------------------
FANUC Ltd. (Industrial Machinery)(a) 252,200 19,935,905
- -----------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment
Manufacturers)(a) 60,600 2,130,296
- -----------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment
Manufacturers)(e) 646,800 22,394,467
- -----------------------------------------------------------------------------
JSR Corp. (Specialty Chemicals)(a) 742,500 17,486,622
- -----------------------------------------------------------------------------
Keyence Corp. (Electronic Equipment
Manufacturers) 75,300 17,234,349
- -----------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks) (Acquired 10/24/05; Cost
$9,401,000)(a)(d) 1,564 10,506,322
- -----------------------------------------------------------------------------
Nidec Corp. (Electronic Equipment
Manufacturers)(a) 120,500 7,053,777
- -----------------------------------------------------------------------------
Nidec Corp. (Electronic Equipment
Manufacturers)(e) 120,500 6,677,478
- -----------------------------------------------------------------------------
Nissan Motor Co., Ltd. (Automobile
Manufacturers)(a) 876,900 9,165,827
- -----------------------------------------------------------------------------
Nitto Denko Corp. (Specialty Chemicals)(a) 231,700 14,028,926
- -----------------------------------------------------------------------------
OMRON Corp. (Electronic Equipment
Manufacturers)(a) 306,100 7,224,549
- -----------------------------------------------------------------------------
Orix Corp. (Consumer Finance)(a) 64,000 11,999,005
- -----------------------------------------------------------------------------
SMC Corp. (Industrial Machinery)(a) 79,300 10,592,746
- -----------------------------------------------------------------------------
Suzuki Motor Corp. (Automobile
Manufacturers)(a) 491,000 8,462,920
- -----------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd.
(Pharmaceuticals)(a) 422,400 23,229,818
- -----------------------------------------------------------------------------
Toyota Motor Corp. (Automobile
Manufacturers)(a) 593,000 27,534,401
- -----------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------------
<Caption>
JAPAN-(CONTINUED)
Yamaha Motor Co., Ltd. (Motorcycle
Manufacturers)(a) 646,500 $ 13,915,344
=============================================================================
273,123,072
=============================================================================
MEXICO-2.69%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services)(b) 932,900 24,488,625
- -----------------------------------------------------------------------------
Grupo Televisa, S.A.-ADR (Broadcasting &
Cable TV) 128,900 9,422,590
- -----------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers) 3,740,400 18,206,100
=============================================================================
52,117,315
=============================================================================
NETHERLANDS-0.87%
Koninklijke (Royal) DSM N.V. (Specialty
Chemicals)(a) 471,200 16,921,318
=============================================================================
RUSSIA-0.53%
OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 186,000 10,259,043
=============================================================================
SINGAPORE-1.74%
DBS Group Holdings Ltd. (Diversified
Banks)(a) 1,410,000 12,758,401
- -----------------------------------------------------------------------------
Keppel Corp. Ltd. (Industrial
Conglomerates)(a) 2,021,000 13,878,415
- -----------------------------------------------------------------------------
Singapore Airlines Ltd. (Airlines)(a) 1,073,000 7,121,002
=============================================================================
33,757,818
=============================================================================
SOUTH AFRICA-0.54%
Standard Bank Group Ltd. (Diversified
Banks)(a) 1,015,761 10,468,794
=============================================================================
SOUTH KOREA-2.81%
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. (Construction & Farm Machinery & Heavy
Trucks)(a) 299,400 6,011,846
- -----------------------------------------------------------------------------
Hyundai Motor Co. (Automobile
Manufacturers)(a) 166,670 12,318,181
- -----------------------------------------------------------------------------
Kookmin Bank (Diversified Banks)(a) 150,880 8,673,534
- -----------------------------------------------------------------------------
LG.Philips LCD Co., Ltd.-ADR (Electronic
Equipment Manufacturers)(b)(e) 582,437 11,072,127
- -----------------------------------------------------------------------------
Samsung Electronics Co., Ltd. (Electronic
Equipment Manufacturers)(a) 30,540 16,314,124
=============================================================================
54,389,812
=============================================================================
SPAIN-3.39%
ACS, Actividades de Construccion y Servicios,
S.A. (Construction & Engineering)(a) 520,400 14,878,829
- -----------------------------------------------------------------------------
Banco Santander Central Hispano S.A.
(Diversified Banks)(a) 1,370,800 17,485,581
- -----------------------------------------------------------------------------
Grupo Ferrovial, S.A. (Construction &
Engineering)(a) 209,900 15,503,385
- -----------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 599,000 17,728,744
=============================================================================
65,596,539
=============================================================================
SWEDEN-1.73%
Atlas Copco A.B.-Class A (Industrial
Machinery) 527,100 9,633,353
- -----------------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(a) 805,600 9,158,644
- -----------------------------------------------------------------------------
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
SWEDEN-(CONTINUED)
Volvo A.B.-Class B (Construction & Farm
Machinery & Heavy Trucks)(a) 357,800 $ 14,721,090
=============================================================================
33,513,087
=============================================================================
SWITZERLAND-7.72%
Compagnie Financiere Richemont A.G.-Class A
(Apparel, Accessories & Luxury Goods)(a)(f) 757,660 28,839,935
- -----------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)(a) 45,200 13,457,071
- -----------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals) 219,475 32,792,277
- -----------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology)(a) 14,240 9,223,180
- -----------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(a)(e) 314,690 33,741,521
- -----------------------------------------------------------------------------
UBS A.G. (Diversified Capital Markets)(a) 370,098 31,423,326
=============================================================================
149,477,310
=============================================================================
TAIWAN-1.21%
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services)(a) 3,169,450 13,752,616
- -----------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(a) 6,222,699 9,733,316
=============================================================================
23,485,932
=============================================================================
TURKEY-0.61%
Akbank T.A.S. (Diversified Banks)(a) 1,911,600 11,891,072
=============================================================================
UNITED KINGDOM-11.26%
Aviva PLC (Multi-Line Insurance) 1,606,640 18,972,654
- -----------------------------------------------------------------------------
BP PLC (Integrated Oil & Gas)(a) 874,500 9,681,199
- -----------------------------------------------------------------------------
Capita Group PLC (Human Resource & Employment
Services) 1,289,900 8,906,443
- -----------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(a) 1,048,600 14,460,835
- -----------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco) 1,216,200 34,882,185
- -----------------------------------------------------------------------------
International Power PLC (Independent Power
Producers & Energy Traders)(a) 3,840,200 15,775,757
- -----------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------------
<Caption>
UNITED KINGDOM-(CONTINUED)
O2 PLC (Wireless Telecommunication Services) 5,924,490 $ 21,502,477
- -----------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products)(a) 721,230 21,800,220
- -----------------------------------------------------------------------------
Shire Pharmaceuticals Group PLC
(Pharmaceuticals)(a) 1,623,100 19,180,560
- -----------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 4,485,673 23,886,835
- -----------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services)(a) 8,671,900 22,764,778
- -----------------------------------------------------------------------------
William Hill PLC (Casinos & Gaming)(a) 663,830 6,278,085
=============================================================================
218,092,028
=============================================================================
Total Foreign Stocks & Other Equity Interests
(Cost $1,276,013,175) 1,891,027,830
=============================================================================
MONEY MARKET FUNDS-0.85%
Liquid Assets Portfolio-Institutional
Class(g) 8,233,242 8,233,242
- -----------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(g) 8,233,242 8,233,242
=============================================================================
Total Money Market Funds (Cost
$16,466,484) 16,466,484
=============================================================================
TOTAL INVESTMENTS-98.47% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,292,479,659) 1,907,494,314
=============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-4.17%
Liquid Assets Portfolio-Institutional
Class(g)(h) 80,692,180 80,692,180
=============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $80,692,180) 80,692,180
=============================================================================
TOTAL INVESTMENTS-102.64% (Cost
$1,373,171,839) 1,988,186,494
=============================================================================
OTHER ASSETS LESS LIABILITIES-(2.64%) (51,083,111)
=============================================================================
NET ASSETS-100.00% $1,937,103,383
_____________________________________________________________________________
=============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2005 was $1,318,182,251,
which represented 68.05% of the Fund's Net Assets. See Note 1A.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at October
31, 2005 represented 0.24% of the Fund's Net Assets. See Note 1A.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2005 was $38,468,700,
which represented 1.99% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Non-income producing security.
(f) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(h) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
<Table>
ASSETS:
Investments, at value (cost $1,276,013,175)* $1,891,027,830
- ------------------------------------------------------------
Investments in affiliated money market funds
(cost $97,158,664) 97,158,664
============================================================
Total investments (cost $1,373,171,839) 1,988,186,494
============================================================
Foreign currencies, at value (cost
$25,199,788) 25,071,888
- ------------------------------------------------------------
Receivables for:
Investments sold 14,547,792
- ------------------------------------------------------------
Fund shares sold 3,901,318
- ------------------------------------------------------------
Dividends 1,844,901
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 114,184
- ------------------------------------------------------------
Other assets 57,344
============================================================
Total assets 2,033,723,921
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 10,706,565
- ------------------------------------------------------------
Fund shares reacquired 3,280,344
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 248,550
- ------------------------------------------------------------
Collateral upon return of securities
loaned 80,692,180
- ------------------------------------------------------------
Accrued distribution fees 605,454
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,512
- ------------------------------------------------------------
Accrued transfer agent fees 791,201
- ------------------------------------------------------------
Accrued operating expenses 292,732
============================================================
Total liabilities 96,620,538
============================================================
Net assets applicable to shares outstanding $1,937,103,383
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,519,522,586
- ------------------------------------------------------------
Undistributed net investment income 9,174,647
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (206,414,006)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 614,820,156
============================================================
$1,937,103,383
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,447,048,509
____________________________________________________________
============================================================
Class B $ 250,055,605
____________________________________________________________
============================================================
Class C $ 132,386,971
____________________________________________________________
============================================================
Class R $ 8,700,085
____________________________________________________________
============================================================
Institutional Class $ 98,912,213
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 66,905,584
____________________________________________________________
============================================================
Class B 12,451,916
____________________________________________________________
============================================================
Class C 6,586,209
____________________________________________________________
============================================================
Class R 406,026
____________________________________________________________
============================================================
Institutional Class 4,502,412
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.63
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $21.63 divided by
94.50%) $ 22.89
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 20.08
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 20.10
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.43
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 21.97
____________________________________________________________
============================================================
</Table>
* At October 31, 2005, securities with an aggregate value of $77,292,395 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,697,813) $ 39,222,079
- --------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $1,124,590, after
compensation to counterparties of $1,873,017) 2,984,992
- --------------------------------------------------------------------------
Interest 56,790
==========================================================================
Total investment income 42,263,861
==========================================================================
EXPENSES:
Advisory fees 17,569,855
- --------------------------------------------------------------------------
Administrative services fees 436,565
- --------------------------------------------------------------------------
Custodian fees 1,793,054
- --------------------------------------------------------------------------
Distribution fees:
Class A 4,045,810
- --------------------------------------------------------------------------
Class B 2,867,796
- --------------------------------------------------------------------------
Class C 1,280,875
- --------------------------------------------------------------------------
Class R 23,920
- --------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 6,693,626
- --------------------------------------------------------------------------
Transfer agent fees -- Institutional 11,220
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 79,787
- --------------------------------------------------------------------------
Other 863,410
==========================================================================
Total expenses 35,665,918
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (960,934)
==========================================================================
Net expenses 34,704,984
==========================================================================
Net investment income 7,558,877
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 165,499,094
- --------------------------------------------------------------------------
Foreign currencies 1,573,449
==========================================================================
167,072,543
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 147,676,240
- --------------------------------------------------------------------------
Foreign currencies (696,162)
==========================================================================
146,980,078
==========================================================================
Net gain from investment securities and foreign currencies 314,052,621
==========================================================================
Net increase in net assets resulting from operations $321,611,498
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
<Table>
<Caption>
2005 2004
- ----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,558,877 $ 1,466,201
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 167,072,543 154,523,642
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 146,980,078 135,099,856
==============================================================================================
Net increase in net assets resulting from operations 321,611,498 291,089,699
==============================================================================================
Distributions to shareholders from net investment income:
Class A -- (1,576,989)
- ----------------------------------------------------------------------------------------------
Institutional Class -- (477)
==============================================================================================
Decrease in net assets resulting from distributions -- (1,577,466)
==============================================================================================
Share transactions-net:
Class A (86,426,188) (38,592,887)
- ----------------------------------------------------------------------------------------------
Class B (100,538,960) (118,039,680)
- ----------------------------------------------------------------------------------------------
Class C (4,637,039) (17,787,137)
- ----------------------------------------------------------------------------------------------
Class R 5,654,245 1,355,519
- ----------------------------------------------------------------------------------------------
Institutional Class 79,580,219 12,408,997
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (106,367,723) (160,655,188)
==============================================================================================
Net increase in net assets 215,243,775 128,857,045
==============================================================================================
NET ASSETS:
Beginning of year 1,721,859,608 1,593,002,563
==============================================================================================
End of year (including undistributed net investment income
(loss) of $9,174,647 and $(274,968), respectively) $1,937,103,383 $1,721,859,608
______________________________________________________________________________________________
==============================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Growth Fund (the "Fund") is a series portfolio of AIM
International Mutual Funds (the "Trust"). The Trust is a Delaware statutory
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of six
separate portfolios, each authorized to issue an unlimited number of shares of
beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
is valued on the basis of prices furnished by independent pricing services,
which may be considered fair valued, or market makers. Each security
reported on the NASDAQ National Market System is valued at the NASDAQ
Official Closing Price ("NOCP") as of the close of the customary trading
session on the valuation date or absent a NOCP, at the closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices.
For purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not
ordinarily be reflected in the computation of the Fund's net asset value.
If the event is likely to have affected the closing price of the security,
the security will be valued at fair value in good faith using procedures
approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent
pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the
NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the
indication of fair value from the independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to
sector indices, ADRs and domestic and foreign index futures.
F-7
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is accounted for as an
addition to shares of beneficial interest by the Fund and is allocated
among the share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F-8
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- ---------------------------------------------------------------------
First $1 billion 0.95%
- ---------------------------------------------------------------------
Over $1 billion 0.90%
____________________________________________________________________
=====================================================================
</Table>
Effective January 1, 2005 through December 31, 2009, AIM has contractually
agreed to waive advisory fees to the extent necessary so that the advisory fees
payable by the Fund (based on the Fund's average daily net assets) do not exceed
the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
- --------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive 0.05% of advisory fees on the Fund's
average daily net assets in excess of $500 million, through October 31, 2005.
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). AIM is also voluntarily waiving a portion of the
advisory fee payable by the Fund equal to the difference between the income
earned from investing in the affiliated money market fund and the hypothetical
income earned from investing in an appropriate comparative benchmark. Voluntary
fee waivers or reimbursements may be modified or discontinued at any time upon
consultation with the Board of Trustees without further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $814,911.
At the request of the Trustees of the Trust, AMVESCAP PLC. ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement, are included in the Statement of Operations. For
the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the
amount of $91,306.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $436,565.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. For the year ended October 31, 2005, the
Fund paid AISI $6,693,626 for Class A, Class B, Class C and Class R share
classes and $11,220 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R and Institutional Class shares of the Fund. The Trust has
adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans").
The Fund, pursuant to the Plans, pays ADI compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the
average daily net assets of Class B and Class C shares and 0.50% of the average
daily net assets of Class R shares. Prior to July 1, 2005, the Fund paid ADI
0.30% of the average daily net assets of Class A shares. Of these amounts, up to
0.25% of the average daily net assets of the Class A, Class B, Class C or Class
R shares may be paid to selected dealers and financial institutions who furnish
continuing personal shareholder services to customers who purchase and own
shares of such classes. Any amounts not paid as a service fee under the Plans
would constitute an asset-based sales charge. National Association of Securities
Dealers ("NASD") Rules also impose a cap on the total sales charges, including
asset-based sales charges that may be paid by any class of shares of the Fund.
Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class
B, Class C and Class R shares paid $4,045,810, $2,867,796, $1,280,875 and
$23,920, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2005, ADI advised the Fund that it retained $169,848 in
front-end sales commissions from the sale of Class A shares and $4,720, $67,529,
$5,890 and $0 from Class A, Class B, Class C and Class R shares, respectively,
for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
F-9
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market funds below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in affiliated money market
funds for the year ended October 31, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $2,582,491 $270,354,007 $(264,703,256) $ -- $ 8,233,242 $ 926,679 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 2,582,491 270,354,007 (264,703,256) -- 8,233,242 933,723 --
===================================================================================================================================
Subtotal $5,164,982 $540,708,014 $(529,406,512) $ -- $16,466,484 $1,860,402 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ -- $ 300,353,222 $ (219,661,042) $ -- $80,692,180 $ 251,241 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 45,583,860 731,959,317 (777,543,177) -- -- 873,349 --
===================================================================================================================================
Subtotal $45,583,860 $1,032,312,539 $ (997,204,219) $ -- $80,692,180 $1,124,590 $ --
===================================================================================================================================
Total $50,748,842 $1,573,020,553 $(1,526,610,731) $ -- $97,158,664 $2,984,992 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2005, the
Fund received credits from this arrangement, which resulted in the reduction of
the Fund's total expenses of $54,717.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $7,933
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
F-10
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend under
the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total asses. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to a loss on
the collateral invested.
At October 31, 2005, securities with an aggregate value of $77,292,395 were
on loan to brokers. The loans were secured by cash collateral of $80,692,180
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $1,124,590 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2005
and 2004 was as follows:
<Table>
<Caption>
2005 2004
- ---------------------------------------------------------------------------------
Distributions paid from ordinary income $ -- $1,577,466
_________________________________________________________________________________
=================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2005, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2005
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 13,941,535
- ----------------------------------------------------------------------------
Unrealized appreciation -- investments 609,380,128
- ----------------------------------------------------------------------------
Temporary book/tax differences (219,589)
- ----------------------------------------------------------------------------
Capital loss carryforward (205,521,277)
- ----------------------------------------------------------------------------
Shares of beneficial interest 1,519,522,586
============================================================================
Total net assets $1,937,103,383
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the realization of unrealized gains on passive foreign investment
companies. The tax-basis unrealized appreciation (depreciation) on investments
amount includes appreciation (depreciation) on foreign currencies of $(194,500).
F-11
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of October
31, 2005 to utilizing $196,528,664 of capital loss carryforward in the fiscal
year ended October 31, 2006.
The Fund utilized $164,718,032 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2005 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2008 $ 2,432,573
- -----------------------------------------------------------------------------
October 31, 2009 9,557,579
- -----------------------------------------------------------------------------
October 31, 2010 193,531,125
=============================================================================
Total capital loss carryforward $205,521,277
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $673,953,806 and $752,647,612 respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $615,914,619
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,339,991)
==============================================================================
Net unrealized appreciation of investment securities $609,574,628
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,378,611,866.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and passive foreign investment companies, on October 31, 2005,
undistributed net investment income was increased by $1,890,738 and
undistributed net realized gain (loss) was decreased by $1,890,738. This
reclassification had no effect on the net assets of the Fund.
F-12
NOTE 11--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A shares,
Class B shares, Class C shares, Class R shares and Institutional Class shares.
Class A shares are sold with a front-end sales charge. Class B shares and Class
C shares are sold with a CDSC. Class R shares and Institutional Class shares are
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2005(a) 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 18,721,536 $ 381,380,192 16,594,554 $ 276,996,258
- --------------------------------------------------------------------------------------------------------------------------
Class B 1,993,930 37,701,226 1,606,048 25,327,091
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,776,272 33,816,769 1,702,233 26,571,147
- --------------------------------------------------------------------------------------------------------------------------
Class R 434,539 9,047,454 125,195 2,109,225
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,991,792 84,280,029 727,969 12,499,824
==========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 94,013 1,482,529
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 3,692,644 75,387,488 3,753,177 63,985,626
- --------------------------------------------------------------------------------------------------------------------------
Class B (3,962,574) (75,387,488) (4,001,836) (63,985,626)
==========================================================================================================================
Reacquired:(b)
Class A (26,448,370) (543,193,868) (22,889,869) (381,057,300)
- --------------------------------------------------------------------------------------------------------------------------
Class B (3,320,218) (62,852,698) (5,052,339) (79,381,145)
- --------------------------------------------------------------------------------------------------------------------------
Class C (2,020,119) (38,453,808) (2,824,116) (44,358,284)
- --------------------------------------------------------------------------------------------------------------------------
Class R (164,354) (3,393,209) (46,636) (753,706)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (217,170) (4,699,810) (5,334) (90,827)
==========================================================================================================================
(5,522,092) $(106,367,723) (10,216,941) $(160,655,188)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 27% of the outstanding shares
of the Fund. ADI has an agreement with this entity to sell Fund shares.
The Fund, AIM and/or AIM affiliates may make payments to this entity,
which is considered to be related to the Fund, for providing services to
the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether
all or any portion of the shares owned of record by this entity are also
owned beneficially.
(b) Amount is net of redemption fees of $14,834, $2,960, $1,319, $47 and
$445 for Class A, Class B, Class C, Class R and Institutional Class
shares, respectively, for the year ended October 31, 2005 and $12,886,
$3,679, $1,251, $15 and $20 for Class A, Class B, Class C, Class R and
Institutional Class shares, respectively, for the year ended October 31,
2004.
F-13
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.16 $ 15.23 $ 12.69 $ 14.45 $ 21.60
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.11(a) 0.05(a) 0.01(a) (0.03)(a) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.36 2.90 2.53 (1.73) (5.66)
=================================================================================================================================
Total from investment operations 3.47 2.95 2.54 (1.76) (5.67)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.02) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (1.48)
=================================================================================================================================
Total distributions -- (0.02) -- -- (1.48)
=================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
=================================================================================================================================
Net asset value, end of period $ 21.63 $ 18.16 $ 15.23 $ 12.69 $ 14.45
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 19.11% 19.40% 20.02% (12.18)% (27.96)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,447,049 $1,288,548 $1,117,420 $1,093,344 $1,404,269
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.69%(c) 1.70% 1.74% 1.70% 1.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.74%(c) 1.74% 1.82% 1.74% 1.61%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.54%(c) 0.27% 0.09% (0.21)% (0.04)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 37% 54% 77% 77% 85%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $1,430,523,323.
F-14
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.99 $ 14.32 $ 12.02 $ 13.78 $ 20.81
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.07)(a) (0.08)(a) (0.12)(a) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.12 2.74 2.38 (1.64) (5.42)
=================================================================================================================================
Total from investment operations 3.09 2.67 2.30 (1.76) (5.55)
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (1.48)
=================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
=================================================================================================================================
Net asset value, end of period $ 20.08 $ 16.99 $ 14.32 $ 12.02 $ 13.78
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 18.19% 18.64% 19.14% (12.77)% (28.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $250,056 $301,380 $360,671 $401,288 $612,125
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.41%(c) 2.40% 2.44% 2.40% 2.27%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.46%(c) 2.44% 2.52% 2.44% 2.31%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.18)%(c) (0.43)% (0.61)% (0.91)% (0.75)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 37% 54% 77% 77% 85%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $286,779,598.
F-15
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.00 $ 14.33 $ 12.03 $ 13.79 $ 20.82
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.07)(a) (0.08)(a) (0.12)(a) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.13 2.74 2.38 (1.64) (5.42)
=================================================================================================================================
Total from investment operations 3.10 2.67 2.30 (1.76) (5.55)
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (1.48)
=================================================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- -- --
=================================================================================================================================
Net asset value, end of period $ 20.10 $ 17.00 $ 14.33 $ 12.03 $ 13.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 18.24% 18.63% 19.12% (12.76)% (28.47)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $132,387 $116,136 $113,965 $114,070 $165,857
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.41%(c) 2.40% 2.44% 2.40% 2.27%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.46%(c) 2.44% 2.52% 2.44% 2.31%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.18)%(c) (0.43)% (0.61)% (0.91)% (0.75)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 37% 54% 77% 77% 85%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $128,087,543.
F-16
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
----------------------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------- OCTOBER 31,
2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $18.04 $15.14 $12.69 $15.27
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07(a) 0.01(a) 0.01(a) (0.02)(a)
- ------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.32 2.89 2.44 (2.56)
============================================================================================================
Total from investment operations 3.39 2.90 2.45 (2.58)
============================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- --
============================================================================================================
Net asset value, end of period $21.43 $18.04 $15.14 $12.69
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 18.79% 19.15% 19.31% (16.90)%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $8,700 $2,450 $ 867 $ 49
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.91%(c) 1.90% 1.94% 1.89%(d)
- ------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.96%(c) 1.94% 2.02% 1.93%(d)
============================================================================================================
Ratio of net investment income (loss) to average net assets 0.32%(c) 0.07% (0.11)% (0.40)%(d)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate 37% 54% 77% 77%
____________________________________________________________________________________________________________
============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $4,783,939.
(d) Annualized.
F-17
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------
MARCH 15, 2002
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------- OCTOBER 31,
2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.34 $ 15.37 $12.73 $ 15.09
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.25(a) 0.15(a) 0.09(a) 0.03(a)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.38 2.93 2.55 (2.39)
===============================================================================================================
Total from investment operations 3.63 3.08 2.64 (2.36)
===============================================================================================================
Less distributions from net realized gains -- (0.11) -- --
===============================================================================================================
Redemption fees added to beneficial interest 0.00 0.00 -- --
===============================================================================================================
Net asset value, end of period $ 21.97 $ 18.34 $15.37 $ 12.73
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 19.79% 20.15% 20.74% (15.64)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $98,912 $13,345 $ 79 $ 74
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.07%(c) 1.13% 1.17% 1.16%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.12%(c) 1.17% 1.21% 1.20%(d)
===============================================================================================================
Ratio of net investment income to average net assets 1.16%(c) 0.84% 0.66% 0.33%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 37% 54% 77% 77%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $46,476,134.
(d) Annualized.
NOTE 13--CHANGE IN INDEPENDENT PUBLIC ACCOUNTING FIRM
On June 29, 2005, the Audit Committee (the "Audit Committee") of the Board of
Trustees (the "Board") of the Trust appointed PricewaterhouseCoopers LLP ("PwC")
as the independent registered public accounting firm of the Fund for the fiscal
year ending October 31, 2005. Such appointment was ratified and approved by the
Independent Trustees of the Board. For the prior fiscal year, Ernst & Young
("E&Y") was the Fund's independent registered public accounting firm. On June
29, 2005, the Trust obtained a formal resignation from E&Y as the independent
registered public accounting firm of the Fund.
E&Y's report on the financial statements of the Fund for the past two years
did not contain an adverse or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
period E&Y was engaged, there were no disagreements with E&Y on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to E&Y's satisfaction, would have
caused E&Y to make reference to that matter in connection with such reports.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent
F-18
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
distribution consultant, in consultation with AIM and the independent trustees
of the AIM Funds and acceptable to the staff of the SEC. As the methodology is
unknown at the present time, management of AIM and the Fund are unable to
estimate the impact, if any, that the distribution of these two fair funds may
have on the Fund or whether such distribution will have an impact on the Fund's
financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue sharing
and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to Section
529 college savings plans and procedures for locating lost securityholders. IFG,
AIM and ADI are providing full cooperation with respect to these inquiries. As
described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities
and individuals are defendants in numerous civil lawsuits related to one or more
of these issues. Regulatory actions and/or additional civil lawsuits related to
these or other issues may be filed against the AIM Funds, IFG, AIM and/or
related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated
mutual fund complexes and financial institutions. None of the AIM Funds has been
named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit
Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in
substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or
deceptive trade practices by failing to disclose in the prospectuses for the AIM
Funds, including those formerly advised by IFG, that they had entered into
certain arrangements permitting market timing of such Funds. As a result of the
foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq.
(the West Virginia Consumer Credit and Protection Act). The WVAG complaint is
seeking, among other things, injunctive relief, civil monetary penalties and a
writ of quo warranto against the defendants. If AIM is unsuccessful in its
defense of the WVAG lawsuit, it could be barred from serving as an investment
advisor for any investment company registered under the Investment Company Act
of 1940, as amended (a "registered investment company"). Such results could
affect the ability of AIM or any other investment advisor directly or indirectly
owned by AMVESCAP, from serving as an investment advisor to any registered
investment company, including the Fund. The Fund has been informed by AIM that,
if these results occur, AIM will seek exemptive relief from the SEC to permit it
to continue to serve as the Fund's investment advisor. There is no assurance
that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings
of fact that essentially mirror the WVAG's allegations mentioned above and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. AIM and ADI have the right to contest the WVASC's findings and
conclusions, which they intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and
failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans;
- that the defendants breached their fiduciary duties by charging distribution
fees while AIM Funds and/or specific share classes were closed generally to
new investors and/or while other share classes of the same AIM Fund were not
charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure
that the AIM Funds participated in class action settlements in which they
were eligible to participate (this lawsuit was dismissed by the Court on
August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
F-19
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the common
issues of law presented in defendants' motions to dismiss the shareholder class
and derivative complaints. These rulings were issued in the context of the Janus
lawsuits, but the Court's legal determinations apply at the omnibus level to all
cases within his track, including the AIM and IFG cases. The Court dismissed for
failure to make pre-suit demand on the fund board all derivative causes of
action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"), as to which the demand requirement does
not apply. The Court dismissed all claims asserted in the class complaint but
two: (i) the securities fraud claims under Section 10(b) of the Securities
Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of
the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on
the 36(b) claim to fees attributable to timing assets, as opposed to all fees on
funds in which any timing occurred. The question whether the duplicative Section
36(b) claim properly belongs in the derivative complaint or in the class action
complaint will be decided at a later date. The Court will subsequently issue an
order applying his legal rulings to the allegations in the AIM and IFG
complaints.
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds and Shareholders of
AIM International Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM International Growth Fund (one
of the funds constituting AIM International Mutual Funds, hereafter referred to
as the "Fund") at October 31, 2005, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2005 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-21
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Group Inc. (financial services holding
Principal Executive Officer company); Director and Vice Chairman,
and President AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC -- Managed Products
- -------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice Officer, A I M Management Group Inc.
President (financial services holding company);
Director and President, A I M Advisors,
Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor); and
A I M Distributors, Inc. (registered
broker dealer); Director and Chairman,
AIM Investment Services, Inc.
(registered transfer agent), Fund
Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -- AIM
Division (parent of AIM and a global
investment management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO Distributors,
Inc.; Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and Chairman,
AIM Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None
Trustee & Bunch Ltd., (investment banking firm);
and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); and CompuDyne Corporation
(provider of products and services to
the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and director of various
affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, 2005 Retired None
Jr.(3) -- 1944
Trustee
Formerly: Partner, Deloitte & Touche
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Group Inc. (financial services holding
Chief Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc. and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and General Counsel, A I M
Secretary and Chief Legal Management Group Inc. and A I M
Officer Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President,
A I M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; Senior Vice President
and General Counsel, Liberty Funds
Group, LLC; Vice President, A I M
Distributors, Inc.; and Director and
General Counsel, Fund Management Company
- -------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.
Financial Officer and
Treasurer Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, and Senior
Investment Officer, A I M Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
</Table>
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005, and
October 31, 2005 are 99.91%, 99.89%, 99.91%, 99.92%, respectively.
DOMESTIC EQUITY
AIM Aggressive Growth Fund SECTOR EQUITY AIM ALLOCATION SOLUTIONS
AIM Basic Balanced Fund*
AIM Basic Value Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund
AIM Blue Chip Fund AIM Energy Fund AIM Growth Allocation Fund(2)
AIM Capital Development Fund AIM Financial Services Fund AIM Moderate Allocation Fund
AIM Charter Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund
AIM Constellation Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation Fund
AIM Diversified Dividend Fund AIM Gold & Precious Metals Fund
AIM Dynamics Fund AIM Leisure Fund
AIM Large Cap Basic Value Fund AIM Multi-Sector Fund
AIM Large Cap Growth Fund AIM Real Estate Fund(1) DIVERSIFIED PORTFOLIOS
AIM Mid Cap Basic Value Fund AIM Technology Fund
AIM Mid Cap Core Equity Fund(1) AIM Utilities Fund AIM Income Allocation Fund
AIM Mid Cap Growth Fund AIM International Allocation Fund
AIM Opportunities I Fund FIXED INCOME
AIM Opportunities II Fund
AIM Opportunities III Fund TAXABLE
AIM Premier Equity Fund
AIM S&P 500 Index Fund AIM Floating Rate Fund
AIM Select Equity Fund AIM High Yield Fund
AIM Small Cap Equity Fund AIM Income Fund
AIM Small Cap Growth Fund(1) AIM Intermediate Government Fund
AIM Small Company Growth Fund AIM Limited Maturity Treasury Fund
AIM Summit Fund AIM Money Market Fund
AIM Trimark Endeavor Fund AIM Short Term Bond Fund
AIM Trimark Small Companies Fund AIM Total Return Bond Fund
AIM Weingarten Fund Premier Portfolio
Premier U.S.Government Money Portfolio
* Domestic equity and income fund
TAX-FREE
INTERNATIONAL/GLOBAL EQUITY
AIM High Income Municipal Fund(1)
AIM Asia Pacific Growth Fund AIM Municipal Bond Fund
AIM Developing Markets Fund AIM Tax-Exempt Cash Fund
AIM European Growth Fund AIM Tax-Free Intermediate Fund
AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio
AIM Global Aggressive Growth Fund
AIM Global Equity Fund =====================================================================================
AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS
AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR
AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING.
AIM International Growth Fund =====================================================================================
AIM International Small Company Fund(1)
AIM Trimark Fund
(1) This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
(2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of
AMVESCAP PLC, one of the world's largest independent financial services
companies with $381 billion in assets under management. Data as of September 30,
2005.
AIMinvestments.com IGR-AR-1 A I M Distributors,Inc.
YOUR GOALS. OUR SOLUTIONS.--Registered Trademark-- [AIM INVESTMENTS LOGO APPEARS HERE]
================================================================================ --Registered Trademark--
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts
================================================================================
AIM INTERNATIONAL CORE
EQUITY FUND
Annual Report to Shareholders . October 31, 2005
[COVER IMAGE]
[YOUR GOALS. OUR SOLUTIONS.]
- REGISTERED TRADEMARK -
[AIM INVESTMENTS LOGO]
- REGISTERED TRADEMARK -
AIM INTERNATIONAL CORE EQUITY FUND SEEKS TOTAL RETURN THROUGH CAPITAL
APPRECIATION AND CURRENT INCOME.
.. Unless otherwise stated, information presented in this report is as of
October 31, 2005, and is based on total net assets.
ABOUT SHARE CLASSES
.. Class B shares are not available as an investment for retirement plans
maintained pursuant to Section 401 of the Internal Revenue Code, including
401(k) plans, money purchase pension plans and profit sharing plans. Plans that
had existing accounts invested in Class B shares prior to September 30, 2003,
will continue to be allowed to make additional purchases.
.. Class R shares are available only to certain retirement plans. Please see the
prospectus for more information.
.. Investor Class shares are closed to most investors. For more information on
who may continue to invest in the Investor Class shares, please see the
prospectus.
PRINCIPAL RISKS OF INVESTING IN THE FUND
.. The Fund may invest 100% of its assets in the securities of non-U.S. issuers.
International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the Fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S.companies.
.. Investing in emerging markets involves greater risk and potential reward than
investing in more established markets.
ABOUT INDEXES USED IN THIS REPORT
.. The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE
- --REGISTERED TRADEMARK--Index) is a group of foreign securities tracked by
Morgan Stanley Capital International.
.. The unmanaged LIPPER INTERNATIONAL LARGE-CAP CORE FUND INDEX represents an
average of the performance of the 10 largest international large-cap core
mutual funds tracked by Lipper, Inc., an independent mutual fund performance
monitor.
.. The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500
- --REGISTERED TRADEMARK-- Index) is an index of common stocks frequently used as
a general measure of U.S. stock market performance.
.. The unmanaged MSCI WORLD INDEX is a group of global securities tracked by
Morgan Stanley Capital International.
.. The Fund is not managed to track the performance of any particular index,
including the indexes defined here, and consequently, the performance of the
Fund may deviate significantly from the performance of the indexes.
.. A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses; performance
of a market index does not.
OTHER INFORMATION
.. The returns shown in management's discussion of Fund performance are based on
net asset values calculated for shareholder transactions. Generally accepted
accounting principles require adjustments to be made to the net assets of the
Fund at period end for financial reporting purposes, and as such, the net asset
values for shareholder transactions and the returns based on those net asset
values may differ from the net asset values and returns reported in the
Financial Highlights.
.. Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital International
Inc. and Standard & Poor's.
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on Products &
Performance, then Mutual Funds, then Fund Overview. Select your Fund from the
drop-down menu and click on Complete Quarterly Holdings. Shareholders can also
look up the Fund's Forms N-Q on the SEC's Web site at sec.gov. And copies of
the Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain
information on the operation of the Public Reference Room, including
information about duplicating fee charges, by calling 202-942-8090 or
800-732-0330, or by electronic request at the following e-mail address:
publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and
33-44611.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, from our Client Services department at 800-959-4246 or on
the AIM Web site, AIMinvestments.com. On the home page, scroll down and click
on AIM Funds Proxy Policy. The information is also available on the Securities
and Exchange Commission's Web site, sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2005, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the Securities and
Exchange Commission's Web site, sec.gov.
- --------------------------------------------------------------------------------
FUND NASDAQ SYMBOLS
Class A Shares IBVAX
Class B Shares IBVBX
Class C Shares IBVCX
Class R Shares IIBRX
Investor Class Shares IIBCX
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
AIMINVESTMENTS.COM
AIM INTERNATIONAL CORE EQUITY FUND
DEAR FELLOW AIM FUNDS SHAREHOLDERS:
[GRAHAM PHOTO] The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-
based S&P 500 Index returned 8.72%. Globally, Morgan Stanley's MSCI World Index rose 13.27%.
Much of this good performance, though, was attained early in the fiscal year as virtually every equity
index declined during October of 2005. Concern about the inflationary potential of rising energy costs
was frequently cited as a major cause of market weakness.
ROBERT H. GRAHAM Within the indexes, there was considerable variability in the performance of different sectors and
markets. Domestically, energy sector performance far outpaced that of the other sectors in the S&P
500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more attractive
results than did developed markets, at least in part because emerging markets tend to be more closely
tied to the performance of natural resources and commodities.
One could make a strong argument for global diversification of a stock portfolio using the
performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the
person most qualified to help you decide whether such diversification is appropriate for you.
[WILLIAMSON PHOTO] For a discussion of the specific market conditions that affected your Fund and how your Fund
was managed during the fiscal year, please turn to Page 3.
NEW INFORMATION IN THIS REPORT
MARK H. WILLIAMSON We would like to call your attention to two new elements in this report. First, on Page 2, is a
message from Bruce Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We
first introduced you to Mr. Crockett in the annual report on your Fund dated October 31, 2004. Mr.
Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in
October 2004.
Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via
letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is
charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight
into some of the many issues the Board addresses in governing your Fund.
One of the most important decisions the Board makes each year is whether to approve the
advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the
assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is
the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9.
Further information about the markets, your Fund, and investing in general is always available
on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently.
We at AIM remain committed to building solutions to help you meet your investment goals. We
thank you for your continued participation in AIM Investments--REGISTERED TRADEMARK--. If you have
any questions, please contact our award-winning Client Service representatives at 800-959-4246. We
are happy to be of help.
Sincerely,
/S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON
Robert H. Graham Mark H. Williamson
President & Vice Chair, AIM Funds President, A I M Advisors, Inc.
DECEMBER 15, 2005
AIM INVESTMENTS IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. A I M
ADVISORS, INC. AND A I M CAPITAL MANAGEMENT, INC. ARE THE INVESTMENT ADVISORS. A I M
DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS REPRESENTED BY AIM INVESTMENTS.
1
AIM INTERNATIONAL CORE EQUITY FUND
DEAR AIM FUNDS SHAREHOLDERS:
As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being
done by your Board.
[CROCKETT PHOTO] At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M
Advisors, Inc. (AIM) that save shareholders approximately $20.8 million annually, based on asset levels
as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be
achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A and Class A3 shares of
those AIM Funds that previously charged these fees at a higher rate.
BRUCE L. CROCKETT Our June meeting, which was the culmination of more than two and one-half months of review and
discussions, took place over a three-day period. The meeting included your Board's annual
comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which
questions about fees, performance and operations were addressed by AIM, your Board approved all
advisory agreements for the year beginning July 1, 2005. You can find information on the factors
considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at
AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement
Renewals.") The advisory agreement information about your Fund is also included in this annual report on
Pages 8 and 9. I encourage you to review it.
Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal
is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its
category.
Your Board has a well-defined process and structure for monitoring all funds and identifying and
assisting AIM in improving underperforming funds. Our Investments Committee--which functions along
with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing
committees to include all 14 independent Board members. Further, our Investments Committee is divided
into three underlying subcommittees, each responsible for, among other things, reviewing the
performance, fees and expenses of the funds that have been assigned to it.
At subcommittee meetings, held throughout the year, the performance of every AIM Fund is
evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with
AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that
a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund
no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all
shareholders affected by the decision. Following AIM's recommendation and your Board's approval,
eight funds were recently merged.
Be assured that your Board is working closely with the management of AIM to help you reach your
investment goals. Should you or your advisor have questions or comments about the governance of AIM
Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza,
Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance
of your funds.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
DECEMBER 15, 2005
2
AIM INTERNATIONAL CORE EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
During the fiscal year ended October 31, 2005, the international stock market
was very bullish in general, helping the Fund post double-digit returns.
However, most international stock markets gave greater rewards to riskier
securities such as small-cap, emerging-market and lower-quality stocks, which
are not a focus of the Fund. Consequently, the Fund's returns for the year
trailed those of the MSCI EAFE Index (EAFE), which measures the broad European,
Australasian and Far Eastern markets.
The Fund's investment results relative to the EAFE were heavily affected
during the fiscal year by the sheer magnitude of the gains within the
international marketplace. The large, financially strong companies favored by
our investment process were largely neglected by investors, who focused much of
their attention on the higher-risk areas.
Your Fund's long-term performance is shown on pages 6 and 7 of this report.
- --------------------------------------------------------------------------------
FUND VS. INDEXES
TOTAL RETURNS, 10/31/04-10/31/05, EXCLUDING APPLICABLE SALES CHARGES. IF SALES
CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER.
Class A Shares 13.89%
Class B Shares 13.00
Class C Shares 13.00
Class R Shares 13.64
Investor Class Shares 13.92
MSCI EAFE Index (Broad Market and Style-specific Index) 18.09
Lipper International Large-Cap Core Fund Index (Peer Group Index) 17.64
SOURCE: LIPPER, INC.
- --------------------------------------------------------------------------------
HOW WE INVEST
Our stock selection process, which is driven by precise financial, valuation,
and global sector-based research criteria, represents the primary focus of our
investment efforts. In addition to having a long time horizon (supported by
four-to five-year average holding periods for investments), risk management at
the stock and portfolio level also plays an important role.
Our investment process is clearly delineated in three discrete investment
steps that include a financial and valuation assessment, global sector-based
research based on primary company contact, and team-based portfolio decisions.
Risk is explicitly managed at the overall portfolio level through the use of
statistical tools to monitor appropriate risk relative to expected return and
to ensure diversification within the portfolio. At the stock-selection level,
there is a strong bias in favor of companies with proven financial strength.
Stocks held in the Fund tend to provide above-average stability of growth, as
measured by the variability of underlying profitability, as well as
below-average balance sheet leverage. Risk management efforts also seek to
ensure that the largest single component of active risk is security-specific,
which is consistent with stock selection being the sole targeted area of
returns relative to the benchmark.
Stock selection focuses on large, well-established companies with at least
five years of quoted financial history. Predictable and consistent returns are
sought by avoiding undue portfolio concentrations and as a result of the
caliber of our portfolio holdings.
We consider selling a security when its share price increases and its
ranking deteriorates relative to other companies, the company's fundamentals
deteriorate or the security causes the overall portfolio to fall outside the
acceptable risk parameters.
MARKET CONDITIONS AND YOUR FUND
In general, international markets continued to perform well relative to the
U.S. stock market during the Fund's fiscal year, continuing the trend of the
past few years. All 10 sectors of the EAFE produced positive returns during the
period.
However, the U.S. dollar strengthened over the year against the euro, the
Japanese yen and
(Continued)
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Diversified Banks 12.6% 1. GlaxoSmithKline PLC-ADR
[PIE CHART] 2. Pharmaceuticals 9.3 (United Kingdom) 2.9%
Financials 23.4% 3. Integrated Oil & Gas 6.8 2. Royal Bank of Scotland Group PLC
Consumer Staples 4. Integrated Telecommunication (United Kingdom)
11.8% Services 6.0 2.8
Consumer Discretionary 10.6% 5. Packaged Foods & Meats 3.7 3. Nokia Oyj (Finland) 2.4
Health Care 10.1% 4. Shin-Etsu Chemical Co., Ltd.
Industrials 9.0% (Japan) 2.4
Telecommunications Services 5. BAE Systems PLC
7.9% (United Kingdom) 2.3
Energy 7.9% 6. Takeda Pharmaceutical Co. Ltd.
Materials 7.8% (Japan) 2.2
Information Technology 6.6% 7. Vodafone Group PLC
Money Market Funds Plus (United Kingdom) 1.9
Other Assets Less Liabilities 3.3% 8. Reed Elsevier PLC
Utilities 1.6% (United Kingdom) 1.9
9. Aegon N.V. (Netherlands) 1.8
10. TNT N.V. (Netherlands) 1.7
TOTAL NET ASSETS $279.5 MILLION
TOTAL NUMBER OF HOLDINGS* 81
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
*Excluding money market fund holdings.
- --------------------------------------------------------------------------------
3
AIM INTERNATIONAL CORE EQUITY FUND
several other currencies. This reduced the returns of stocks denominated in
those currencies upon conversion into dollars, somewhat diminishing Fund
results.
With oil prices approaching $70 per barrel during the fiscal year, the
energy sector benefited from a dramatic rise in commodity prices. The Fund
reaped benefits from both an allocation and stock selection perspective. The
single largest positive contributor to Fund returns was EnCana, a Canadian
natural gas provider. Statoil, a Norwegian oil and gas company, also
contributed positively. These companies benefited from rising commodity prices,
strong production growth relative to their peers and attractive
valuations--characteristics we believe could lead to strong long-term
performance. During the period, we took profits on some energy holdings to
scale back the Fund's exposure and bring it into line with the EAFE.
WE CONTINUE TO BELIEVE NON-U.S. EQUITIES ARE MORE ATTRACTIVELY VALUED THAN
DOMESTIC STOCKS.
The market trend of higher-risk securities outperforming lower-risk stocks
was especially pronounced in Japan, and much of the under-performance within
the Fund came from that region. NEC ELECTRONICS CORP., a Japanese information
technology company, was a detractor during the fiscal year. We continued to
hold this company due to our conviction in its long term potential.
Results from the United Kingdom (U.K.) were mixed. Defense contractor BAE
SYSTEMS was among the Fund's top contributors, as was pharmaceutical giant
GLAXOSMITHKLINE. The consumer discretionary and consumer staples sectors in the
U.K. suffered as interest rate hikes imposed during previous years began taking
a toll on consumer spending. British home improvement retailer KINGFISHER
suffered as a result and was a negative contributor to the Fund's performance.
The company continued to trade at attractive valuations and we retained it in
the portfolio due to our belief in its prospects for long-term success.
IN CLOSING
At the end of the Fund's fiscal year, we continue to believe non-U.S. equities
are more attractively valued than domestic stocks and offer U.S.-based
investors valuable portfolio diversification. We anticipate that returns from
global equity markets may be more modest in the coming year. In our opinion,
macroeconomic conditions indicate possible risks from a decelerating worldwide
growth rate, inflationary pressures and further U.S. interest-rate increases.
We remain committed to our disciplined strategy of selecting securities
based on the strengths of individual companies. We believe many of the well
established, financially strong companies favored by our investment approach
may be better positioned to perform well in such conditions than some of the
higher-risk market segments that have outperformed in recent years.
We welcome any new investors who have joined the Fund during the reporting
period, and to all of our shareholders we would like to say thank you for your
continued investment in AIM International Core Equity Fund.
THE VIEWS AND OPINIONS EXPRESSED IN MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
ARE THOSE OF A I M ADVISORS, INC. THESE VIEWS AND OPINIONS ARE SUBJECT TO
CHANGE AT ANY TIME BASED ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS.
THESE VIEWS AND OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR
RECOMMENDATIONS, OR AS AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS
NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY,
SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE,
BUT A I M ADVISORS, INC. MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
See important Fund and index disclosures inside front cover.
- --------------------------------------------------------------------------------
The Fund is team managed by INVESCO Global Asset Management (N.A.), Inc. The
five most senior members of the investment team, who have the most significant
responsibility for managing the Fund, are as follows:
[GRANADE PHOTO]
ERIK B. GRANADE, Chartered Financial Analyst, is a manager of AIM International
Core Equity Fund. He began his investment career in 1986 and has been a
portfolio manager with INVESCO and its affiliates since 1996. He holds a B.A.
in economics from Trinity College in Hartford, Connecticut.
[BAKER PHOTO]
INGRID E. BAKER, Chartered Financial Analyst, is a manager of AIM International
Core Equity Fund. She began her investment career in 1990 and joined INVESCO in
1999. She holds a B.A. in inter-national politics from Oberlin College and an
M.B.A. in finance from the University of Navarra in Spain.
[DAVIDSON PHOTO]
W. LINDSAY DAVIDSON is a manager of AIM International Core Equity Fund. He
began his investment career in 1974 and has served as portfolio manager with
AMVESCAP PLC and affiliated companies since 1984. A native of St. Andrews,
Scotland, he received his degree in economics with honors from Edinburgh
University.
[GARREN PHOTO]
MICHELE T. GARREN, Chartered Financial Analyst, is a manager of AIM
International Core Equity Fund. She began her investment career in 1987 and
joined INVESCO in 1997. She holds a B.B.A. in finance from Southern Methodist
University and an M.B.A. in finance from New York University.
[STARKE PHOTO]
KENT A. STARKE, Chartered Financial Analyst, is a manager of AIM International
Core Equity Fund. He began his investment career in 1983 and joined INVESCO in
1992. He has been with the international equity product since its inception. He
received a B.B.A. from the University of Georgia and an M.S. in Finance from
Georgia State University.
- --------------------------------------------------------------------------------
[RIGHT ARROW GRAPHIC]
FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO
PAGES 6 AND 7.
4
AIM INTERNATIONAL CORE EQUITY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments; contingent
deferred sales charges on redemptions; and redemption fees, if any; and
(2) ongoing costs, including management fees; distribution and/or service fees
(12b-1); and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period May 1, 2005, through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The Fund's actual cumulative total returns at net asset value after
expenses for the six months ended October 31, 2005, appear in the table
"Cumulative Total Returns" on Page 7.
THE HYPOTHETICAL ACCOUNT VALUES AND EXPENSES MAY NOT BE USED TO ESTIMATE THE
ACTUAL ENDING ACCOUNT BALANCE OR EXPENSES YOU PAID FOR THE PERIOD. YOU MAY USE
THIS INFORMATION TO COMPARE THE ONGOING COSTS OF INVESTING IN THE FUND AND
OTHER FUNDS. TO DO SO, COMPARE THIS 5% HYPOTHETICAL EXAMPLE WITH THE 5%
HYPOTHETICAL EXAMPLES THAT APPEAR IN THE SHAREHOLDER REPORTS OF THE OTHER FUNDS.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/05) (10/31/05)/1/ PERIOD/2,3/ (10/31/05) PERIOD/2,4/ RATIO
A $1,000.00 $1,065.40 $ 8.49 $1,016.99 $ 8.29 1.63%
B 1,000.00 1,061.20 12.21 1,013.36 11.93 2.35
C 1,000.00 1,060.70 12.21 1,013.36 11.93 2.35
R 1,000.00 1,063.60 9.62 1,015.88 9.40 1.85
Investor 1,000.00 1,065.50 8.33 1,017.14 8.13 1.60
/1/The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2005, through October 31, 2005, after actual
expenses and will differ from the hypothetical ending account value which is
based on the Fund's expense ratio and a hypothetical annual return of 5% before
expenses. The Fund's actual cumulative total returns at net asset value after
expenses for the six months ended October 31, 2005, appear in the table
"Cumulative Total Returns" on Page 7.
/2/Expenses are equal to the Fund's annualized expense ratio as indicated above
multiplied by the average account value over the period, multiplied by 184/365
to reflect the most recent fiscal half year. Effective on July 1, 2005, the
distributor contractually agreed to reduce Rule 12b-1 plan fees for Class A
shares to 0.25%. The annualized expense ratio restated as if this agreement had
been in effect throughout the entire most recent fiscal half year is 1.60% for
Class A shares.
/3/The actual expenses paid restated as if the changes discussed above had been
in effect throughout the entire most recent fiscal half year are $8.33 for
Class A shares.
/4/The hypothetical expenses paid restated as if the changes discussed above
had been in effect throughout the entire most recent fiscal half year are $8.13
for Class A shares.
- --------------------------------------------------------------------------------
[ARROW
BUTTON For More Information Visit
IMAGE] AIMINVESTMENTS.COM
5
AIM INTERNATIONAL CORE EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
- --------------------------------------------------------------------------------
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 10/28/98, INDEX DATA FROM 10/31/98
[MOUNTAIN CHART]
AIM INTERNATIONAL LIPPER INTERNATIONAL
CORE EQUITY FUND- LARGE-CAP CORE MSCI EAFE
DATE CLASS A SHARES FUND INDEX INDEX
10/28/98 $ 10000
10/98 10020 $ 10000 $ 10000
11/98 10340 10509 10512
12/98 10650 10790 10927
1/99 10429 10876 10895
2/99 10109 10578 10635
3/99 10379 10977 11079
4/99 10589 11495 11528
5/99 10329 11014 10934
6/99 10680 11557 11361
7/99 10780 11860 11698
8/99 10850 11945 11741
9/99 10840 11993 11859
10/99 11199 12428 12303
11/99 11686 13333 12731
12/99 13146 14993 13873
1/00 12043 14125 12992
2/00 12486 15065 13342
3/00 12682 15218 13859
4/00 12002 14298 13130
5/00 11919 14039 12809
6/00 12620 14700 13310
7/00 12126 14252 12752
8/00 12424 14441 12862
9/00 11672 13600 12236
10/00 11497 13213 11947
11/00 11103 12778 11499
12/00 11555 13318 11908
1/01 11950 13288 11902
2/01 11239 12430 11009
3/01 10540 11542 10276
4/01 11273 12271 10990
5/01 11070 11910 10602
6/01 10686 11529 10168
7/01 10392 11210 9983
8/01 10200 10982 9730
9/01 9208 9859 8745
10/01 9228 10073 8969
11/01 9623 10450 9299
12/01 9668 10610 9354
1/02 9352 10105 8857
2/02 9566 10275 8920
3/02 10120 10815 9445
4/02 10391 10836 9464
5/02 10572 10963 9584
6/02 10154 10571 9203
7/02 9092 9477 8294
8/02 9160 9492 8275
9/02 8054 8488 7387
10/02 8303 8992 7784
11/02 8720 9399 8137
12/02 8529 9066 7863
1/03 8156 8652 7535
2/03 7930 8438 7362
3/03 7783 8255 7218
4/03 8461 9024 7925
5/03 8913 9548 8405
6/03 9026 9758 8608
7/03 9218 9996 8817
8/03 9388 10240 9030
9/03 9523 10437 9308
10/03 9998 11040 9888
11/03 10311 11248 10108
12/03 11106 12031 10898
1/04 11220 12277 11052
2/04 11492 12554 11307
3/04 11436 12575 11370
4/04 11220 12183 11113
5/04 11311 12161 11137
6/04 11696 12325 11395
7/04 11322 11873 11025
8/04 11356 11971 11074
9/04 11663 12332 11363
10/04 12083 12703 11751
11/04 12741 13523 12553
12/04 13251 14097 13104
1/05 12919 13797 12864
2/05 13537 14422 13419
3/05 13205 14037 13082
4/05 12920 13713 12775
5/05 12885 13758 12781
6/05 12988 13914 12950
7/05 13274 14398 13347
8/05 13594 14854 13685
9/05 14120 15387 14294
10/05 13761 14944 13877
SOURCE: LIPPER, INC.
- --------------------------------------------------------------------------------
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges, Fund expenses and management fees. Performance of an index of
funds reflects fund expenses and management fees; performance of a market index
does not. Performance shown in the chart and table(s) does not reflect
deduction of taxes a shareholder would pay on Fund distributions or sale of
Fund shares. Performance of the indexes does not reflect the effects of taxes.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during
the early years shown in the chart. The vertical axis, the one that indicates
the dollar value of an investment, is constructed with each segment
representing a percent change in the value of the investment. In this chart,
each segment represents a doubling, or 100% change, in the value of the
investment. In other words, the space between $5,000 and $10,000 is the same
size as the space between $10,000 and $20,000 and so on.
6
AIM INTERNATIONAL CORE EQUITY FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/05, including applicable sales charges
CLASS A SHARES
Inception (3/28/02) 6.93%
1 Year 7.65
CLASS B SHARES
Inception (3/28/02) 7.40%
1 Year 8.00
CLASS C SHARES
Inception (2/14/00) 0.90%
5 Years 2.65
1 Year 12.00
CLASS R SHARES
Inception (11/24/03) 16.60%
1 Year 13.64
INVESTOR CLASS SHARES
Inception (10/28/98) 4.66%
5 Years 3.66
1 Year 13.92
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 9/30/05, most recent calendar quarter-end, including applicable sales
charges
CLASS A SHARES
Inception (3/28/02) 7.87%
1 Year 14.26
CLASS B SHARES
Inception (3/28/02) 8.40%
1 Year 15.12
CLASS C SHARES
Inception (2/14/00) 1.39%
5 Years 2.86
1 Year 19.15
CLASS R SHARES
Inception (11/24/03) 19.07%
1 Year 20.74
INVESTOR CLASS SHARES
Inception (10/28/98) 5.10%
5 Years 3.87
1 Year 21.06
================================================================================
CUMULATIVE TOTAL RETURNS
6 months ended 10/31/05, excluding applicable sales charges
Class A Shares 6.54%
Class B Shares 6.12
Class C Shares 6.07
Class R Shares 6.36
Investor Class Shares 6.55
- --------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
VISIT AIMINVESTMENTS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE
FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE
EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. PERFORMANCE FIGURES
DO NOT REFLECT DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS
OR SALE OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO
THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
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. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN
ARE AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A
TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. INVESTOR
CLASS SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR CDSC; THEREFORE,
PERFORMANCE SHOWN IS AT NET ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER DUE TO DIFFERENT
SALES CHARGE STRUCTURES AND CLASS EXPENSES.
HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE WOULD HAVE BEEN LOWER.
A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES
OUT OF THE FUND WITHIN 30 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE
ARE LISTED IN THE FUND'S PROSPECTUS.
7
AIM INTERNATIONAL CORE EQUITY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND
SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION
The Board of Trustees of AIM International Mutual Funds (the "Board") oversees
the management of AIM International Core Equity Fund (the "Fund") and, as
required by law, determines annually whether to approve the continuance of the
Fund's advisory agreement with A I M Advisors, Inc. ("AIM"). Based upon the
recommendation of the Investments Committee of the Board, which is comprised
solely of independent trustees, at a meeting held on June 30, 2005, the Board,
including all of the independent trustees, approved the continuance of the
advisory agreement (the "Advisory Agreement") between the Fund and AIM for
another year, effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness
and reasonableness of the Advisory Agreement at the meeting on June 30, 2005
and as part of the Board's ongoing oversight of the Fund. In their
deliberations, the Board and the independent trustees did not identify any
particular factor that was controlling, and each trustee attributed different
weights to the various factors.
One of the responsibilities of the Senior Officer of the Fund, who is
independent of AIM and AIM's affiliates, is to manage the process by which the
Fund's proposed management fees are negotiated to ensure that they are
negotiated in a manner which is at arm's length and reasonable. To that end,
the Senior Officer must either supervise a competitive bidding process or
prepare an independent written evaluation. The Senior Officer has recommended
an independent written evaluation in lieu of a competitive bidding process and,
upon the direction of the Board, has prepared such an independent written
evaluation. Such written evaluation also considered certain of the factors
discussed below. In addition, as discussed below, the Senior Officer made
certain recommendations to the Board in connection with such written evaluation.
The discussion below serves as a summary of the Senior Officer's independent
written evaluation and recommendations to the Board in connection therewith, as
well as a discussion of the material factors and the conclusions with respect
thereto that formed the basis for the Board's approval of the Advisory
Agreement. After consideration of all of the factors below and based on its
informed business judgment, the Board determined that the Advisory Agreement is
in the best interests of the Fund and its shareholders and that the
compensation to AIM under the Advisory Agreement is fair and reasonable and
would have been obtained through arm's length negotiations.
.. The nature and extent of the advisory services to be provided by AIM. The
Board reviewed the services to be provided by AIM under the Advisory Agreement.
Based on such review, the Board concluded that the range of services to be
provided by AIM under the Advisory Agreement was appropriate and that AIM
currently is providing services in accordance with the terms of the Advisory
Agreement.
.. The quality of services to be provided by AIM. The Board reviewed the
credentials and experience of the officers and employees of AIM who will
provide investment advisory services to the Fund. In reviewing the
qualifications of AIM to provide investment advisory services, the Board
reviewed the qualifications of AIM's investment personnel and considered such
issues as AIM's portfolio and product review process, various back office
support functions provided by AIM and AIM's equity and fixed income trading
operations. Based on the review of these and other factors, the Board concluded
that the quality of services to be provided by AIM was appropriate and that AIM
currently is providing satisfactory services in accordance with the terms of
the Advisory Agreement.
.. The performance of the Fund relative to comparable funds. The Board reviewed
the performance of the Fund during the past one, three and five calendar years
against the performance of funds advised by other advisors with investment
strategies comparable to those of the Fund. The Board noted that the Fund's
performance in such periods was above the median performance of such comparable
funds. The Board also noted that AIM began serving as investment advisor to the
Fund in November 2003. Based on this review, the Board concluded that no
changes should be made to the Fund and that it was not necessary to change the
Fund's portfolio management team at this time.
.. The performance of the Fund relative to indices. The Board reviewed the
performance of the Fund during the past one, three and five calendar years
against the performance of the Lipper International Large Cap Core Index. The
Board noted that the Fund's performance in such periods was above the Index
performance. The Board also noted that AIM began serving as investment advisor
to the Fund in November 2003. Based on this review, the Board concluded that no
changes should be made to the Fund and that it was not necessary to change the
Fund's portfolio management team at this time.
.. Meeting with the Fund's portfolio managers and investment personnel. With
respect to the Fund, the Board is meeting periodically with such Fund's
portfolio managers and/or other investment personnel and believes that such
individuals are competent and able to continue to carry out their
responsibilities under the Advisory Agreement.
.. Overall performance of AIM. The Board considered the overall performance of
AIM in providing investment advisory and portfolio administrative services to
the Fund and concluded that such performance was satisfactory.
.. Fees relative to those of clients of AIM with comparable investment
strategies. The Board reviewed the advisory fee rate for the Fund under the
Advisory Agreement. The Board noted that this rate was higher than the
sub-advisory fee rate for an unaffiliated mutual fund for which an AIM
affiliate serves as sub-advisor with investment strategies comparable to those
of the Fund, although the total management fees paid by such unaffiliated
mutual fund was higher than the advisory fee rate for the Fund. The Board noted
that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's
total operating expenses, as discussed below. Based on this review, the Board
concluded that the advisory fee rate for the Fund under the Advisory Agreement
was fair and reasonable.
.. Fees relative to those of comparable funds with other advisors. The Board
reviewed the advisory fee rate for the Fund under the Advisory Agreement. The
Board compared effective contractual advisory fee rates at a common asset level
and noted that the Fund's rate was comparable to the median rate of the funds
advised by other advisors with investment strategies comparable to those of the
Fund that the Board reviewed. The Board noted that AIM has agreed to waive
advisory fees of the Fund and to limit the Fund's total operating expenses, as
discussed below. Based on this review, the Board concluded that the advisory
fee rate for the Fund under the Advisory Agreement was fair and reasonable.
.. Expense limitations and fee waivers. The Board noted that AIM has
contractually agreed to waive advisory fees of the Fund through June 30, 2006
to the extent necessary so that the advisory fees payable by the Fund do not
exceed a specified maximum advisory fee rate, which maximum rate includes
breakpoints and is based on net asset levels. The Board considered the
contractual nature of this fee waiver and noted that it remains in effect until
June 30, 2006. The Board noted that AIM has contractually agreed to waive fees
and/or limit expenses of the Fund through October 31, 2005 in an amount
necessary to limit total annual operating expenses to a specified percentage of
average daily net assets for each class of the Fund. The Board considered the
contractual nature of this fee waiver/expense limitation and noted that it
remains in effect until October 31, 2005. The Board considered the effect this
fee waiver/expense limitation would have on the Fund's estimated expenses and
concluded that the levels of fee waivers/expense limitations for the Fund were
fair and reasonable.
.. Breakpoints and economies of scale. The Board reviewed the structure of the
Fund's advisory fee under the Advisory Agreement, noting that it includes six
breakpoints. The Board reviewed the level of the Fund's advisory fees, and
noted that such fees, as a percentage of the Fund's net assets, would decrease
as net assets increase because the Advisory Agreement includes breakpoints. The
Board noted that, due to the Fund's current asset levels and the way in which
the advisory fee breakpoints have been structured, the Fund has yet to benefit
from the breakpoints. The Board noted that AIM has contractually agreed to
waive advisory fees of the Fund through June 30, 2006 to the extent necessary
so that the advisory fees payable by the Fund do not exceed a specified maximum
advisory fee rate, which maximum rate includes breakpoints and is based on net
asset levels. The Board concluded that the Fund's fee levels under the Advisory
Agreement therefore would reflect economies of scale at higher asset levels and
that it was not necessary to change the advisory fee breakpoints in the Fund's
advisory fee schedule.
.. Investments in affiliated money market funds. The Board also took into
account the fact that uninvested cash and cash collateral from securities
lending arrangements (collectively, "cash balances") of the Fund may be
invested in money market funds advised by AIM pursuant to the terms of an SEC
exemptive order. The Board found that the Fund may realize certain benefits
upon investing cash balances in AIM advised money market funds, including a
higher net return, increased liquidity, increased diversification or decreased
transaction costs. The Board also found that the Fund will not receive reduced
services if it invests its cash balances in such money market funds. The Board
noted that, to the extent the Fund invests in affiliated money market funds,
AIM has voluntarily agreed to waive a portion of the advisory fees it receives
from the Fund attributable to such investment. The Board further determined
that the proposed securities lending program and related procedures with
respect to the lending Fund is in the best interests of the lending Fund and
its respective shareholders. The Board therefore concluded that the investment
of cash collateral received in connection with the securities lending program
in the money market funds according to the procedures is in the best interests
of the lending Fund and its respective shareholders.
(continued)
8
AIM INTERNATIONAL CORE EQUITY FUND
.. Independent written evaluation and recommendations of the Fund's Senior
Officer. The Board noted that, upon their direction, the Senior Officer of the
Fund, who is independent of AIM and AIM's affiliates, had prepared an
independent written evaluation in order to assist the Board in determining the
reasonableness of the proposed management fees of the AIM Funds, including the
Fund. The Board noted that the Senior Officer's written evaluation had been
relied upon by the Board in this regard in lieu of a competitive bidding
process. In determining whether to continue the Advisory Agreement for the
Fund, the Board considered the Senior Officer's written evaluation and the
recommendation made by the Senior Officer to the Board that the Board consider
implementing a process to assist them in more closely monitoring the
performance of the AIM Funds. The Board concluded that it would be advisable to
implement such a process as soon as reasonably practicable.
.. Profitability of AIM and its affiliates. The Board reviewed information
concerning the profitability of AIM's (and its affiliates') investment advisory
and other activities and its financial condition. The Board considered the
overall profitability of AIM, as well as the profitability of AIM in connection
with managing the Fund. The Board noted that AIM's operations remain
profitable, although increased expenses in recent years have reduced AIM's
profitability. Based on the review of the profitability of AIM's and its
affiliates' investment advisory and other activities and its financial
condition, the Board concluded that the compensation to be paid by the Fund to
AIM under its Advisory Agreement was not excessive.
.. Benefits of soft dollars to AIM. The Board considered the benefits realized
by AIM as a result of brokerage transactions executed through "soft dollar"
arrangements. Under these arrangements, brokerage commissions paid by the Fund
and/or other funds advised by AIM are used to pay for research and execution
services. This research is used by AIM in making investment decisions for the
Fund. The Board concluded that such arrangements were appropriate.
.. AIM's financial soundness in light of the Fund's needs. The Board considered
whether AIM is financially sound and has the resources necessary to perform its
obligations under the Advisory Agreement, and concluded that AIM has the
financial resources necessary to fulfill its obligations under the Advisory
Agreement.
.. Historical relationship between the Fund and AIM. In determining whether to
continue the Advisory Agreement for the Fund, the Board also considered the
prior relationship between AIM and the Fund, as well as the Board's knowledge
of AIM's operations, and concluded that it was beneficial to maintain the
current relationship, in part, because of such knowledge. The Board also
reviewed the general nature of the non-investment advisory services currently
performed by AIM and its affiliates, such as administrative, transfer agency
and distribution services, and the fees received by AIM and its affiliates for
performing such services. In addition to reviewing such services, the trustees
also considered the organizational structure employed by AIM and its affiliates
to provide those services. Based on the review of these and other factors, the
Board concluded that AIM and its affiliates were qualified to continue to
provide non-investment advisory services to the Fund, including administrative,
transfer agency and distribution services, and that AIM and its affiliates
currently are providing satisfactory non-investment advisory services.
.. Other factors and current trends. In determining whether to continue the
Advisory Agreement for the Fund, the Board considered the fact that AIM, along
with others in the mutual fund industry, is subject to regulatory inquiries and
litigation related to a wide range of issues. The Board also considered the
governance and compliance reforms being undertaken by AIM and its affiliates,
including maintaining an internal controls committee and retaining an
independent compliance consultant, and the fact that AIM has undertaken to
cause the Fund to operate in accordance with certain governance policies and
practices. The Board concluded that these actions indicated a good faith effort
on the part of AIM to adhere to the highest ethical standards, and determined
that the current regulatory and litigation environment to which AIM is subject
should not prevent the Board from continuing the Advisory Agreement for the
Fund.
APPROVAL OF SUB-ADVISORY AGREEMENT
The Board oversees the management of the Fund and, as required by law,
determines annually whether to approve the continuance of the Fund's
sub-advisory agreement. Based upon the recommendation of the Investments
Committee of the Board, which is comprised solely of independent trustees, at a
meeting held on June 30, 2005, the Board, including all of the independent
trustees, approved the continuance of the sub-advisory agreement (the
"Sub-Advisory Agreement") between INVESCO Global Asset Management (N.A.), Inc.
(the "Sub-Advisor") and AIM with respect to the Fund for another year,
effective July 1, 2005.
The Board considered the factors discussed below in evaluating the fairness
and reasonableness of the Sub-Advisory Agreement at the meeting on June 30,
2005 and as part of the Board's ongoing oversight of the Fund. In their
deliberations, the Board and the independent trustees did not identify any
particular factor that was controlling, and each trustee attributed different
weights to the various factors.
The discussion below serves as a discussion of the material factors and the
conclusions with respect thereto that formed the basis for the Board's approval
of the Sub-Advisory Agreement. After consideration of all of the factors below
and based on its informed business judgment, the Board determined that the
Sub-Advisory Agreement is in the best interests of the Fund and its
shareholders.
.. The nature and extent of the advisory services to be provided by the
Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor
under the Sub-Advisory Agreement. Based on such review, the Board concluded
that the range of services to be provided by the Sub-Advisor under the
Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is
providing services in accordance with the terms of the Sub-Advisory Agreement.
.. The quality of services to be provided by the Sub-Advisor. The Board reviewed
the credentials and experience of the officers and employees of the Sub-Advisor
who will provide investment advisory services to the Fund. Based on the review
of these and other factors, the Board concluded that the quality of services to
be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor
currently is providing satisfactory services in accordance with the terms of
the Sub-Advisory Agreement.
.. The performance of the Fund relative to comparable funds. The Board reviewed
the performance of the Fund during the past one, three and five calendar years
against the performance of funds advised by other advisors with investment
strategies comparable to those of the Fund. The Board noted that the Fund's
performance in such periods was above the median performance of such comparable
funds. The Board also noted that AIM began serving as investment advisor to the
Fund in November 2003. Based on this review, the Board concluded that no
changes should be made to the Fund and that it was not necessary to change the
Fund's portfolio management team at this time.
.. The performance of the Fund relative to indices. The Board reviewed the
performance of the Fund during the past one, three and five calendar years
against the performance of the Lipper International Large Cap Core Index. The
Board noted that the Fund's performance in such periods was above the Index
performance. The Board also noted that AIM began serving as investment advisor
to the Fund in November 2003. Based on this review, the Board concluded that no
changes should be made to the Fund and that it was not necessary to change the
Fund's portfolio management team at this time.
.. Meeting with the Fund's portfolio managers and investment personnel. The
Board is meeting periodically with the Fund's portfolio managers and/or other
investment personnel and believes that such individuals are competent and able
to continue to carry out their responsibilities under the Sub-Advisory
Agreement.
.. Overall performance of the Sub-Advisor. The Board considered the overall
performance of the Sub-Advisor in providing investment advisory services to the
Fund and concluded that such performance was satisfactory.
.. Advisory fees, expense limitations and fee waivers, and breakpoints and
economies of scale. In reviewing these factors, the Board considered only the
advisory fees charged to the Fund by AIM and did not consider the sub-advisory
fees paid by AIM to the Sub-Advisor. The Board believes that this approach is
appropriate because the sub-advisory fees have no effect on the Fund or its
shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM
and the Sub-Advisor are affiliates and the Board believes that the allocation
of fees between them is a business matter, provided that the advisory fees
charged to the Fund are fair and reasonable.
.. Profitability of AIM and its affiliates. The Board reviewed information
concerning the profitability of AIM's (and its affiliates') investment advisory
and other activities and its financial condition. The Board considered the
overall profitability of AIM, as well as the profitability of AIM in connection
with managing the Fund. The Board noted that AIM's operations remain
profitable, although increased expenses in recent years have reduced AIM's
profitability. Based on the review of the profitability of AIM's and its
affiliates' investment advisory and other activities and its financial
condition, the Board concluded that the compensation to be paid by the Fund to
AIM under its Advisory Agreement was not excessive.
.. The Sub-Advisor's financial soundness in light of the Fund's needs. The Board
considered whether the Sub-Advisor is financially sound and has the resources
necessary to perform its obligations under the Sub-Advisory Agreement, and
concluded that the Sub-Advisor has the financial resources necessary to fulfill
its obligations under the Sub-Advisory Agreement.
9
SUPPLEMENT TO ANNUAL REPORT DATED 10/31/05
AIM INTERNATIONAL CORE EQUITY FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/05
Inception (4/30/04) 15.17%
1 Year 14.53
6 Months* 6.78
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 9/30/05, most recent calendar quarter-end
Inception (4/30/04) 18.26%
1 Year 21.76
6 Months* 7.34
*Cumulative total return that has not been annualized
================================================================================
INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT
NET ASSET VALUE (NAV). PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER
FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND
CLASS EXPENSES.
PLEASE NOTE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MORE
RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. ALL RETURNS ASSUME
REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. SEE FULL REPORT FOR INFORMATION ON
COMPARATIVE BENCHMARKS. PLEASE CONSULT YOUR FUND PROSPECTUS FOR MORE
INFORMATION. FOR THE MOST CURRENT MONTH-END PERFORMANCE, PLEASE CALL
800-525-8085 OR VISIT AIMINVESTMENTS.COM.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL IBVIX
- --------------------------------------------------------------------------------
Over for information on your Fund's expenses.
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature
for public use.
[YOUR GOALS.
OUR SOLUTIONS.] [AIM INVESTMENTS LOGO]
- REGISTERED TRADEMARK - - REGISTERED TRADEMARK -
AIMINVESTMENTS.COM I-ICE-INS-1
INFORMATION ABOUT YOUR FUND'S EXPENSES
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with ongoing costs of investing in other mutual funds. The example is
based on an investment of $1,000 invested at the beginning of the period and
held for the entire period May 1, 2005, through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The Fund's actual cumulative total return after expenses for the six
months ended October 31, 2005, appears in the table on the front of this
supplement.
THE HYPOTHETICAL ACCOUNT VALUES AND EXPENSES MAY NOT BE USED TO ESTIMATE THE
ACTUAL ENDING ACCOUNT BALANCE OR EXPENSES YOU PAID FOR THE PERIOD. YOU MAY USE
THIS INFORMATION TO COMPARE THE ONGOING COSTS OF INVESTING IN THE FUND AND
OTHER FUNDS. TO DO SO, COMPARE THIS 5% HYPOTHETICAL EXAMPLE WITH THE 5%
HYPOTHETICAL EXAMPLES THAT APPEAR IN THE SHAREHOLDER REPORTS OF THE OTHER FUNDS.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds.
- --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
SHARE CLASS (5/1/05) (10/31/05)/1/ PERIOD/2/ (10/31/05) PERIOD/2/ RATIO
Institutional $ 1,000.00 $ 1,067.80 $ 5.16 $ 1,020.21 $5.04 0.99%
/1/The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2005, through October 31, 2005, after actual
expenses and will differ from the hypothetical ending account value which is
based on the Fund's expense ratio and a hypothetical annual return of 5% before
expenses. The Fund's actual cumulative total return after expenses for the six
months ended October 31, 2005, appears in the table on the front of this
supplement.
/2/Expenses are equal to the Fund's annualized expense ratio as indicated above
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.
- --------------------------------------------------------------------------------
AIMINVESTMENTS.COM I-ICE-INS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2005
SHARES VALUE
- ----------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-96.61%
AUSTRALIA-1.62%
National Australia Bank Ltd. (Diversified Banks)/(a)(b)/ 129,600 $ 3,206,375
- ----------------------------------------------------------------------------------
National Australia Bank Ltd.-ADR (Diversified
Banks)/(a)/ 10,600 1,314,506
- ----------------------------------------------------------------------------------
4,520,881
- ----------------------------------------------------------------------------------
BELGIUM-1.48%
Belgacom S.A. (Integrated Telecommunication
Services)/(b)/ 123,100 4,128,504
- ----------------------------------------------------------------------------------
CANADA-2.06%
BCE Inc. (Integrated Telecommunication Services)/(a)/ 105,900 2,614,660
- ----------------------------------------------------------------------------------
EnCana Corp. (Oil & Gas Exploration & Production) 68,800 3,160,821
- ----------------------------------------------------------------------------------
5,775,481
- ----------------------------------------------------------------------------------
CHINA-0.39%
China Life Insurance Co., Ltd.-ADR (Life & Health
Insurance)/(c)/ 37,100 1,088,885
- ----------------------------------------------------------------------------------
DENMARK-1.41%
Danske Bank A.S. (Diversified Banks)/(b)/ 125,800 3,945,710
- ----------------------------------------------------------------------------------
FINLAND-4.47%
Nokia Oyj (Communications Equipment)/(b)/ 406,550 6,823,374
- ----------------------------------------------------------------------------------
Stora Enso Oyj-Class R (Paper Products)/(b)/ 271,900 3,481,423
- ----------------------------------------------------------------------------------
UPM-Kymmene Oyj (Paper Products)/(b)/ 113,800 2,197,933
- ----------------------------------------------------------------------------------
12,502,730
- ----------------------------------------------------------------------------------
FRANCE-5.38%
Compagnie Generale des Etablissements Michelin-
Class B (Tires & Rubber)/(a)/ 72,461 3,912,129
- ----------------------------------------------------------------------------------
Credit Agricole S.A. (Diversified Banks)/(a)(b)/ 113,600 3,330,099
- ----------------------------------------------------------------------------------
Societe Generale-ADR (Diversified Banks)/(d)/ 155,100 3,538,932
- ----------------------------------------------------------------------------------
Total S.A.-ADR (Integrated Oil & Gas) 33,730 4,250,655
- ----------------------------------------------------------------------------------
15,031,815
- ----------------------------------------------------------------------------------
GERMANY-3.87%
BASF A.G. (Diversified Chemicals)/(b)/ 32,400 2,336,187
- ----------------------------------------------------------------------------------
BASF A.G.-ADR (Diversified Chemicals) 29,750 2,141,702
- ----------------------------------------------------------------------------------
Bayerische Motoren Werke A.G. (Automobile
Manufacturers)/(b)/ 87,200 3,784,511
- ----------------------------------------------------------------------------------
Deutsche Bank A.G.-German Shares (Diversified
Capital Markets)/(a)/ 14,200 1,329,893
- ----------------------------------------------------------------------------------
Deutsche Bank A.G. -New York Shares (Diversified
Capital Markets) 13,070 1,223,352
- ----------------------------------------------------------------------------------
10,815,645
- ----------------------------------------------------------------------------------
HONG KONG-1.55%
Cheung Kong (Holdings) Ltd. (Real Estate
Management & Development)/(b)/ 135,000 1,408,500
- ----------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Industrial
Conglomerates)/(b)/ 307,100 2,914,818
- ----------------------------------------------------------------------------------
4,323,318
- ----------------------------------------------------------------------------------
SHARES VALUE
- ---------------------------------------------------------------------------------
ITALY-1.50%
Eni S.p.A.-ADR (Integrated Oil & Gas)/(a)/ 31,325 $ 4,189,719
- ---------------------------------------------------------------------------------
JAPAN-22.06%
Canon Inc. (Office Electronics)/(b)/ 59,900 3,170,230
- ---------------------------------------------------------------------------------
Canon Inc.-ADR (Office Electronics) 48,700 2,584,509
- ---------------------------------------------------------------------------------
East Japan Railway Co. (Railroads)/(b)/ 705 4,203,000
- ---------------------------------------------------------------------------------
Fuji Photo Film Co., Ltd. (Photographic Products)/(b)/ 72,000 2,299,452
- ---------------------------------------------------------------------------------
Fuji Photo Film Co., Ltd.-ADR (Photographic
Products) 94,100 3,015,905
- ---------------------------------------------------------------------------------
Kao Corp. (Household Products)/(b)/ 150,000 3,582,679
- ---------------------------------------------------------------------------------
Millea Holdings, Inc. (Property & Casualty
Insurance)/(b)/ 162 2,946,753
- ---------------------------------------------------------------------------------
NEC Electronics Corp. (Semiconductors) (Acquired
05/18/04-02/09/05; Cost $2,059,548)/(a)(b)/ 40,800 1,101,628
- ---------------------------------------------------------------------------------
Nintendo Co., Ltd. (Home Entertainment Software)/(b)/ 31,300 3,513,791
- ---------------------------------------------------------------------------------
Nippon Telegraph and Telephone Corp. (Integrated
Telecommunication Services)/(b)/ 705 3,359,852
- ---------------------------------------------------------------------------------
Nippon Telegraph and Telephone Corp.-ADR
(Integrated Telecommunication Services) 24,585 587,827
- ---------------------------------------------------------------------------------
Nomura Holdings, Inc. (Investment Banking &
Brokerage)/(b)/ 307,000 4,727,935
- ---------------------------------------------------------------------------------
Olympus Corp. (Health Care Equipment)/(a)(b)/ 100,000 2,219,420
- ---------------------------------------------------------------------------------
Seven & I Holdings Co., Ltd. (Food Retail)/(c)/ 66,000 2,154,732
- ---------------------------------------------------------------------------------
Shin-Etsu Chemical Co., Ltd. (Specialty Chemicals)/(b)/ 138,200 6,652,396
- ---------------------------------------------------------------------------------
SMC Corp. (Industrial Machinery)/(a)(b)/ 20,800 2,778,425
- ---------------------------------------------------------------------------------
Sony Corp.-ADR (Consumer Electronics) 94,120 3,087,136
- ---------------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)/(b)/ 112,200 6,170,420
- ---------------------------------------------------------------------------------
Toyota Motor Corp. (Automobile Manufacturers)/(b)/ 75,500 3,505,645
- ---------------------------------------------------------------------------------
61,661,735
- ---------------------------------------------------------------------------------
MEXICO-1.59%
Fomento Economico Mexicano, S.A. de C.V.-ADR
(Soft Drinks) 26,700 1,815,333
- ---------------------------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.-Series L-ADR
(Integrated Telecommunication Services) 130,190 2,627,234
- ---------------------------------------------------------------------------------
4,442,567
- ---------------------------------------------------------------------------------
NETHERLANDS-7.61%
Aegon N.V. (Life & Health Insurance) 331,400 4,985,477
- ---------------------------------------------------------------------------------
Heineken N.V. (Brewers)/(a)(b)/ 129,000 4,086,364
- ---------------------------------------------------------------------------------
ING Groep N.V.-ADR (Other Diversified Financial
Services) 116,950 3,375,177
- ---------------------------------------------------------------------------------
Royal DSM N.V. (Specialty Chemicals)/(b)/ 47,140 1,692,850
- ---------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.-New York
Shares (Consumer Electronics) 87,550 2,290,308
- ---------------------------------------------------------------------------------
TNT N.V. (Air Freight & Logistics) 205,950 4,860,915
- ---------------------------------------------------------------------------------
21,291,091
- ---------------------------------------------------------------------------------
NORWAY-1.05%
Statoil A.S.A. (Integrated Oil & Gas)/(b)/ 132,100 2,933,760
- ---------------------------------------------------------------------------------
F-1
SHARES VALUE
- -----------------------------------------------------------------------------------
SOUTH KOREA-2.42%
Kookmin Bank (Diversified Banks)/(b)/ 34,700 $ 1,994,775
- -----------------------------------------------------------------------------------
Korea Electric Power Corp.-ADR (Electric Utilities) 80,700 1,317,831
- -----------------------------------------------------------------------------------
KT Corp.-ADR (Integrated Telecommunication
Services) 160,550 3,459,853
- -----------------------------------------------------------------------------------
6,772,459
- -----------------------------------------------------------------------------------
SPAIN-2.23%
Endesa, S.A.-ADR (Electric Utilities) 122,385 3,033,924
- -----------------------------------------------------------------------------------
Repsol YPF, S.A.-ADR (Integrated Oil & Gas) 107,035 3,190,713
- -----------------------------------------------------------------------------------
6,224,637
- -----------------------------------------------------------------------------------
SWEDEN-1.20%
Nordea Bank A.B. (Diversified Banks)/(b)/ 341,500 3,346,120
- -----------------------------------------------------------------------------------
SWITZERLAND-9.08%
Credit Suisse Group (Diversified Capital Markets)/(b)/ 96,700 4,278,537
- -----------------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)/(b)/ 9,250 2,753,936
- -----------------------------------------------------------------------------------
Nestle S.A.-ADR (Packaged Foods & Meats)/(d)/ 38,575 2,868,252
- -----------------------------------------------------------------------------------
Novartis A.G. (Pharmaceuticals) 88,100 4,739,719
- -----------------------------------------------------------------------------------
Novartis A.G.-ADR (Pharmaceuticals) 70,000 3,767,400
- -----------------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals) 14,500 2,166,479
- -----------------------------------------------------------------------------------
Zurich Financial Services A.G. (Multi-Line Insurance) 28,195 4,809,806
- -----------------------------------------------------------------------------------
25,384,129
- -----------------------------------------------------------------------------------
TAIWAN-0.42%
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR
(Semiconductors) 145,109 1,172,481
- -----------------------------------------------------------------------------------
UNITED KINGDOM-25.22%
Anglo American PLC (Diversified Metals & Mining) 113,800 3,364,669
- -----------------------------------------------------------------------------------
BAA PLC (Airport Services) 349,400 3,795,082
- -----------------------------------------------------------------------------------
BAE Systems PLC (Aerospace & Defense)/(b)/ 1,110,000 6,491,854
- -----------------------------------------------------------------------------------
Boots Group PLC (Drug Retail)/(b)/ 257,300 2,803,991
- -----------------------------------------------------------------------------------
BP PLC (Integrated Oil & Gas)/(b)/ 234,600 2,597,152
- -----------------------------------------------------------------------------------
Cadbury Schweppes PLC (Packaged Foods & Meats)/(b)/ 470,000 4,627,086
- -----------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Diageo PLC (Distillers & Vintners) 328,200 $ 4,851,865
- -------------------------------------------------------------------------------
GlaxoSmithKline PLC (Pharmaceuticals) 36,000 936,285
- -------------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals) 156,200 8,120,838
- -------------------------------------------------------------------------------
HSBC Holdings PLC-ADR (Diversified Banks) 49,285 3,881,687
- -------------------------------------------------------------------------------
Kingfisher PLC (Home Improvement Retail)/(b)/ 620,300 2,327,086
- -------------------------------------------------------------------------------
Lloyds TSB Group PLC (Diversified Banks)/(b)/ 350,000 2,870,092
- -------------------------------------------------------------------------------
Morrison (William) Supermarkets PLC (Food Retail) 1,185,200 3,430,782
- -------------------------------------------------------------------------------
Reed Elsevier PLC (Publishing)/(b)/ 579,700 5,292,949
- -------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Diversified
Banks)/(b)/ 284,300 7,873,158
- -------------------------------------------------------------------------------
Royal Dutch Shell PLC-Class A-ADR (Integrated Oil &
Gas) 29,450 1,827,078
- -------------------------------------------------------------------------------
Vodafone Group PLC (Wireless Telecommunication
Services)/(b)/ 2,065,000 5,420,873
- -------------------------------------------------------------------------------
70,512,527
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests
(Cost $218,902,082) 270,064,194
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS-3.82%
Premier Portfolio-Institutional Class
(Cost $10,682,350)/(e)/ 10,682,350 10,682,350
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.43% (excluding
investments purchased with cash collateral from
securities loaned) (Cost $229,584,432) 280,746,544
- -------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED
MONEY MARKET FUNDS-6.43%
Premier Portfolio--Institutional Class/(e)(f)/ 17,969,344 17,969,344
- -------------------------------------------------------------------------------
Total Money Market Funds (purchased with cash
collateral from securities loaned)
(Cost $17,969,344) 17,969,344
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-106.86% (Cost $247,553,776) 298,715,888
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(6.86%) (19,174,286)
- -------------------------------------------------------------------------------
NET ASSETS-100.00% $ 279,541,602
- -------------------------------------------------------------------------------
Investment Abbreviations:
ADR- American Depositary Receipt
Notes to Schedule of Investments:
/(a)/All or a portion of this security has been pledged as collateral for
securities lending transactions at October 31, 2005.
/(b)/In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market prices.
The aggregate value of these securities at October 31, 2005 was
$149,179,643 which represented 53.37% of the Fund's Net Assets. See Note
1A.
/(c)/Non-income producing security.
/(d)/In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an
independent pricing service. The aggregate value of these securities at
October 31, 2005 was $6,407,184, which represented 2.29% of the Fund's Net
Assets. See Note 1A.
/(e)/The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
/(f)/The security has been segregated to satisfy the forward commitment to
return the cash collateral received in securities lending transactions
upon the borrower's return of the securities loaned. See Note 7.
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-2
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2005
ASSETS:
Investments, at value (cost $218,902,082)* $270,064,194
- -----------------------------------------------------------------------------------
Investments in affiliated money market funds (cost $28,651,694) 28,651,694
- -----------------------------------------------------------------------------------
Total investments (cost $247,553,776) 298,715,888
- -----------------------------------------------------------------------------------
Receivables for:
Investments sold 1,257,336
- -----------------------------------------------------------------------------------
Fund shares sold 716,314
- -----------------------------------------------------------------------------------
Dividends 545,196
- -----------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 44,449
- -----------------------------------------------------------------------------------
Other assets 93,412
- -----------------------------------------------------------------------------------
Total assets 301,372,595
- -----------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,667,571
- -----------------------------------------------------------------------------------
Fund shares reacquired 542,190
- -----------------------------------------------------------------------------------
Amount due custodian 362,431
- -----------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 56,171
- -----------------------------------------------------------------------------------
Collateral upon return of securities loaned 17,969,344
- -----------------------------------------------------------------------------------
Accrued distribution fees 78,123
- -----------------------------------------------------------------------------------
Accrued trustees' and officer's fees and benefits 1,778
- -----------------------------------------------------------------------------------
Accrued transfer agent fees 86,751
- -----------------------------------------------------------------------------------
Accrued operating expenses 66,634
- -----------------------------------------------------------------------------------
Total liabilities 21,830,993
- -----------------------------------------------------------------------------------
Net assets applicable to shares outstanding $279,541,602
- -----------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $225,063,043
- -----------------------------------------------------------------------------------
Undistributed net investment income 2,223,232
- -----------------------------------------------------------------------------------
Undistributed net realized gain from investment securities and foreign
currencies 1,095,964
- -----------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign
currencies 51,159,363
- -----------------------------------------------------------------------------------
$279,541,602
- -----------------------------------------------------------------------------------
NET ASSETS:
Class A $90,022,353
-----------------------------------------------------------
Class B $28,784,800
-----------------------------------------------------------
Class C $38,107,515
-----------------------------------------------------------
Class R $ 2,621,514
-----------------------------------------------------------
Investor Class $46,987,510
-----------------------------------------------------------
Institutional Class $73,017,910
-----------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 7,567,135
-----------------------------------------------------------
Class B 2,441,352
-----------------------------------------------------------
Class C 3,301,277
-----------------------------------------------------------
Class R 220,804
-----------------------------------------------------------
Investor Class 3,903,031
-----------------------------------------------------------
Institutional Class 6,099,726
-----------------------------------------------------------
Class A :
Net asset value per share $ 11.90
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.90 / 94.50%) $ 12.59
-----------------------------------------------------------
Class B :
Net asset value and offering price per share $ 11.79
-----------------------------------------------------------
Class C :
Net asset value and offering price per share $ 11.54
-----------------------------------------------------------
Class R:
Net asset value and offering price per share $ 11.87
-----------------------------------------------------------
Investor Class:
Net asset value and offering price per share $ 12.04
-----------------------------------------------------------
Institutional Class:
Net asset value and offering price per share $ 11.97
-----------------------------------------------------------
* At October 31, 2005, securities with an aggregate value of $17,287,429 were
on loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-3
STATEMENT OF OPERATIONS
For the year ended October 31, 2005
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $669,500) $ 6,197,826
- ---------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending
income of $144,771, after compensation to counterparties of $758,442) 404,887
- ---------------------------------------------------------------------------------------------
Total investment income 6,602,713
- ---------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,792,685
- ---------------------------------------------------------------------------------------------
Administrative services fees 104,976
- ---------------------------------------------------------------------------------------------
Custodian fees 97,632
- ---------------------------------------------------------------------------------------------
Distribution fees:
Class A 238,546
- ---------------------------------------------------------------------------------------------
Class B 277,342
- ---------------------------------------------------------------------------------------------
Class C 383,579
- ---------------------------------------------------------------------------------------------
Class R 12,972
- ---------------------------------------------------------------------------------------------
Investor Class 120,120
- ---------------------------------------------------------------------------------------------
Transfer agent fees- A, B, C, R and Investor 549,525
- ---------------------------------------------------------------------------------------------
Transfer agent fees-Institutional 2,734
- ---------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 22,559
- ---------------------------------------------------------------------------------------------
Other 305,561
- ---------------------------------------------------------------------------------------------
Total expenses 3,908,231
- ---------------------------------------------------------------------------------------------
Less:Fees waived, expenses reimbursed and expense offset arrangement (10,636)
- ---------------------------------------------------------------------------------------------
Net expenses 3,897,595
- ---------------------------------------------------------------------------------------------
Net investment income 2,705,118
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 14,556,422
- ---------------------------------------------------------------------------------------------
Foreign currencies (436,126)
- ---------------------------------------------------------------------------------------------
14,120,296
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 11,685,742
- ---------------------------------------------------------------------------------------------
Foreign currencies (10,370)
- ---------------------------------------------------------------------------------------------
11,675,372
- ---------------------------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 25,795,668
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $28,500,786
- ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-4
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2005 and 2004
2005
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,705,118
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign currencies 14,120,296
- ------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities and foreign currencies 11,675,372
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 28,500,786
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (445,320)
- ------------------------------------------------------------------------------------------------------------------------
Class B (16,207)
- ------------------------------------------------------------------------------------------------------------------------
Class C (65,085)
- ------------------------------------------------------------------------------------------------------------------------
Class R (14,030)
- ------------------------------------------------------------------------------------------------------------------------
Investor Class (314,265)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (244,538)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in net assets resulting from distributions (1,099,445)
- ------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 20,388,288
- ------------------------------------------------------------------------------------------------------------------------
Class B 1,779,734
- ------------------------------------------------------------------------------------------------------------------------
Class C (2,982,997)
- ------------------------------------------------------------------------------------------------------------------------
Class R 207,566
- ------------------------------------------------------------------------------------------------------------------------
Investor Class (3,117,007)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 52,077,505
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from share transactions 68,353,089
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 95,754,430
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 183,787,172
- ------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of $2,223,232 and $1,050,690, respectively) $279,541,602
- ------------------------------------------------------------------------------------------------------------------------
2004
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,247,768
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign currencies 10,968,871
- -----------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities and foreign currencies 19,036,729
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 31,253,368
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (186,438)
- -----------------------------------------------------------------------------------------------------------------------
Class B (58,073)
- -----------------------------------------------------------------------------------------------------------------------
Class C (103,958)
- -----------------------------------------------------------------------------------------------------------------------
Class R (3,851)
- -----------------------------------------------------------------------------------------------------------------------
Investor Class (137,556)
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class --
- -----------------------------------------------------------------------------------------------------------------------
Decrease in net assets resulting from distributions (489,876)
- -----------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 48,377,188
- -----------------------------------------------------------------------------------------------------------------------
Class B 19,285,145
- -----------------------------------------------------------------------------------------------------------------------
Class C 27,251,240
- -----------------------------------------------------------------------------------------------------------------------
Class R 1,849,400
- -----------------------------------------------------------------------------------------------------------------------
Investor Class (11,435,203)
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class 15,561,946
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from share transactions 100,889,716
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets 131,653,208
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 52,133,964
- -----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of $2,223,232 and $1,050,690, respectively) $183,787,172
- -----------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
F-5
NOTES TO FINANCIAL STATEMENTS
October 31, 2005
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Core Equity Fund (the "Fund") is a series portfolio of AIM
International Mutual Funds (the "Trust"). The Trust is a Delaware statutory
trust registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end series management investment company consisting of
six separate portfolios, each authorized to issue an unlimited number of shares
of beneficial interest. The Fund currently consists of multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to seek total return.
Under the Trust's organizational documents, each Trustee, officer, employee
or other agent of the Trust (including the Trust's investment manager) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
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 including
estimates and assumptions related to taxation. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued on the basis of prices furnished by
independent pricing services, which may be considered fair valued, or market
makers. Each security reported on the NASDAQ National Market System is
valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the
customary trading session on the valuation date or absent a NOCP, at the
closing bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at
the mean between the last bid and the ask prices from the exchange on which
they are principally traded. Options not listed on an exchange are valued by
an independent source at the mean between the last bid and ask prices. For
purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated quotes
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in the
case of debt obligations, the mean between the last bid and asked prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the close
of the NYSE. Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the NYSE. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of the close of the respective markets.
Events affecting the values of such foreign securities may occur between the
times at which the particular foreign market closes and the close of the
customary trading session of the NYSE which would not ordinarily be
reflected in the computation of the Fund's net asset value. If the event is
likely to have affected the closing price of the security, the security will
be valued at fair value in good faith using procedures approved by the Board
of Trustees. Adjustments to closing prices to reflect fair value may also be
based on a screening process of an independent pricing service to indicate
the degree of certainty, based on historical data, that the closing price in
the principal market where a foreign security trades is not the current
market value as of the close of the NYSE. Foreign securities meeting the
approved degree of certainty that the price is not reflective of current
market value will be priced at the indication of fair value from the
independent pricing service. Multiple factors may be considered by the
independent pricing service in determining adjustments to reflect fair value
and may include information relating to sector indices, ADRs and domestic
and foreign index futures.
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by the
Board of Trustees. Issuer specific events, market trends, bid/ask quotes of
brokers and information providers and other market data may be reviewed in
the course of making a good faith determination of a security's fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
F-6
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased and/or
a reduction of proceeds on a sale of securities. Such transaction costs are
included in the determination of realized and unrealized gain (loss) from
investment securities reported in the Statement of Operations and the
Statement of Changes in Net Assets and the realized and unrealized net gains
(losses) on securities per share in the Financial Highlights. Transaction
costs are included in the calculation of the Fund's net asset value and,
accordingly, they reduce the Fund's total returns. These transaction costs
are not considered operating expenses and are not reflected in net
investment income reported in the Statement of Operations and Statement of
Changes in Net Assets, or the net investment income per share and ratios of
expenses and net investment income reported in the Financial Highlights, nor
are they limited by any expense limitation arrangements between the Fund and
the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may determine
the country in which an issuer is located and/or credit risk exposure based
on various factors. These factors include the laws of the country under
which the issuer is organized, where the issuer maintains a principal
office, the country in which the issuer derives 50% or more of its total
revenues and the country that has the primary market for the issuer's
securities, as well as other criteria. Among the other criteria that may be
evaluated for making this determination are the country in which the issuer
maintains 50% or more of its assets, the type of security, financial
guarantees and enhancements, the nature of the collateral and the sponsor
organization. Country of issuer and/or credit risk exposure has been
determined to be United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those classes
based on relative net assets. All other expenses are allocated among the
classes based on relative net assets.
G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of shares
held less than 30 days. The redemption fee is accounted for as an addition
to shares of beneficial interest by the Fund and is allocated among the
share classes based on the relative net assets of each class.
H. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at date of valuation.
Purchases and sales of portfolio securities (net of foreign taxes withheld
on disposition) and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments (net of estimated
foreign tax withholding) are included with the net realized and unrealized
gain or loss from investments in the Statement of Operations. Reported net
realized foreign currency gains or losses arise from (i) sales of foreign
currencies, (ii) currency gains or losses realized between the trade and
settlement dates on securities transactions, and (iii) the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign currency gains and losses
arise from changes in the fair values of assets and liabilities, other than
investments in securities at fiscal period end, resulting from changes in
exchange rates.
I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
AVERAGE NET ASSETS RATE
----------------------------------------------------
First $500 million 0.75%
----------------------------------------------------
Next $500 million 0.65%
----------------------------------------------------
Next $1 billion 0.55%
----------------------------------------------------
Next $2 billion 0.45%
----------------------------------------------------
Next $2 billion 0.40%
----------------------------------------------------
Next $2 billion 0.375%
----------------------------------------------------
Over $8 billion 0.35%
----------------------------------------------------
F-7
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Global Asset Management (N.A.) ("IGAM"), AIM pays IGAM 40% of the amount of
AIM's compensation on the sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse expenses
to the extent necessary to limit total annual operating expenses (excluding
certain items discussed below) of Class A, Class B, Class C, Class R, Investor
Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 2.00% and
1.75% of average daily net assets, respectively, through October 31, 2006. In
determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause
the total annual fund operating expenses to exceed the numbers reflected above:
(i) interest; (ii) taxes; (iii) dividend expense on short sales;
(iv) extraordinary items; (v) expenses related to a merger or reorganization,
as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund
has incurred but did not actually pay because of an expense offset arrangement.
Currently, in addition to the expense reimbursement arrangement with AMVESCAP
PLC ("AMVESCAP") described more fully below, the expense offset arrangements
from which the Fund may benefit are in the form of credits that the Fund
receives from banks where the Fund or its transfer agent has deposit accounts
in which it holds uninvested cash. Those credits are used to pay certain
expenses incurred by the Fund. AIM did not waive fees and/or reimburse expenses
during the period under this expense limitation.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the
amount of 25% of the advisory fee AIM receives from the affiliated money market
funds on investments by the Fund in such affiliated money market funds
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the fund). AIM is also voluntarily waiving
a portion of the advisory fee payable by the Fund equal to the difference
between the income earned from investing in the affiliated money market fund
and the hypothetical income earned from investing in an appropriate comparative
benchmark. Voluntary fee waivers or reimbursements may be modified or
discontinued at any time upon consultation with the Board of Trustees without
further notice to investors.
For the year ended October 31, 2005, AIM waived fees of $3,138.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting,
communications and trustee expenses. These expenses along with the related
expense reimbursement, are included in the Statement of Operations. For the
year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the
amount of $590.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2005, AIM was paid $104,976.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services,
sub-accounting services and/or networking services. For the year ended
October 31, 2005, the Fund paid AISI $549,525 for Class A, Class B, Class C,
Class R and Investor Class share classes and $2,734 for Institutional Class
shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class
B, Class C, Class R, Investor Class and Institutional Class shares of the Fund.
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with
respect to the Fund's Class A, Class B, Class C, Class R and Investor Class
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares, 1.00% of the average daily net assets of Class B and Class C
shares, 0.50% of the average daily net assets of Class R shares and 0.25% of
the average daily net assets of Investor Class shares. Prior to July 1, 2005,
the Fund paid ADI 0.35% of the average daily net assets of Class A shares. Of
these amounts, up to 0.25% of the average daily net assets of the Class A,
Class B, Class C, Class R or Investor Class shares may be paid to furnish
continuing personal shareholder services to customers who purchase and own
shares of such classes. Any amounts not paid as a service fee under the Plans
would constitute an asset-based sales charge. National Association of
Securities Dealers ("NASD") Rules also impose a cap on the total sales charges,
including asset-based sales charges that may be paid by any class of shares of
the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class
A, Class B, Class C, Class R and Investor Class shares paid $238,546, $277,342,
$383,579, $12,972, and $120,120, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted
from redemption proceeds prior to remittance to the shareholder. For the year
ended October 31, 2005, ADI advised the Fund that it retained $32,193 in
front-end sales commissions from the sale of Class A shares and $48, $9,011,
$2,615 and $0 from Class A, Class B, Class C and Class R shares, respectively,
for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM,
AISI, IGAM and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC"), to invest daily available cash balances and cash
collateral from securities lending transactions in affiliated money market
funds. The Fund and the money market fund below have the same investment
advisor and therefore, are considered to be affiliated. The tables below show
the transactions in and earnings from investments in an affiliated money market
fund for the year ended October 31, 2005.
F-8
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class $3,494,279 $77,120,270 $(69,932,199) $ -- $10,682,350 $260,116 $ --
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class $38,945,109 $242,413,401 $(263,389,166) $ -- $17,969,344 $144,771 $ --
- -----------------------------------------------------------------------------------------------------------------------------
Total $42,439,388 $319,533,671 $(333,321,365) $ -- $28,651,694 $404,887 $ --
- -----------------------------------------------------------------------------------------------------------------------------
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions. For the year ended October 31,
2005, the Fund received credits from this arrangement, which resulted in the
reduction of the Fund's total expenses of $6,908.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees
who also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2005, the Fund paid legal fees of $3,463
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate
available on investments in overnight repurchase agreements) is favorable to
both the lending fund and the borrowing fund. A loan will be secured by
collateral if the Fund's aggregate borrowings from all sources exceeds 10% of
the Fund's total assets. To the extent that the loan is required to be secured
by collateral, the collateral is marked to market daily to ensure that the
market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to
the credit facility can borrow on a first come, first served basis. Principal
on each loan outstanding shall bear interest at the bid rate quoted by SSB at
the time of the request for the loan.
During the year ended October 31, 2005, the Fund did not borrow or lend under
the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate
the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian can be
compensated by earning the additional interest; or (ii) compensate by paying
the custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the rate contractually agreed upon.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such
collateral will be cash or debt securities issued or guaranteed by the U.S.
Government or any of its agencies. Cash collateral received in connection with
these loans is invested in short-term money market instruments or affiliated
money market funds. It is the Fund's policy to obtain additional collateral
from or return excess collateral to the borrower by the end of the next
business day, following the valuation date of the securities loaned. Therefore,
the value of the collateral held may be temporarily less than the value of the
securities on loan. Lending securities entails a risk of loss to the Fund if
and to the extent that the market value of the securities loaned were to
increase and the borrower did not increase the collateral accordingly, and the
borrower fails to return the securities. The Fund could also experience delays
and costs in gaining access to the collateral. The Fund bears the risk of any
deficiency in the amount of the collateral available for return to the borrower
due to a loss on the collateral invested.
F-9
At October 31, 2005, securities with an aggregate value of $17,287,429 were
on loan to brokers. The loans were secured by cash collateral of $17,969,344
received by the Fund and subsequently invested in affiliated money market
funds. For the year ended October 31, 2005, the Fund received dividends on cash
collateral of $144,771 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2005
and 2004 was as follows:
2005 2004
-----------------------------------------------------------
Distributions paid from ordinary income $1,099,445 $489,876
-----------------------------------------------------------
TAX COMPONENTS OF NET ASSETS:
2005
As of October 31, 2005, the components of net assets on a tax basis were as follows: ----
Undistributed ordinary income $ 2,270,119
- --------------------------------------------------------------------------------------------------
Undistributed long-term gain 9,324,879
- --------------------------------------------------------------------------------------------------
Unrealized appreciation--investments 44,882,942
- --------------------------------------------------------------------------------------------------
Temporary book/tax differences (46,886)
- --------------------------------------------------------------------------------------------------
Capital loss carryforward (1,952,495)
- --------------------------------------------------------------------------------------------------
Shares of beneficial interest 225,063,043
- --------------------------------------------------------------------------------------------------
Total net assets $279,541,602
- --------------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and certain corporate actions. The tax-basis unrealized appreciation
on investments amount includes appreciation (depreciation) on foreign
currencies of $(2,749).
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the
amount of capital loss carryforward actually available for the Fund to utilize.
The ability to utilize capital loss carryforward in the future may be limited
under the Internal Revenue Code and related regulations based on the results of
future transactions. Under these limitation rules, the Fund is limited as of
October 31, 2005 to utilizing $1,952,495 of capital loss carryforward in the
fiscal year ended October 31, 2006.
The Fund utilized $3,212,773 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2005 which expires as
follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------
October 31, 2009 $1,634,475
---------------------------------------------
October 31, 2010 318,020
---------------------------------------------
Total capital loss carryforward $1,952,495
---------------------------------------------
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of November 3, 2003, the date of the
reorganization of INVESCO Advantage Fund into the Fund, and realized on
securities held in each fund at such date, the capital loss carryforward may
be further limited for up to five years from the reorganization.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the year ended
October 31, 2005 was $108,758,361 and $45,127,853, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $51,864,182
-------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,978,491)
-------------------------------------------------------------------------
Net unrealized appreciation of investment securities $44,885,691
-------------------------------------------------------------------------
Cost of investments for tax purposes is $253,830,197.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, passive foreign investment companies, reorganization expenses and
the use of a portion of the proceeds from redemptions as distributions, on
October 31, 2005, undistributed net investment income (loss) was decreased by
$433,131, undistributed net realized gain (loss) was decreased by $1,132,895
and shares of beneficial interest increased by $1,566,026. This
reclassification had no effect on the net assets of the Fund.
F-10
NOTE 11--SHARE INFORMATION
The Fund currently consists of six different classes of shares: Class A shares,
Class B shares, Class C shares, Class R shares, Investor Class shares and
Institutional Class shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with CDSC. Class R shares,
Investor Class shares and Institutional Class shares are sold at net asset
value. Under certain circumstances, Class A shares and Class R shares are
subject to CDSC. Generally, Class B shares will automatically convert to
Class A shares eight years after the end of the calendar month of purchase.
Investor Class shares of the Fund are offered only to certain grandfathered
investors.
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2005(a) 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,683,711 $ 42,067,093 2,187,817 $ 21,070,438
- -------------------------------------------------------------------------------------------------------------
Class B 852,397 9,660,234 726,386 6,786,146
- -------------------------------------------------------------------------------------------------------------
Class C 557,708 6,173,726 607,932 5,844,662
- -------------------------------------------------------------------------------------------------------------
Class R/(b)/ 106,097 1,214,679 111,406 1,094,858
- -------------------------------------------------------------------------------------------------------------
Investor Class 1,014,202 11,703,395 1,427,600 14,079,460
- -------------------------------------------------------------------------------------------------------------
Institutional Class/(c)/ 4,608,700 52,821,822 1,571,660 15,727,981
- -------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 36,718 407,568 17,683 156,851
- -------------------------------------------------------------------------------------------------------------
Class B 1,231 13,623 5,564 49,244
- -------------------------------------------------------------------------------------------------------------
Class C 2,955 32,029 6,021 52,143
- -------------------------------------------------------------------------------------------------------------
Class R/(b)/ 1,222 13,563 422 3,742
- -------------------------------------------------------------------------------------------------------------
Investor Class 25,955 291,470 11,868 106,340
- -------------------------------------------------------------------------------------------------------------
Institutional Class/(c)/ 21,991 244,538 -- --
- -------------------------------------------------------------------------------------------------------------
Issued in connection with acquisitions:/(d)/
Class A -- -- 5,517,421 48,731,245
- -------------------------------------------------------------------------------------------------------------
Class B -- -- 2,132,563 18,784,595
- -------------------------------------------------------------------------------------------------------------
Class C -- -- 4,224,998 36,433,079
- -------------------------------------------------------------------------------------------------------------
Class R/(b)/ -- -- 127,020 1,121,998
- -------------------------------------------------------------------------------------------------------------
Automatic conversion of Class B shares to Class A shares:
Class A 175,673 2,004,370 169,160 1,680,849
- -------------------------------------------------------------------------------------------------------------
Class B (176,720) (2,004,370) (170,086) (1,680,849)
- -------------------------------------------------------------------------------------------------------------
Reacquired:/(e)/
Class A (2,090,118) (24,090,743) (2,363,667) (23,262,195)
- -------------------------------------------------------------------------------------------------------------
Class B (517,865) (5,889,753) (477,775) (4,653,991)
- -------------------------------------------------------------------------------------------------------------
Class C (828,056) (9,188,752) (1,576,001) (15,078,644)
- -------------------------------------------------------------------------------------------------------------
Class R/(b)/ (88,020) (1,020,676) (37,343) (371,198)
- -------------------------------------------------------------------------------------------------------------
Investor Class (1,305,798) (15,111,872) (2,585,961) (25,621,003)
- -------------------------------------------------------------------------------------------------------------
Institutional Class/(c)/ (86,215) (988,855) (16,410) (166,035)
- -------------------------------------------------------------------------------------------------------------
5,995,768 $ 68,353,089 11,618,278 $100,889,716
- -------------------------------------------------------------------------------------------------------------
/(a)/There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 10% of the outstanding shares
of the Fund. ADI has an agreement with this entity to sell Fund shares.
The Fund, AIM and/or AIM affiliates may make payments to this entity,
which are considered to be related to the Fund, for providing services to
the Fund, AIM and/or AIM affiliates including but not limited to services
such as, securities brokerage, distribution, third party record keeping
and account servicing. The Trust has no knowledge as to whether all or any
of the shares owned of record by this entity are also owned beneficially.
23% of the outstanding shares of the Fund are owned by affiliated mutual
funds. Affiliated mutual funds are mutual funds that are advised by AIM.
/(b)/Class R shares commenced sales on November 24, 2003.
/(c)/Institutional Class shares commenced sales on April 30, 2004.
/(d)/As of the opening of business on November 24, 2003, the AIM International
Core Equity Fund (formerly INVESCO International Core Equity Fund)
acquired all of the net assets of AIM International Core Equity Fund
pursuant to a plan of reorganization approved by the Trustees of the Fund
on June 9, 2003 and AIM International Core Equity Fund shareholders on
October 28, 2003. The acquisition was accomplished by a tax-free exchange
of 12,002,001 shares of the Fund for 7,980,438 shares of AIM International
Core Equity Fund outstanding as of the close of business on November 21,
2003. AIM International Core Equity Fund's net assets at that date of
$105,070,917, including $15,892,958 of unrealized appreciation, were
combined with those of the Fund. The aggregate net assets of the Fund
immediately before the acquisition were $59,505,921.
/(e)/Amount is net of redemption fees of $3,047, $1,166, $1,676, $106, $2,104
and $1,366 for Class A, Class B, Class C, Class R, Investor Class and
Institutional Class shares, respectively, for the year ended October 31,
2005 and $1,154, $454, $725, $32, $1,030 and $86 for Class A, Class B,
Class C, Class R, Investor Class and Institutional Class shares,
respectively, for the year ended October 31, 2004.
F-11
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------
MARCH 28, 2002
(DATE SALES
COMMENCED TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
---------------------------------- 2002
2005 2004 2003 --------------
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.52 $ 8.74 $ 7.31 $ 8.96
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14/(a)/ 0.09/(a)/ 0.07/(a)/ 0.01/(b)/
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.32 1.72 1.39 (1.66)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.46 1.81 1.46 (1.65)
- ---------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.08) (0.03) (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.90 $ 10.52 $ 8.74 $ 7.31
- ---------------------------------------------------------------------------------------------------------------------------
Total return/(c)/ 13.89% 20.78% 19.96% (18.42)%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $90,022 $60,603 $2,033 $ 2,944
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.56%/(d)/ 1.84%/(e)/ 1.87% 1.48%/(f)/
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.20%/(d)/ 0.94% 0.91% 0.47%/(f)/
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69% 51% 44%
- ---------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/The net investment income per share was calculated after permanent book
tax differences, such as corporate actions which were reclassified from
accumulated net investment income to paid in capital. Had net investment
income per share been calculated using the current method, which is before
reclassification of net operating losses, net investment income per share
would have been $0.00.
/(c)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year.
/(d)/Ratios and based on average daily net assets of $76,621,439.
/(e)/After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.86%.
/(f)/Annualized.
F-12
NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS B
-------------------------------------------------
MARCH 28, 2002
(DATE SALES
COMMENCED) TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
--------------------------------- 2002
2005 2004 2003 --------------
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.43 $ 8.72 $ 7.31 $ 8.96
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06/(a)/ 0.02/(a)/ 0.00/(a)/ (0.01)/(a)(b)/
- -----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.31 1.71 1.43 (1.64)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.37 1.73 1.43 (1.65)
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income (0.01) (0.02) (0.02) --
- -----------------------------------------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.79 $ 10.43 $ 8.72 $ 7.31
- -----------------------------------------------------------------------------------------------------------------------------
Total return/(c)/ 13.11% 19.92% 19.50% (18.42)%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,785 $23,812 $ 573 $ 84
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers and /or expense reimbursements 2.25%/(d)/ 2.53% 2.75% 2.60%/(e)/
- -----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and /or expense reimbursements 2.25%/(d)/ 2.57% 4.13% 2.60%/(e)/
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets 0.51%/(d)/ 0.25% 0.03% (0.14)%/(e)/
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69% 51% 44%
- -----------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/The net investment income (loss) per share was calculated after permanent
book tax differences, such as corporate actions which were reclassified
from accumulated net investment income (loss) to paid in capital. Had net
investment income (loss) per share been calculated using the current
method, which is before reclassification of net operating losses, net
investment income (loss) per share would have been $(0.01).
/(c)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year.
/(d)/Ratios are based on average daily net assets of $27,734,132.
/(e)/Annualized.
F-13
NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS C
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 8.53 $ 7.16 $ 8.06
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06/(a)/ 0.04/(a)/ 0.00/(a)/ (0.02)/(b)/
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.28 1.67 1.37 (0.88)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.34 1.71 1.37 (0.90)
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.02) (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.54 $ 10.22 $ 8.53 $ 7.16
- ------------------------------------------------------------------------------------------------------------------------
Total return/(c)/ 13.11% 20.13% 19.13% (11.17)%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $38,108 $36,490 $2,608 $ 1,115
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers and /or expense reimbursements 2.25%/(d)/ 2.41% 2.75% 2.75%
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and /or expense reimbursements 2.25%/(d)/ 2.46% 4.14% 3.52%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 0.51%/(d)/ 0.37% 0.03% (0.43)%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69% 51% 44%
- ------------------------------------------------------------------------------------------------------------------------
--------
--------
2001
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.14
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)/(b)/
- --------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) (2.12)
- --------------------------------------------------------------------------------
Total from investment operations (2.14)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.00)
- --------------------------------------------------------------------------------
Distributions from net realized gains (0.94)
- --------------------------------------------------------------------------------
Total distributions (0.94)
- --------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00
- --------------------------------------------------------------------------------
Net asset value, end of period $ 8.06
- --------------------------------------------------------------------------------
Total return/(c)/ (20.75)%
- --------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,272
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers and /or expense reimbursements 2.76%
- --------------------------------------------------------------------------------
Without fee waivers and /or expense reimbursements 3.02%
- --------------------------------------------------------------------------------
Ratio of net investment income to average net assets (0.62)%
- --------------------------------------------------------------------------------
Portfolio turnover rate 54%
- --------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/The net investment income (loss) per share was calculated after permanent
book tax differences, such as corporate actions which were reclassified
from accumulated net investment income (loss) to paid in capital. Had net
investment income (loss) per share been calculated using the current
method, which is before reclassification of net operating losses, net
investment income (loss) per share would have been $(0.03) and $(0.04) for
the years ended 2002 and 2001, respectively.
/(c)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
/(d)/Ratios are based on average daily net assets of $38,357,919.
F-14
NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS R
--------------------------
NOVEMBER 24, 2003
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2005 2004
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.51 $ 8.90
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12/(a)/ 0.08/(a)/
- ---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.31 1.56
- ---------------------------------------------------------------------------------------------
Total from investment operations 1.43 1.64
- ---------------------------------------------------------------------------------------------
Less dividends from net investment income (0.07) (0.03)
- ---------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $11.87 $10.51
- ---------------------------------------------------------------------------------------------
Total return/(b)/ 13.64% 18.49%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,622 $2,118
- ---------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.75%/(c)/ 1.91%/(d)(e)/
- ---------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.01%/(c)/ 0.87%/(e)/
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69%
- ---------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Not annualized for periods less than one year.
/(c)/Ratios are based on average daily net assets of $2,594,447.
/(d)/After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.93%.
/(e)/Annualized.
INVESTOR CLASS
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.64 $ 8.83 $ 7.35 $ 8.17
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15/(a)/ 0.09/(a)/ 0.06/(a)/ 0.05/(b)/
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) 1.33 1.75 1.44 (0.87)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.48 1.84 1.50 (0.82)
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.08) (0.03) (0.02) --
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08) (0.03) (0.02) --
- ------------------------------------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.04 $ 10.64 $ 8.83 $ 7.35
- ------------------------------------------------------------------------------------------------------------------------
Total return/(c)/ 13.92% 20.84% 20.42% (10.04)%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,988 $44,345 $46,920 $40,620
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers and /or expense reimbursements 1.50%/(d)/ 1.84% 2.00% 1.99%
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and /or expense reimbursements 1.50%/(d)/ 1.89% 2.26% 1.99%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets 1.26%/(d)/ 0.94% 0.78% 0.42%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69% 51% 44%
- ------------------------------------------------------------------------------------------------------------------------
--------
--------
2001
- -------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.16
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03/(b)/
- -------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) (2.07)
- -------------------------------------------------------------------------------
Total from investment operations (2.04)
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.01)
- -------------------------------------------------------------------------------
Distributions from net realized gains (0.94)
- -------------------------------------------------------------------------------
Total distributions (0.95)
- -------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00
- -------------------------------------------------------------------------------
Net asset value, end of period $ 8.17
- -------------------------------------------------------------------------------
Total return/(c)/ (19.74)%
- -------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,562
- -------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers and /or expense reimbursements 1.89%
- -------------------------------------------------------------------------------
Without fee waivers and /or expense reimbursements 1.89%
- -------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets 0.12%
- -------------------------------------------------------------------------------
Portfolio turnover rate 54%
- -------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/The net investment income per share was calculated after permanent book
tax differences, such as corporate actions which were reclassified from
accumulated net investment income to paid in capital. Had net investment
income per share been calculated using the current method, which is before
reclassification of net operating losses, net investment income per share
would have been $0.04 and $0.01 for the years ended 2002 and 2001,
respectively.
/(c)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from the net asset value and returns for
shareholder transactions.
/(d)/Ratios are based on average daily net assets of $48,197,977.
F-15
NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
INSTITUTIONAL CLASS
--------------------------
APRIL 30, 2004
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2005 2004
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.56 $ 9.78
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.21/(a)/ 0.09/(a)/
- ------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.32 0.69
- ------------------------------------------------------------------------------------------
Total from investment operations 1.53 0.78
- ------------------------------------------------------------------------------------------
Less dividends from net investment income (0.12) --
- ------------------------------------------------------------------------------------------
Redemption fees added to shares of beneficial interest 0.00 0.00
- ------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.97 $ 10.56
- ------------------------------------------------------------------------------------------
Total return/(b)/ 14.53% 7.97%
- ------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $73,018 $16,421
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.98%/(c)/ 1.07%/(d)/
- ------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.78%/(c)/ 1.71%/(d)/
- ------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 69%
- ------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding.
/(b)/Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Not annualized for periods less than one year.
/(c)/Ratios are based on average daily net assets of $45,518,794.
/(d)/Annualized.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Half of this amount has
already been paid to the fair fund pursuant to the terms of the settlement with
the remainder due December 31, 2005. Additionally, AIM and ADI created a $50
million fair fund ($30 million of which is civil penalties) to compensate
shareholders harmed by market timing and related activity in funds advised by
AIM, which was done pursuant to the terms of the settlement. These two fair
funds may increase as a result of contributions from third parties who reach
final settlements with the SEC or other regulators to resolve allegations of
market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a
methodology to be determined by AIM's independent distribution consultant, in
consultation with AIM and the independent trustees of the AIM Funds and
acceptable to the staff of the SEC. As the methodology is unknown at the
present time, management of AIM and the Fund are unable to estimate the impact,
if any, that the distribution of these two fair funds may have on the Fund or
whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, some of which concern one or more AIM Funds: market timing
activity, late trading, fair value pricing, excessive or improper advisory
and/or distribution fees, mutual fund sales practices, including revenue
sharing and directed-brokerage arrangements, investments in securities of other
registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost
securityholders. IFG, AIM and ADI are providing full cooperation with respect
to these inquiries. As described more fully below, the AIM
F-16
NOTE 13--LEGAL PROCEEDINGS-(CONTINUED)
Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in
numerous civil lawsuits related to one or more of these issues. Regulatory
actions and/or additional civil lawsuits related to these or other issues may
be filed against the AIM Funds, IFG, AIM and/or related entities and
individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous
unrelated mutual fund complexes and financial institutions. None of the AIM
Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed
in the Circuit Court of Marshall County, West Virginia [Civil Action
No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose
in the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of
such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va.
Code (S) 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking, among other things, injunctive relief,
civil monetary penalties and a writ of quo warranto against the defendants. If
AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from
serving as an investment advisor for any investment company registered under
the Investment Company Act of 1940, as amended (a "registered investment
company"). Such results could affect the ability of AIM or any other investment
advisor directly or indirectly owned by AMVESCAP, from serving as an investment
advisor to any registered investment company, including the Fund. The Fund has
been informed by AIM that, if these results occur, AIM will seek exemptive
relief from the SEC to permit it to continue to serve as the Fund's investment
advisor. There is no assurance that such exemptive relief will be granted.
On June 13, 2005, the MDL Court (as defined below) issued a Conditional
Transfer Order transferring this lawsuit to the MDL Court, which Conditional
Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme
Court of West Virginia ruled in the context of a separate lawsuit that the WVAG
does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West
Virginia Consumer Credit and Protection Act to bring an action based upon
conduct that is ancillary to the purchase or sale of securities. AIM intends to
seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this
ruling.
On August 30, 2005, the West Virginia Office of the State Auditor--Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to AIM and ADI. The WVASC makes findings of fact that
essentially mirror the WVAG's allegations mentioned above and conclusions of
law to the effect that AIM and ADI violated the West Virginia securities laws.
The WVASC orders AIM and ADI to cease any further violations and seeks to
impose monetary sanctions to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
AIM and ADI have the right to contest the WVASC's findings and conclusions,
which they intend to do.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
. that the defendants permitted improper market timing and related
activity in the AIM Funds;
. that certain AIM Funds inadequately employed fair value pricing;
. that the defendants charged excessive advisory and/or distribution
fees and failed to pass on to shareholders the perceived savings
generated by economies of scale and that the defendants adopted
unlawful distribution plans;
. that the defendants breached their fiduciary duties by charging
distribution fees while AIM Funds and/or specific share classes were
closed generally to new investors and/or while other share classes of
the same AIM Fund were not charged the same distribution fees;
. that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions; and
. that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in
which they were eligible to participate (this lawsuit was dismissed by
the Court on August 12, 2005).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
activity have been transferred to the United States District Court for the
District of Maryland. On August 25, 2005, the Court issued rulings on the
common issues of law presented in defendants' motions to dismiss the
shareholder class and derivative complaints. These rulings were issued in the
context of the Janus lawsuits, but the Court's legal determinations apply at
the omnibus level to all cases within his track, including the AIM and IFG
cases. The Court dismissed for failure to make pre-suit demand on the fund
board all derivative causes of action but one: the excessive fee claim under
Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to
which the demand requirement does not apply. The Court dismissed all claims
asserted in the class complaint but two: (i) the securities fraud claims under
Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive
fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited
plaintiffs' potential recovery on the 36(b) claim to fees attributable to
timing assets, as opposed to all fees on funds in which any timing occurred.
The question whether the duplicative Section 36(b) claim properly belongs in
the derivative complaint or in the class action complaint will be decided at a
later date. The Court will subsequently issue an order applying his legal
rulings to the allegations in the AIM and IFG complaints.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending
Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM International Mutual Funds
and Shareholders of AIM International Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM International Core Equity Fund
(one of the funds constituting AIM International Mutual Funds, hereafter
referred to as the "Fund") at October 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 19, 2005
Houston, Texas
F-18
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
NAME, YEAR OF BIRTH AND
POSITIONS(S) HELD WITH THE TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- ---------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham/1 /-- 1946 1991 Director and Chairman, A I M Management None
Trustee, Vice Chair, Principal Group Inc. (financial services holding
Executive Officer and President company); Director and Vice Chairman,
AMVESCAP PLC and Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and
a global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M
Distributors, Inc. (registered broker
dealer), AIM Investment Services, Inc.
(registered transfer agent), and Fund
Management Company (registered broker
dealer); and Chief Executive Officer,
AMVESCAP PLC -- Managed Products
- ---------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson/2 /-- 1951 2003 Director, President and Chief Executive None
Trustee and Executive Vice President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors,
Inc.; Director, A I M Capital
Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services,
Inc., Fund Management Company and
INVESCO Distributors, Inc. (registered
broker dealer); and Chief Executive
Officer, AMVESCAP PLC -- AIM Division
(parent of AIM and a global investment
management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds Group, Inc.; President and Chief
Executive Officer, INVESCO
Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC -- Managed
Products; and Chairman, A I M Advisors,
Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology ACE Limited (insurance
Trustee and Chair Associates (technology consulting company); and Captaris, Inc.
company) (unified messaging provider)
- ---------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered
Trustee investment company
Formerly: Partner, law firm of Baker & (2 portfolios))
McKenzie
- ---------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Co-President and Founder, Green, None
Trustee Manning & Bunch Ltd., (investment
banking firm); and Director, Policy
Studies, Inc. and Van Gilder Insurance
Corporation
- ---------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations,
including the Boss Group Ltd. (private
investment and management); Cortland
Trust, Inc. (Chairman) (registered
investment company (3 portfolios));
Annuity and Life Re (Holdings), Ltd.
(insurance company); and CompuDyne
Corporation (provider of products and
services to the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President,
AB Volvo; and director of various
affiliated Volvo companies
- ---------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Retired None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff and Discovery
Trustee Century Group, Inc. (government affairs Global Education Fund (non-
company); and owner, Dos Angelos Ranch, profit)
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company
(3 portfolios))
- ---------------------------------------------------------------------------------------------------------------------------------
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc.
Trustee (San Diego, California)
- ---------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr./3 /-- 1944 2005 Retired None
Trustee
Formerly: Partner, Deloitte & Touche
- ---------------------------------------------------------------------------------------------------------------------------------
/1/ Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
/2/ Mr. Williamson is considered an interested person of the Trust because he
is an officer and a director of the advisor to, and a director of the
principal underwriter of, the Trust.
/3/ Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
TRUSTEES AND OFFICERS-(CONTINUED)
As of October 31, 2005
The address of each trustee and officer of AIM International Mutual Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee
oversees 109 portfolios in the AIM Funds complex. The trustees serve for the
life of the Trust, subject to their earlier death, incapacitation, resignation,
retirement or removal as more specifically provided in the Trust's
organizational documents. Column two below includes length of time served with
predecessor entities, if any.
NAME, YEAR OF BIRTH AND
POSITION(S) HELD WITH THE TRUSTEE AND/ PRINCIPAL OCCUPATION(S) DURING PAST 5 OTHER DIRECTORSHIP(S)
TRUST OR OFFICER SINCE YEARS HELD BY TRUSTEE
- ----------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ----------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A
Senior Vice President and Chief Group Inc. (financial services holding
Compliance Officer company); Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Vice President and
Chief Compliance Officer, A I M Capital
Management, Inc. and Vice President, A
I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Senior Vice President and
Compliance Director, Delaware
Investments Family of Funds and Chief
Compliance Officer, A I M Distributors,
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A
Senior Vice President and Assistant General Counsel, ICON
Senior Officer Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A
Senior Vice President, Secretary and Secretary and General Counsel, A I M
Chief Legal Officer Management Group Inc. and A I M
Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Vice President, A I M Capital
Management, Inc., AIM Investment
Services, Inc. and Fund Management
Company; and Senior Vice President, A I
M Distributors, Inc.
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; and Senior Vice
President and General Counsel, Liberty
Funds Group, LLC.; and Vice President,
A I M Distributors, Inc.; and Director
and General Counsel, Fund Management
Company
- ----------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A
Vice President Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and
Vice President, A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I N/A
Vice President, Principal Financial M Advisors, Inc.
Officer and Treasurer
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ----------------------------------------------------------------------------------------------------------------------
J. Phillip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors
Inc.; Director, Chairman, Chief
Executive Officer, President and Chief
Investment Officer, A I M Capital
Management, Inc.; Executive Vice
President, A I M Management Group Inc.
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; Chief
Equity Officer, and Senior Investment
Officer, A I M Capital Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management,
Inc.; Director and President, Fund
Management Company, and Vice President,
A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza. A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers LLP
Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, Texas 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment Services, Inc. State Street Bank and Trust
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis & P.O. Box 4739 Company
1735 Market Street Frankel LLP Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 1177 Avenue of the Americas Boston, MA 02110-2801
New York, NY 10036-2714
SUB-ADVISOR
INVESCO Global Management (N.A.) Inc.
One Midtown Plaza
1360 Peachtree Street N.E.
Suite 100
Atlanta, GA 30309
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2005, 0% is eligible for the dividends received deduction for
corporations.
For its tax year ended October 31, 2005, the Fund designated 100%, or the
maximum amount allowable, of its dividend distribution as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported on Form 1099-DIV. You should consult your tax advisor
regarding treatment of these amounts. The Fund distributed long-term capital
gains of $1,569,000 for the Fund's tax year ended October 31, 2005.
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED)
The percentage of qualifying assets not subject to the estate tax for the
fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and
October 31, 2005 are 99.14%, 99.85%, 99.82%, and 99.86%, respectively.
DOMESTIC EQUITY SECTOR EQUITY
AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund
AIM Basic Balanced Fund* AIM Energy Fund
AIM Basic Value Fund AIM Financial Services Fund
AIM Blue Chip Fund AIM Global Health Care Fund
AIM Capital Development Fund AIM Global Real Estate Fund
AIM Charter Fund AIM Gold & Precious Metals Fund
AIM Constellation Fund AIM Leisure Fund
AIM Diversified Dividend Fund AIM Multi-Sector Fund
AIM Dynamics Fund AIM Real Estate Fund/1/
AIM Large Cap Basic Value Fund AIM Technology Fund
AIM Large Cap Growth Fund AIM Utilities Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund/1/ FIXED INCOME
AIM Mid Cap Growth Fund
AIM Opportunities I Fund TAXABLE
AIM Opportunities II Fund
AIM Opportunities III Fund AIM Floating Rate Fund
AIM Premier Equity Fund AIM High Yield Fund
AIM S&P 500 Index Fund AIM Income Fund
AIM Select Equity Fund AIM Intermediate Government Fund
AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund
AIM Small Cap Growth Fund/1/ AIM Money Market Fund
AIM Small Company Growth Fund AIM Short Term Bond Fund
AIM Summit Fund AIM Total Return Bond Fund
AIM Trimark Endeavor Fund Premier Portfolio
AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio
AIM Weingarten Fund
*Domestic equity and income fund TAX-FREE
INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund/1/
AIM Municipal Bond Fund
AIM Asia Pacific Growth Fund AIM Tax-Exempt Cash Fund
AIM Developing Markets Fund AIM Tax-Free Intermediate Fund
AIM European Growth Fund Premier Tax-Exempt Portfolio
AIM European Small Company Fund/1/
AIM Global Aggressive Growth Fund AIM ALLOCATION SOLUTIONS
AIM Global Equity Fund
AIM Global Growth Fund AIM Conservative Allocation Fund
AIM Global Value Fund AIM Growth Allocation Fund/2/
AIM International Core Equity Fund AIM Moderate Allocation Fund
AIM International Growth Fund AIM Moderate Growth Allocation Fund
AIM International Small Company Fund/1/ AIM Moderately Conservative Allocation Fund
AIM Trimark Fund
DIVERSIFIED PORTFOLIOS
AIM Income Allocation Fund
AIM International Allocation Fund
/1/This fund has limited public sales of its shares to certain investors. For
more information on who may continue to invest in the fund, please see the
appropriate prospectus.
/2/Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM
Growth Allocation Fund.
If used after January 20, 2006, this report must be accompanied by a Fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.
A I M MANAGEMENT GROUP INC. HAS PROVIDED LEADERSHIP IN THE INVESTMENT
MANAGEMENT INDUSTRY SINCE 1976 AND MANAGES $129 BILLION IN ASSETS. AIM IS A
SUBSIDIARY OF AMVESCAP PLC, ONE OF THE WORLD'S LARGEST INDEPENDENT FINANCIAL
SERVICES COMPANIES WITH $381 BILLION IN ASSETS UNDER MANAGEMENT. DATA AS OF
SEPTEMBER 30, 2005.
- --------------------------------------------------------------------------------
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY.
FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR
FINANCIAL ADVISOR AND READ IT CAREFULLY BEFORE INVESTING.
- --------------------------------------------------------------------------------
AIMinvestments.com I-ICE--AR-1 A I M Distributors, Inc.
[YOUR GOALS. OUR SOLUTIONS.]
- REGISTERED TRADEMARK -
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts
[AIM INVESTMENTS LOGO]
- REGISTERED TRADEMARK -
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the Registrant had
adopted a code of ethics (the "Code") that applies to the Registrant's
principal executive officer ("PEO") and principal financial officer
("PFO"). There were no amendments to the Code during the period covered by
the report. The Registrant did not grant any waivers, including implicit
waivers, from any provisions of the Code to the PEO or PFO during the
period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has at least one
audit committee financial expert serving on its Audit Committee.
On the date of the reporting period, October 31, 2005, the Registrant's
audit committee financial expert was Prema Mathai-Davis. Dr. Mathai-Davis
is "independent" within the meaning of that term as used in Form N-CSR.
On October 27, 2005, the Board of Trustees determined that Raymond
Stickel, Jr. is an audit committee financial expert. Mr. Stickel was
appointed to the Registrant's Audit Committee effective as of October 1,
2005. Mr. Stickel is "independent" within the meaning of that term as used
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
FEES BILLED BY PWC RELATED TO THE REGISTRANT
PWC billed the Registrant aggregate fees for services rendered to the
Registrant for the last two fiscal years as follows:
Percentage of Fees
Billed Applicable Percentage of Fees
to Non-Audit Billed Applicable to
Services Provided Non-Audit Services
for fiscal year end Provided for fiscal
Fees Billed for 2005 Pursuant to Fees Billed for year end 2004
Services Rendered Waiver of Services Rendered to Pursuant to Waiver
to the Registrant Pre-Approval the Registrant for of Pre-Approval
for fiscal year end 2005 Requirement(1) fiscal year end 2004 Requirement(1)
------------------------ ------------------- -------------------- ---------------------
Audit Fees $ 230,419 N/A $ 213,253 N/A
Audit-Related Fees(2) $ 10,000 0% $ 0 0%
Tax Fees(3) $ 56,095 0% $ 50,567 0%
All Other Fees $ 0 0% $ 0 0%
-------------- --------------
Total Fees $ 296,514 0% $ 263,820 0%
PWC billed the Registrant aggregate non-audit fees of $66,095 for the fiscal
year ended 2005, and $50,567 for the fiscal year ended 2004, for non-audit
services rendered to the Registrant.
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at
the time of engagement, (ii) the aggregate amount of all such services
provided is no more than 5% of the aggregate audit and non-audit fees paid
by the Registrant to PWC during a fiscal year; and (iii) such services are
promptly approved by the Registrant's Audit Committee prior to the
completion of the audit by the Audit Committee.
(2) Audit-Related Fees for the fiscal year end October 31, 2005 includes fees
billed for completing agreed-upon procedures related to fund mergers.
(3) Tax Fees for the fiscal year end October 31, 2005 includes fees billed for
reviewing tax returns and consultation services. Tax fees for fiscal year
end October 31, 2004 includes fees billed for reviewing tax returns and
consultation services.
FEES BILLED BY PWC RELATED TO AIM AND AIM AFFILIATES
PWC billed AIM Advisors, Inc. ("AIM"), the Registrant's adviser, and any
entity controlling, controlled by or under common control with AIM that provides
ongoing services to the Registrant ("AIM Affiliates") aggregate fees for
pre-approved non-audit services rendered to AIM and AIM Affiliates for the last
two fiscal years as follows:
Fees Billed for Fees Billed for
Non-Audit Services Percentage of Fees Non-Audit Services Percentage of Fees
Rendered to AIM and Billed Applicable to Rendered to AIM and Billed Applicable to
AIM Affiliates for Non-Audit Services AIM Affiliates for Non-Audit Services
fiscal year end 2005 Provided for fiscal fiscal year end 2004 Provided for fiscal
That Were Required year end 2005 That Were Required year end 2004
to be Pre-Approved Pursuant to Waiver to be Pre-Approved Pursuant to Waiver of
by the Registrant's of Pre-Approval by the Registrant's Pre-Approval
Audit Committee Requirement(1) Audit Committee Requirement(1)
------------------- -------------------- -------------------- ---------------------
Audit-Related Fees $0 0% $0 0%
Tax Fees $0 0% $0 0%
All Other Fees $0 0% $0 0%
-- --
Total Fees(2) $0 0% $0 0%
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at
the time of engagement, (ii) the aggregate amount of all such services
provided is no more than 5% of the aggregate audit and non-audit fees paid
by the Registrant, AIM and AIM Affiliates to PWC during a fiscal year; and
(iii) such services are promptly approved by the Registrant's Audit
Committee prior to the completion of the audit by the Audit Committee.
(2) Including the fees for services not required to be pre-approved by the
registrant's audit committee, PWC billed AIM and AIM Affiliates aggregate
non-audit fees of $0 for the fiscal year ended 2005, and $0 for the fiscal
year ended 2004, for non-audit services rendered to AIM and AIM
Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to AIM and AIM Affiliates that were not
required to be pre-approved pursuant to SEC regulations, if any, is
compatible with maintaining PWC's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the "Funds")
Last Amended September 13, 2005
I. STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Directors/Trustees (the "Board") are responsible for
the appointment, compensation and oversight of the work of independent
accountants (an "Auditor"). As part of this responsibility and to assure that
the Auditor's independence is not impaired, the Audit Committees pre-approve the
audit and non-audit services provided to the Funds by each Auditor, as well as
all non-audit services provided by the Auditor to the Funds' investment adviser
and to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC
Rules also specify the types of services that an Auditor may not provide to its
audit client. The following policies and procedures comply with the requirements
for pre-approval and provide a mechanism by which management of the Funds may
request and secure pre-approval of audit and non-audit services in an orderly
manner with minimal disruption to normal business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committees ("general pre-approval") or
require the specific pre-approval of the Audit Committees ("specific
pre-approval"). As set forth in these policies and procedures, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committees. Additionally, any fees exceeding 110% of estimated
pre-approved fee levels provided at the time the service was pre-approved will
also require specific approval by the Audit Committees before payment is made.
The Audit Committees will also consider the impact of additional fees on the
Auditor's independence when determining whether to approve any additional fees
for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services
that may be provided by each Auditor without obtaining specific pre-approval
from the Audit Committee. The term of any general pre-approval runs from the
date of such pre-approval through September 30th of the following year, unless
the Audit Committees consider a different period and state otherwise. The Audit
Committees will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committees in fulfilling their responsibilities.
II. DELEGATION
The Audit Committees may from time to time delegate pre-approval authority to
one or more of its members who are Independent Directors. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next quarterly meeting.
III. AUDIT SERVICES
The annual audit services engagement terms will be subject to specific
pre-approval of the Audit Committees. Audit services include the annual
financial statement audit and other procedures such as tax provision work that
is required to be performed by the independent auditor to be able to form an
opinion on the Funds' financial statements. The Audit Committee will obtain,
review and consider sufficient information concerning the proposed Auditor to
make a reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may
grant general pre-approval for other audit services, which are those services
that only the independent auditor reasonably can provide. Other Audit services
may include services such as issuing consents for the inclusion of audited
financial statements with SEC registration statements, periodic reports and
other documents filed with the SEC or other documents issued in connection with
securities offerings.
IV. NON-AUDIT SERVICES
The Audit Committees may provide general pre-approval of types of non-audit
services described in this Section IV to the Funds and its Service Affiliates if
the Audit Committees believe that the provision of the service will not impair
the independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
The Audit Committees may provide specific pre-approval of any non-audit services
to the Funds and its Service Affiliates if the Audit Committees believe that the
provision of the service will not impair the independence of the auditor, is
consistent with the SEC Rules on auditor independence, and otherwise conforms to
the Audit Committees' general principles and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers, compliance with ratings agency requirements and
interfund lending activities.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Provider before a tax court,
district court or federal court of claims.
ALL OTHER AUDITOR SERVICES
The Audit Committees may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
V. PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval of estimated fees or established amounts for services to be
provided by the Auditor under general or specific pre-approval policies will be
set periodically by the Audit Committees. Any proposed fees exceeding 110% of
the maximum estimated pre-approved fees or established amounts for pre-approved
audit and non-audit services will be reported to the Audit Committees at the
quarterly Audit Committees meeting and will require specific approval by the
Audit Committees before payment is made. The Audit Committee will always factor
in the overall relationship of fees for audit and non-audit services in
determining whether to pre-approve any such services and in determining whether
to approve any additional fees exceeding 110% of the maximum pre-approved fees
or established amounts for previously pre-approved services.
VI. PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committees for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees and such other information as the Audit Committee may
request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committees will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed description of the services
to be rendered. The Treasurer or his or her designee will ensure that such
services are included within the list of services that have received the general
pre-approval of the Audit Committees. The Audit Committees will be informed at
the next quarterly scheduled Audit Committees meeting of any such services for
which the Auditor rendered an invoice and whether such services and fees had
been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit
Committees shall be submitted to the Audit Committees jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committees for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committees have designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND
PROCEDURES
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
o Bookkeeping or other services related to the accounting records or
financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
o Actuarial services
o Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
o Management functions
o Human resources
o Broker-dealer, investment adviser, or investment banking services
o Legal services
o Expert services unrelated to the audit
o Any other service that the Public Company Oversight Board determines
by regulation is impermissible.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as
part of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of December 15, 2005, an evaluation was performed under the
supervision and with the participation of the officers of the
Registrant, including the PEO and PFO, to assess the effectiveness
of the Registrant's disclosure controls and procedures, as that term
is defined in Rule 30a-3(c) under the Investment Company Act of 1940
(the "Act"), as amended. Based on that evaluation, the Registrant's
officers, including the PEO and PFO, concluded that, as of December
15, 2005, the Registrant's disclosure controls and procedures were
reasonably designed to ensure: (1) that information required to be
disclosed by the Registrant on Form N-CSR is recorded, processed,
summarized and reported within the time periods specified by the
rules and forms of the Securities and Exchange Commission; and (2)
that material information relating to the Registrant is made known
to the PEO and PFO as appropriate to allow timely decisions
regarding required disclosure.
(b) There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act) that
occurred during the second fiscal quarter of the period covered by
this report that have materially affected, or are reasonably likely
to materially affect, the Registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
12(a)(1) Code of Ethics.
12(a)(2) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(a) under the Investment
Company Act of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(b) under the Investment
Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM International Mutual Funds
By: /s/ Robert H. Graham
---------------------------
Robert H. Graham
Principal Executive Officer
Date: January 6, 2006
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Robert H. Graham
---------------------------
Robert H. Graham
Principal Executive Officer
Date: January 6, 2006
By:
/s/ Sidney M. Dilgren
---------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: January 6, 2006
EXHIBIT INDEX
12(a)(1) Code of Ethics.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.