-----------------------------
OMB APPROVAL
-----------------------------
OMB Number: 3235-0570
Expires: September 30, 2007
Estimated average burden
hours per response: 19.4
-----------------------------
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 811-21792
---------
AIM Core Allocation Portfolio Series
------------------------------------
(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: 8/31
----
Date of reporting period: 02/28/06
--------
Item 1. Reports to Stockholders.
AIM CORE ALLOCATION PORTFOLIO
SERIES C AND SERIES M
Semiannual Report to Shareholders o February 28, 2006
================================================================================
THE FUNDS ARE USED EXCLUSIVELY FOR SEPARATELY MANAGED ACCOUNTS (E.G. WRAP FEE OR
CERTAIN OTHER PROGRAMS) ADVISED OR SUB-ADVISED BY A I M ADVISORS, INC. (THE
ADVISOR OR AIM) OR ITS AFFILIATES FOR WHOM AIM OR ITS AFFILIATES HAS A CORE
FIXED INCOME MANDATE. THE FUNDS ARE DESIGNED TO BE A PORTION (ALTHOUGH NOT THE
WHOLE) OF A CORE FIXED INCOME PORTFOLIO. AIM HAS ENGAGED THE SERVICES OF INVESCO
INSTITUTIONAL (N.A.), INC. (THE SUB-ADVISOR OR INVESCO) TO PROVIDE SUB-ADVISORY
SERVICES TO THE FUNDS.
================================================================================
============================================================
INSIDE THIS REPORT
General Information 1
Letter to Shareholders 2
Letter from Independent
Chairman of Board of Trustees 3
Management's Discussion of Performance - Series C 4
Management's Discussion of Performance - Series M 6
Fund Performance 8
Calculating Your Ongoing Fund Expenses 9
Approval of Investment Advisory Agreement 10
Financial Pages:
Series C 12
Series M 21
============================================================
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
-- Registered Trademark -- -- Registered Trademark --
SERIES C AND SERIES M SEEK TO ACHIEVE HIGH TOTAL RETURN CONSISTENT WITH PRESERVATION OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of February 28, 2006, and is based on total net assets.
ABOUT INDEXES USED IN THIS REPORT
o The unmanaged LEHMAN BROTHERS U.S. level only and do not include separately PORTFOLIO MANAGEMENT TEAM FOR
AGGREGATE BOND INDEX (the Lehman managed account charges. If such charges SERIES C AND SERIES M
Aggregate Index), which represents the were included, the total returns would
U.S. investment-grade fixed-rate bond be lower. STEPHEN M. JOHNSON,
market (including government and [JOHNSON Chartered Financial Analyst,
corporate securities, mortgage The Fund provides a complete list of its PHOTO] Portfolio Manager and Chief
pass-through securities and asset-backed holdings four times in each fiscal year, Investment Officer, INVESCO
securities), is compiled by Lehman at the quarter-ends. For the second and Worldwide Fixed Income, has
Brothers, a global investment bank. fourth quarters, the lists appear in the been responsible for the Funds since
Fund's semiannual and annual reports to December 2005. Mr. Johnson joined
o The unmanaged STANDARD & POOR'S shareholders. For the first and third INVESCO in 1991. He earned a Bachelor of
COMPOSITE INDEX OF 500 STOCKS (the S&P quarters, the Fund files the lists with Science degree in Petroleum Engineering
500--Registered Trademark-- Index) is the Securities and Exchange Commission from the University of Kansas in 1983
an index of common stocks frequently (SEC) on Form N-Q. The Fund's Form N-Q and a Master of Business Administration
used as a general measure of U.S. stock filings are available on the SEC's Web from Rice University in 1986.
market performance. site, sec.gov. Copies of the Fund's
Forms N-Q may be reviewed and copied at KENNETH R. BOWLING,
o The unmanaged MSCI WORLD INDEX is a the SEC's Public Reference Room at 450 [BOWLING Chartered Financial Analyst,
group of global securities tracked by Fifth Street, N.W., Washington, D.C. PHOTO] Portfolio Manager and
Morgan Stanley Capital International. 20549-0102. You can obtain information Director, U.S Fixed Income
on the operation of the Public Reference of INVESCO Worldwide Fixed
o The Fund is not managed to track the Room, including information about Income, has been responsible for the
performance of any particular index, duplicating fee charges, by calling Funds since December 2005. Mr. Bowling
including the indexes defined here, and 202-942-8090 or 800-732-0330,or by joined INVESCO in 1993. He earned a
consequently, the performance of the electronic request at the following Bachelor of Science degree in 1988 in
Fund may deviate significantly from the E-mail address: publicinfo@sec.gov. The Mechanical Engineering and a Masters
performance of the indexes. SEC file numbers for the Fund are degree in Engineering in 1989 from the
811-21792 and 333-127335. University of Louisville.
o A direct investment cannot be made in
an index. Unless otherwise indicated, A description of the policies and JAMES F. GUENTHER,
index results include reinvested procedures that the Fund uses to [GUENTHER Chartered Financial Analyst,
dividends, and they do not reflect sales determine how to vote proxies relating PHOTO] Portfolio Manager and
charges. Performance of an index of to portfolio securities is available Director, Worldwide Credit
funds reflects fund expenses; without charge, upon request, from our Research, INVESCO Worldwide
performance of a market index does not. Client Services department at Fixed Income, has been responsible for
800-410-4246 or on the AIM Web site, the Funds since December 2005. Mr.
OTHER INFORMATION AIMinvestments.com. On the home page, Guenther joined INVESCO in 1992. He
scroll down and click on AIM Funds earned a Bachelor of Science degree in
o The returns shown in management's Proxy Policy. The information is also Business Administration from Western
discussion of Fund performance are based available on the SEC Web site, sec.gov. Michigan University in 1981 and attended
on net asset values calculated for the DePaul University School of Law.
shareholder transactions. Generally Information regarding how the
accepted accounting principles require Fund voted proxies related to its J. RICHARD ROBBEN,
adjustments to be made to the net assets portfolio securities during the 12 [ROBBEN Chartered Financial Analyst,
of the Fund at period end for financial months ended June 30,2006, will be PHOTO] Senior Portfolio Manager,
reporting purposes, and as such, the net available at our Web site. Go to INVESCO Worldwide Fixed
asset values for shareholder AIMinvestments.com, access the About Us Income, has been responsible
transactions and the returns based on tab, click on Required Notices and then for the Funds since December 2005. Mr.
those net asset values may differ from click on Proxy Voting Activity. Next, Robben joined INVESCO in 1996. He earned
the net asset values and returns select the Fund from the drop-down menu. a Bachelor of Science degree in Business
reported in the Financial Highlights. The information is also available on the Administration from Bellarmine
SEC Web site, sec.gov. University in 1987.
Additionally, the returns and net asset
values shown throughout this report are Assisted by INVESCO Worldwide Fixed
at the fund Income Team
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
1
AIM CORE ALLOCATION PORTFOLIO
DEAR SHAREHOLDERS:
Financial markets fared relatively well over the period
covered by this report. The S&P 500 Index, frequently cited
[GRAHAM as a benchmark for U.S. stock market performance, returned
PHOTO] 2.93%. Results for international stocks were more
impressive, with the MSCI World Index gaining 4.31%. Bond
performance was more modest as the Lehman Aggregate Index
returned 0.34%.
Bond performance was varied. High yield bonds and
emerging market debt were among the better-performing
segments of the fixed-income market. The difference between
ROBERT H. GRAHAM bond yields was relatively narrow across the maturity
spectrum, as bond yields continued to converge over the
period.
A number of key developments affected markets and the
economy during the reporting period:
o Consumer confidence, dealt a setback by Hurricane
Katrina which devastated New Orleans in August 2005,
rebounded at the beginning of the reporting period,
with analysts crediting the resiliency of the economy,
falling gas prices and job growth for this trend.
o The Federal Reserve Board (the Fed) continued its
tightening policy, raising the key federal funds
[WILLIAMSON target rate to 4.50% by the end of the reporting
PHOTO] period. Many analysts believed that the central bank
was near the end of its tightening policy as Ben
Bernanke succeeded the retiring Alan Greenspan as Fed
chairman early in 2006.
o Gasoline prices, which soared to a nationwide average
of slightly more than $3.08 per gallon on September 5,
2005, following Hurricane Katrina, had dropped by more
MARK H. WILLIAMSON than 80 cents by the end of the reporting period,
according to the U.S. Energy Information
Administration.
o For the first two months of 2006, the economy created
400,000 new jobs, according to the U.S. Department of
Labor.
YOUR FUND
For a discussion of the specific market conditions that
affected Series C and Series M and how your Funds were
managed during the reporting period, please turn to pages
4-8.
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.
April 12, 2006
2
AIM CORE ALLOCATION PORTFOLIO
DEAR SHAREHOLDERS:
Having completed a year of transition and change at AIM
Funds--as well as my first full year as your board's
[CROCKETT independent chair--I can assure you that shareholder
PHOTO] interests are at the forefront of every decision your board
makes. While regulators and fund companies debate the value
of an independent board chair, this structure is working for
you. An independent chair can help lead to unbiased
decisions and eliminate potential conflicts.
Some highlights of 2005 board activity:
o Board approval of voluntary fee reductions, which are
BRUCE L. CROCKETT saving shareholders more than $20 million annually,
based on asset levels as of March 31, 2005.
o Board approval for the merger of 14 funds into other
AIM funds with similar investment objectives. Eight of
these mergers were approved by shareholders of the
target funds during 2005. The remaining six are being
voted on by shareholders in early 2006. In each case,
the goal is for the resulting merged fund to benefit
from strengthened management and greater efficiency.
o Board approval for portfolio management changes at 11
funds, consistent with the goal of organizing
management teams around common processes and shared
investment views. Again, we hope that these changes
will improve fund performance and efficiency.
In 2006, your board will continue to focus on reducing
costs and shareholder fees and improving portfolio
performance, which is not yet as strong as we expect to see
it. Eight in-person board meetings and several additional
telephone and committee meetings are scheduled to take place
this year. I'll inform you of our progress in my next
semiannual letter to shareholders.
The AIM Funds board is pleased to welcome our newest
independent member, Raymond Stickel, Jr., a former partner
with the international auditing firm of Deloitte & Touche.
We also send our thanks and best wishes to Gerald J. Lewis,
who retired from your board in December 2005, and to Edward
K. Dunn, Jr., who is retiring this year.
Your board welcomes your views. Please mail them to me at
AIM Investments--Registered Trademark--, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
On Behalf of the Board of Trustees
AIM Funds
April 12, 2006
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.
3
AIM CORE ALLOCATION PORTFOLIO - SERIES C
MANAGEMENT'S DISCUSSION We may sell or reduce our position in
OF PERFORMANCE a security when:
=====================================================================================
o It reaches our valuation target
PERFORMANCE SUMMARY
o A more attractive investment becomes
We are pleased to send you this first The portfolio is a component of available
report for the Series C portfolio. The INVESCO Full Discretion Core product,
portfolio began operations on December and therefore, has no benchmark o We want to reduce our exposure to a
30, 2005, and posted a cumulative total index. The benchmark index for INVESCO certain segment of the market
return of 0.25% at net asset value for Full Discretion Core product is the
the period ended February 28, 2006.The Lehman Brothers U.S. Aggregate Bond o The fundamentals of a particular
portfolio's U.S. Treasury holdings Index, which returned 0.34% over the security deteriorate
helped it record slightly positive reporting period.
returns for the reporting period. MARKET CONDITIONS AND YOUR FUND
===================================================================================== The U.S. Federal Reserve (the Fed)
continued its monetary tightening policy
HOW WE INVEST tom up analysis involves an evaluation over the period--a trend that had a
of securities on an individual basis. We significant impact on bond market
The Series C portfolio is a component of also seek to own securities that are performance. The Fed raised the key
INVESCO Full Discretion Core product, attractively valued relative to the rest federal funds target rate to 4.50% to
which seeks to provide exposure to the of the market. slow economic growth and contain
bond market in general and is held in inflation. Rising interest rates
separately managed accounts. The Our investment team consists of restrained bond performance. Most
portfolio consists of securities that we specialists in three main areas: domestic bond market indexes posted
believe can be more efficiently held investment decision-making, portfolio modest gains or losses over the period.
through a mutual fund for certain size construction and risk management. Domestically, high yield bonds, which
accounts. tend to be less affected by interest
In managing the portfolio, we can also rate changes, posted the best return.
Our objective is to achieve high use derivatives, such as options, Internationally, emerging market debt
total return, consistent with futures contracts and other investment was one of the better performing market
preservation of capital. The portfolio instruments, and leveraging, which segments.
can invest in a variety of fixed-income involves the borrowing of assets to
instruments, including U.S. and foreign potentially increase returns. We may The portfolio received its initial
corporate bonds, U.S. and foreign also buy or sell currencies other than seed money at the end of December 2005,
government and agency bonds, high yield the U.S. dollar in an attempt to take and we began purchasing securities to
securities, emerging market debt; and advantage of anticipated changes in implement our investment strategy. Among
mortgage and asset-backed securities. exchange rates. the securities that we purchased were
U.S. Treasury and U.S. government agency
In selecting securities for the The Fund may have a higher rate of bonds. We believed that the yield curve
portfolio, we use both "top-down" and turnover than other funds. In an effort would continue to flatten, which means,
"bottom-up" analysis. Top-down analysis to mitigate some of the effects of we believed the difference in the yields
takes into account general market and transactions on investors in the Full of shorter- and longer-maturity Treasury
economic trends and their impact on the Discretion Core Product, we expect much securities would continue to converge.
various asset classes while bot- of the trading to occur within the Fund.
(continued)
======================================== ======================================== ========================================
PORTFOLIO COMPOSITION TOP 10 FIXED-INCOME ISSUERS TOTAL NET ASSETS $1.3 MILLION
By investment type
Bonds & Notes 59.4% 1. Federal National TOTAL NUMBER OF HOLDINGS 30
U.S. Mortgaged-Backed Securities 22.6 Mortgage Association (FNMA) 23.8%
U.S. Government Agency Securities 9.9 2. Federal Home
U.S. Treasury Securities 3.1 Mortgage Corp. (FHLMC) 8.7 The Fund's holdings are subject to
Other Assets Less Liabilities 5.0 3. HSBC Finance Corp. 5.5 change, and there is no assurance that
4. Pacific Gas and Electric Co. 4.3 the Fund will continue to hold any
5. British Telecommunications PLC 4.2 particular security.
6. Telecom Italia Capital 3.9
7. Johnson Controls,Inc. 3.7 Industry classifications used in this
8. Sprint Capital Corp. 3.4 report are generally according to the
9. BellSouth Corp. 3.3 Global Industry Classification Standard,
10. AT&T Corp. 3.3 which was developed by and is the
exclusive property and a service mark of
Morgan Stanley Capital International
Inc. and Standard & Poor's.
======================================== ======================================== ========================================
4
AIM CORE ALLOCATION PORTFOLIO - SERIES C
Consequently, our focus was on longer both to a particular currency and IN CLOSING
term Treasuries. We accomplished this interest rates. During the reporting
positioning mainly by buying and selling period, the Fund benefited from We consider the Series C portfolio to be
U.S. Treasury futures contracts. This investing in Australian interest rates an important component of the INVESCO
strategy proved beneficial as yields in through exchange-traded futures Full Discretion Core product, as it can
the five- and 10-year maturity segment contracts, as interest rates generally potentially enhance diversification by
of the Treasury yield curve rose while rose worldwide. investing in a relatively wide range of
they remained relatively constant in the domestic and foreign securities that we
30-year range. Please keep in mind that We were slightly bearish on corporate believe can be more efficiently held
bond prices and yields move in opposite bonds, as we believed rising interest through a mutual fund. We thank you for
directions. rates could slow economic growth and your investment in the Series C
adversely affect company profitability. portfolio.
The use of exchange-traded futures We were also concerned that increased
contracts is a significant part of our leveraged buyout activity could further THE VIEWS AND OPINIONS EXPRESSED IN
strategy for managing U.S. interest rate detract from corporate earnings. We MANAGEMENT'S DISCUSSION OF FUND
risk. We believe futures contracts are bought corporate bonds that we believed PERFORMANCE ARE THOSE OF A I M ADVISORS,
an efficient method of managing the were sufficiently liquid and were INC. THESE VIEWS AND OPINIONS ARE
Fund's exposure to U.S. interest rate available in small lot sizes. Our focus SUBJECT TO CHANGE AT ANY TIME BASED ON
markets. Futures contracts on U. S. was on corporate bonds that we believed FACTORS SUCH AS MARKET AND ECONOMIC
Treasury bonds, for example, have the had solid return potential, and our CONDITIONS. THESE VIEWS AND OPINIONS MAY
potential to mitigate interest rate holdings in this market segment NOT BE RELIED UPON AS INVESTMENT ADVICE
exposure in the portfolio. Moreover, generally had a positive impact on our OR RECOMMENDATIONS, OR AS AN OFFER FOR A
these contracts are generally less performance. PARTICULAR SECURITY. THE INFORMATION IS
expensive to trade than Treasury bonds. NOT A COMPLETE ANALYSIS OF EVERY ASPECT
We were also bearish on OF ANY MARKET, COUNTRY, INDUSTRY,
To a lesser extent, we also use mortgage-backed securities because we SECURITY OR THE FUND. STATEMENTS OF FACT
exchange-traded futures contracts to believed they were relatively expensive ARE FROM SOURCES CONSIDERED RELIABLE,
gain exposure to both foreign currencies compared to the rest of the bond market. BUT A I M ADVISORS, INC. MAKES NO
and non-U.S. interest rates. By using Moreover, this asset class has REPRESENTATION OR WARRANTY AS TO THEIR
futures contracts, we are able to historically performed better in a COMPLETENESS OR ACCURACY. ALTHOUGH
specifically target either interest stable interest rate environment. With HISTORICAL PERFORMANCE IS NO GUARANTEE
rates or currencies. With actual interest rates rising, our holdings in OF FUTURE RESULTS, THESE INSIGHTS MAY
securities, there would be exposure this market segment generally detracted HELP YOU UNDERSTAND OUR INVESTMENT
from performance. MANAGEMENT PHILOSOPHY.
====================================================================================================================================
PRINCIPAL RISKS OF INVESTING IN SERIES C fluctuation and loss of principal and fluctuations in the value of the U.S.
income than do U.S. government dollars relative to the values of other
o The value of your investment in the securities such as U.S. Treasury bills, currencies, the custody arrangements
Fund will go up and down with prices of notes and bonds, for which principal and made for the Fund's foreign holdings,
the securities in which the Fund any applicable interest are guaranteed differences in accounting, political
invests. The prices of securities change by the government if held to maturity. risks and the lesser degree of public
in response to many factors, including information required to be provided by
the historical and prospective earnings o A change in interest rates will affect non-U.S. companies.
of the issuer, the value of its assets, the performance of the Funds'
general economic conditions, interest investments in debt securities. o Investing in emerging markets involves
rates, investor perceptions and market greater risk and potential reward than
liquidity. o The Fund is nondiversified, which investing in more established markets.
increases risks as well as potential
o Interest rate increases may cause the rewards. o The Fund may buy or sell currencies
price of a debt security to decrease. other than the U.S. dollar to capitalize
The longer a debt security's duration, o The Fund may invest a portion of its on anticipated changes in exchange
the more sensitive it is to interest assets in mortgage-backed securities, rates, but there is no guarantee that
rate risk. High yield bonds (junk bonds) which may lose value if mortgages are such investments will achieve the
are less sensitive to interest rate risk prepaid in response to falling interest intended results.
than are higher quality bonds. rates.
o Portfolio turnover is greater than
o U.S. Treasury securities such as o The Fund may invest in derivatives, that of most funds, which may affect
bills, notes and bonds offer a high which may rise or fall in value more performance.
degree of safety, and they guarantee the rapidly than other investments.
payment of principal and any applicable o There is no guarantee that the
interest if held to maturity. Fund o Leveraging presents higher risks, but investment techniques and risk analyses
shares are not insured, and their value also offers greater potential rewards. used by the Fund's portfolio will
and yield will vary with market Leveraging may cause the Fund to be more produce the intended results.
conditions. volatile.
o The Fund invests in higher-yielding, o International investing presents
lower-rated corporate bonds, commonly certain risks not associated with
known as junk bonds, which have a investing solely in the United States.
greater risk of price These include risks relating to
====================================================================================================================================
5
AIM CORE ALLOCATION PORTFOLIO - SERIES M
MANAGEMENT'S DISCUSSION and other investment instruments, and
OF PERFORMANCE leveraging, which involves the
borrowing of assets to potentially
====================================================================================== increase returns.
PERFORMANCE SUMMARY
The Fund may have a higher rate of
We are pleased to send you this first The portfolio is a component of turnover than other funds. In an
report for the Series M portfolio. The INVESCO Full Discretion Core product, effort to mitigate some of the effects
portfolio began operations on December and therefore, has no benchmark index. of transactions on investors in the Full
30, 2005, and posted a cumulative total The benchmark index for INVESCO Full Discretion Core Product, we expect much
return of -0.60% at net asset value for Discretion Core product is the Lehman of the trading to occur within the Fund.
the period ended February 28, 2006. The Brothers U.S. Aggregate Bond Index,
portfolio's mortgage holdings detracted which returned 0.34% over the reporting We may sell or reduce our position in
from performance for the reporting period. a security when:
period.
o It reaches our valuation target
======================================================================================
o A more attractive investment becomes
HOW WE INVEST and state and local government bonds. available
The Series M portfolio is a component of In selecting securities for the Fund, o We want to reduce our exposure to a
INVESCO Full Discretion Core product, we use both "top-down" and "bottom-up" certain segment of the market
which seeks to provide exposure to the analysis. Top-down analysis takes into
bond market in general and is held in account general market and economic o The fundamentals of a particular
separately managed accounts. The trends and their impact on the various security deteriorate
portfolio consists of securities that we asset classes, while bottom-up analysis
believe can be more efficiently held involves an evaluation of securities on MARKET CONDITIONS AND YOUR FUND
through a mutual fund for certain size an individual basis. We also seek to own
accounts. securities that are attractively valued The U.S. Federal Reserve (the Fed)
relative to the rest of the market. continued its monetary tightening policy
Our objective is to achieve high over the period--a trend that had a
total return, consistent with Our investment team consists of significant impact on the bond market
preservation of capital. The portfolio specialists in three main areas: performance. The Fed raised the key
can invest in a variety of fixed-income investment decision-making, portfolio federal funds target rate to 4.50% to
instruments, including mortgage and construction and risk management. slow economic growth and contain
asset-backed securities; bank inflation. Rising interest rates
certificates of deposit; U.S. government In managing the Fund, we can also use restrained bond performance. Most
and agency bonds; derivatives, such as options, futures domestic bond market indexes posted
contracts modest gains or losses over the period.
Domestically, high yield bonds, which
tend to be less affected by interest
rate changes, posted
(continued)
======================================== ======================================== ========================================
PORTFOLIO COMPOSITION TOP FIXED-INCOME ISSUERS TOTAL NET ASSETS $1.3 MILLION
By investment type 1. U.S. Treasury Notes 43.5% TOTAL NUMBER OF HOLDINGS 8
U.S. Treasury Securities 50.6% 2. Federal National
U.S. Government Agency Securities 24.6 Mortgage Association,
U.S. Mortgage-Backed Securities 22.8 Pass Through Certificates 22.8
Asset-Backed Securities 9.5 3. Federal National
Other Assets Less Liabilities -7.5 Mortgage Association,
Unsec. Global Notes 10.6
4. Banc of America
Commercial Mortgage Inc. 9.5
5. Federal Home Loan Mortgage Corp. 7.0
6. Federal National The Fund's holdings are subject to
Mortgage Association 7.0 change, and there is no assurance that
7. U.S. Treasury Bonds 6.6 the Fund will continue to hold any
8. U.S. Treasury Bills 0.5 particular security.
======================================== ======================================== ========================================
6
AIM CORE ALLOCATION PORTFOLIO - SERIES M
the best return. Internationally, expensive compared to the rest of the PRINCIPAL RISKS OF INVESTING IN SERIES M
emerging market debt was one of the bond market. Moreover, this asset class
better performing market segments. has historically performed better in a o The value of your investment in the
stable interest rate environment. Fund will go up and down with prices of
The Fund received its initial seed Because the portfolio's asset base was the securities in which the Fund
money at the end of December 2005, and relatively small, we were also somewhat invests. The prices of securities change
we began purchasing securities to constrained in our ability to purchase in response to many factors, including
implement our investment strategy. Among mortgage securities, as they are the historical and prospective earnings
the securities that we purchased were generally not as readily available in of the issuer, the value of its assets,
U.S. Treasury and U.S. government agency smaller lot sizes. With interest rates general economic conditions, interest
bonds. We believed that the yield curve rising, our holdings in this market rates, investor perceptions and market
would continue to flatten, which means, segment generally detracted from liquidity.
we believed the difference in the yields performance.
of shorter- and longer-maturity Treasury o Interest rate increases may cause the
securities would continue to converge. IN CLOSING price of a debt security to decrease.
The longer a debt security's duration,
We consider the Series M portfolio to be the more sensitive it is to interest
an important component of the INVESCO rate risk. High yield bonds (junk bonds)
... WE WERE BEARISH Full Discretion Core product, as it can are less sensitive to interest rate risk
ON MORTGAGE-BACKED potentially enhance diversification by than are higher quality bonds.
SECURITIES BECAUSE WE investing in a relatively wide range of
BELIEVED THEY WERE domestic securities that we believe can o U.S. Treasury securities such as
RELATIVELY EXPENSIVE be more efficiently held through a bills, notes and bonds offer a high
COMPARED TO THE REST mutual fund. We thank you for your degree of safety, and they guarantee the
OF THE BOND MARKET. INVESTMENT IN the Series M portfolio. payment of principal and any applicable
interest if held to maturity. Fund
THE VIEWS AND OPINIONS EXPRESSED IN shares are not insured, and their value
MANAGEMENT'S DISCUSSION OF FUND and yield will vary with market
Consequently, our focus was on longer PERFORMANCE ARE THOSE OF A I M ADVISORS, conditions.
term Treasuries. We accomplished this INC. THESE VIEWS AND OPINIONS ARE
positioning mainly by buying and selling SUBJECT TO CHANGE AT ANY TIME BASED ON o The Fund invests in higher-yielding,
U.S. Treasury futures contracts. This FACTORS SUCH AS MARKET AND ECONOMIC lower-rated corporate bonds, commonly
strategy proved beneficial as yields in CONDITIONS. THESE VIEWS AND OPINIONS MAY known as junk bonds, which have a
the five-year and 10-year maturity NOT BE RELIED UPON AS INVESTMENT ADVICE greater risk of price fluctuation and
segment of the Treasury yield curve rose OR RECOMMENDATIONS, OR AS AN OFFER FOR A loss of principal and income than do
while they remained relatively constant PARTICULAR SECURITY. THE INFORMATION IS U.S. government securities such as U.S.
in the 30-year range. Please keep in NOT A COMPLETE ANALYSIS OF EVERY ASPECT Treasury bills, notes and bonds, for
mind that bond prices and yields move in OF ANY MARKET, COUNTRY, INDUSTRY, which principal and any applicable
opposite directions. SECURITY OR THE FUND. STATEMENTS OF FACT interest are guaranteed by the
ARE FROM SOURCES CONSIDERED RELIABLE, government if held to maturity.
The use of exchange-traded futures BUT A I M ADVISORS, INC. MAKES NO
contracts is a significant part of our REPRESENTATION OR WARRANTY AS TO THEIR o A change in interest rates will affect
strategy for managing U.S. interest rate COMPLETENESS OR ACCURACY. ALTHOUGH the performance of the Funds'
risk. We believe futures contracts are HISTORICAL PERFORMANCE IS NO GUARANTEE investments in debt securities.
an efficient method of managing the OF FUTURE RESULTS, THESE INSIGHTS MAY
Fund's exposure to U.S. interest rate HELP YOU UNDERSTAND OUR INVESTMENT o The Fund is nondiversified, which
markets. Futures contracts on U.S. MANAGEMENT PHILOSOPHY. increases risks as well as potential
Treasury bonds, for example, have the rewards.
potential to mitigate interest rate
exposure in the portfolio. Moreover, o The Fund may invest a portion of its
these contracts are generally less assets in mortgage-backed securities,
expensive to trade than Treasury bonds. which may lose value if mortgages are
prepaid in response to falling interest
We were bearish on mortgage-backed rates.
securities because we believed they were
relatively o The Fund may invest in derivatives,
which may rise or fall in value more
rapidly than other investments.
o Leveraging presents higher risks, but
also offers greater potential rewards.
Leveraging may cause the Fund to be more
volatile.
o Portfolio turnover is greater than
that of most funds, which may affect
performance.
o There is no guarantee that the
investment techniques and risk analyses
used by the Fund's portfolio will
produce the intended results.
7
AIM CORE ALLOCATION PORTFOLIO
PORTFOLIO PERFORMANCE
========================================
CUMULATIVE TOTAL RETURNS
As of 2/28/06
Inception (12/30/05)
SERIES C 0.25%
Inception (12/30/05)
SERIES M -0.60%
========================================
THE PERFORMANCE DATA QUOTED REPRESENT THE FUNDS ARE USED EXCLUSIVELY FOR PERFORMANCE FIGURES GIVEN REPRESENT
PAST PERFORMANCE AND CANNOT GUARANTEE SEPARATELY MANAGED ACCOUNTS ADVISED OR THE FUNDS AND ARE NOT INTENDED TO
COMPARABLE FUTURE RESULTS; CURRENT SUB-ADVISED BY A I M ADVISORS, INC. OR REFLECT ACTUAL SEPARATELY MANAGED
PERFORMANCE MAY BE LOWER OR HIGHER. ITS AFFILIATES FOR WHOM AIM OR ITS ACCOUNT VALUES. THEY DO NOT REFLECT
THERE ARE NO FUND EXPENSES INCLUDED AFFILIATES HAS A CORE FIXED INCOME CHARGES ASSESSED IN CONNECTION WITH A
BECAUSE THE FUNDS DO NOT PAY ANY MANDATE. THE FUNDS ARE DESIGNED TO BE A SEPARATELY MANAGED ACCOUNT. CHARGES,
EXPENSES DIRECTLY. INVESTMENT RETURN AND PORTION OF A CORE FIXED INCOME EXPENSES AND FEES, WHICH ARE DETERMINED
NET ASSET VALUE WILL FLUCTUATE SO THAT PORTFOLIO. YOU CANNOT PURCHASE SHARES OF BY THE SEPARATELY MANAGED ACCOUNT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU THE FUNDS DIRECTLY. ISSUER, WILL VARY AND WILL LOWER THE
SELL SHARES. TOTAL RETURN.
8
AIM CORE ALLOCATION PORTFOLIO
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of a Fund, you incur ACTUAL EXPENSES based on each Fund's actual expense ratio
ongoing costs, including management and an assumed rate of return of 5% per
fees; and other Fund expenses, if any. The table below provides information year before expenses, which is not a
A I M Advisors, Inc. ("AIM"), the Fund's about actual account values and actual Fund's actual return. Each Fund's actual
advisor, has agreed to irrevocably waive expenses. You may use the information in cumulative total returns at net asset
all fees and pay all operating expenses, this table, together with the amount you value after expenses for the period
except extraordinary expenses, incurred invested, to estimate the expenses that ended February 28, 2006, appear in the
by the Funds. This example is intended you paid over the period. Simply divide table on page 8.
to help you understand your ongoing your account value by $1,000 (for
costs (in dollars) of investing in the example, an $8,600 account value divided The hypothetical account values and
Funds and to compare these costs with by $1,000 = 8.6), then multiply the expenses may not be used to estimate the
ongoing costs of investing in other result by the number in the table under actual ending account balance or
mutual funds. The actual ending account the heading entitled "Actual Expenses expenses you paid for the period. You
value and expenses of the Funds in the Paid During Period" to estimate the may use this information to compare the
below example are based on an investment expenses you paid on your account during ongoing costs of investing in a Fund and
of $1,000 invested on December 30, 2005 this period (December 30, 2005, through other funds. To do so, compare this 5%
(the date the Funds commenced February 28, 2006 for the Funds). hypothetical example with the 5%
operations) and held through February Because the actual ending account value hypothetical examples that appear in the
28, 2006. The Funds are used only for and expense information in the example shareholder reports of the other funds.
investors who are clients of a wrap fee is not based upon a six month period for
or certain other programs advised or the Funds, the ending account value and Please note that the expenses shown
sub-advised by AIM or its affiliates. expense information may not provide a in the table are meant to highlight your
Clients pay a wrap fee or similar fee to meaningful comparison to mutual funds ongoing costs only and do not reflect
participate in such programs, and such that provide such information for a full any wrap program fees. Therefore, the
fees are not reflected in the table six month period. hypothetical information is useful in
below. comparing ongoing costs only, and will
HYPOTHETICAL EXAMPLE FOR COMPARISON not help you determine the relative
PURPOSES total costs of owning different funds.
In addition, if these wrap program fees
The table below also provides were included, your costs would have
information about hypothetical account been higher.
values and hypothetical expenses
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
SERIES (12/30/05) (2/28/06)(1) PERIOD(2) (2/28/06) PERIOD(3) RATIO
C $1,000.00 $1,002.50 $0.00 $1,024.79 $0.00 0.00%
M 1,000.00 994.00 0.00 1,024.79 0.00 0.00
(1)The actual ending account value is based on the actual total return of the
Fund for the period December 30, 2005, through February 28, 2006, 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 period ended February 28, 2006, appear in
the table on page 8.
(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 61
(December 30, 2005, through February 28, 2006)/365. Because the Funds have
not been in existence for a full six month period, the actual ending account
value and expense information shown may not provide a meaningful comparison
to fund expense information of funds that show such data for a full six month
period and, because the actual ending account value and expense information
in the expense example covers a short time period, return and expense data
may not be indicative of return and expense data for longer time periods. AIM
has agreed to irrevocably waive all fees and pay all operating expenses,
except extraordinary expenses, incurred by the Fund.
(3)Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
181/365 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in the
Funds and other funds because such data is based on a full six month period.
AIM has agreed to irrevocably waive all fees and pay all operating expenses,
except extraordinary expenses, incurred by the Fund.
====================================================================================================================================
9
AIM CORE ALLOCATION PORTFOLIO
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the "Board") of o The performance of each Fund relative breakpoints for each Fund or whether,
the AIM Core Allocation Portfolio Series to indices. Not applicable because these due to the nature of each Fund and the
(the "Trust") oversees the management of are new Funds. advisory fee structures of comparable
each Fund of the Trust and, as required funds, it was reasonable to structure
by law, determines annually whether to o Meeting with each Fund's portfolio the advisory fee without breakpoints.
approve the continuance of each Fund's managers and investment personnel. The Based on this review, the Board
advisory agreement with A I M Advisors, Board intends to periodically meet with concluded that it was not necessary to
Inc. ("AIM"). Based upon the each Fund's portfolio managers and/or add advisory fee breakpoints to each
recommendation of the Investments other investment personnel and believes Fund's advisory fee schedule. The Board
Committee of the Board at a meeting held that such individuals are competent and reviewed the level of each Fund's
on June 30, 2005, the Board, including able to carry out their responsibilities advisory fees, and noted that such fees,
all of the independent trustees, under the Advisory Agreement. as a percentage of each Fund's net
approved the initial advisory agreement assets, would remain constant under the
(the "Advisory Agreement") between each o Overall performance of AIM. Not Advisory Agreement because the Advisory
Fund and AIM for an initial period applicable because these are new Funds. Agreement does not include any
beginning December 30, 2005 and ending However, the Board considered the breakpoints. The Board concluded that
June 30, 2007. overall performance of AIM in providing each Fund's fee levels under the
investment advisory and portfolio Advisory Agreement therefore would not
The Board considered the factors administrative services to other mutual reflect economies of scale. However, the
discussed below in evaluating the funds advised by AIM and concluded that Board also concluded that the "all-in"
fairness and reasonableness of each such performance was satisfactory. nature of each Fund's advisory fee under
Fund's Advisory Agreement at the meeting the Advisory Agreement and the fact that
on June 30, 2005 and as part of the o Fees relative to those of clients of AIM pays for each Fund's ordinary
Board's ongoing oversight of each Fund. AIM with comparable investment operating expenses was beneficial to
In their deliberations, the Board and strategies. The Board reviewed the shareholders.
the independent trustees did not advisory fee rate for each Fund under
identify any particular factor that was the Advisory Agreement. The Board noted o Investments in affiliated money market
controlling, and each trustee attributed that this rate was comparable to the funds. The Board also took into account
different weights to the various advisory fee rate for one separately the fact that uninvested cash and cash
factors. managed wrap account managed by an AIM collateral from securities lending
affiliate with investment strategies arrangements (collectively, "cash
The discussion below serves as a comparable to those of each Fund. The balances") of each Fund may be invested
summary of the discussion of the Board noted the "all-in" nature of the in money market funds advised by AIM
material factors and the conclusions advisory fee under the Advisory pursuant to the terms of an SEC
with respect thereto that formed the Agreement, whereby AIM pays all of each exemptive order. The Board found that
basis for the Board's approval of the Fund's ordinary operating expenses. The each Fund may realize certain benefits
Advisory Agreement. After consideration Board also noted that AIM has agreed to upon investing cash balances in AIM
of all of the factors below and based on waive advisory fees of each Fund, as advised money market funds, including a
its informed business judgment, the discussed below. Based on this review, higher net return, increased liquidity,
Board determined that the Advisory the Board concluded that the advisory increased diversification or decreased
Agreement is in the best interests of fee rate for each Fund under the transaction costs. The Board also found
each Fund and its shareholders and that Advisory Agreement was fair and that each Fund will not receive reduced
the compensation to AIM under the reasonable. services if it invests its cash balances
Advisory Agreement is fair and in such money market funds. The Board
reasonable and would have been obtained o Fees relative to those of comparable further determined that the proposed
through arm's length negotiations. funds with other advisors. The Board securities lending program and related
reviewed the advisory fee rate for each procedures with respect to each lending
SERIES C AND SERIES M Fund under the Advisory Agreement. The Fund is in the best interests of each
Board compared contractual advisory fee lending Fund and its respective
o The nature and extent of the advisory rates and noted that each Fund's rate shareholders. The Board therefore
services to be provided by AIM. The was comparable to the median rate of the concluded that the investment of cash
Board reviewed the services to be funds advised by other advisors with collateral received in connection with
provided by AIM under the Advisory investment strategies comparable to the securities lending program in the
Agreement. Based on this review, the those of each Fund that the Board money market funds according to the
Board concluded that the range of reviewed. The Board also noted the procedures is in the best interests of
services to be provided by AIM under the "all-in" nature of the advisory fee each lending Fund and its respective
Advisory Agreement was appropriate. under the Advisory Agreement, whereby shareholders.
AIM pays all of each Fund's ordinary
o The quality of services to be provided operating expenses. The Board noted that o Profitability of AIM and its
by AIM. The Board reviewed the AIM has agreed to waive advisory fees of affiliates. The Board reviewed
credentials and experience of the each Fund, as discussed below. Based on information concerning the profitability
officers and employees of AIM who will this review, the Board concluded that of AIM's (and its affiliates')
provide investment advisory services to the advisory fee rate for each Fund investment advisory and other activities
each Fund. In reviewing the under the Advisory Agreement was fair and its financial condition. The Board
qualifications of AIM to provide and reasonable. considered the overall profitability of
investment advisory services, the Board AIM, as well as the profitability of AIM
reviewed the qualifications of AIM's o Expense limitations and fee waivers. in connection with managing each Fund.
investment personnel and considered such The Board noted that AIM has irrevocably The Board noted that AIM's operations
issues as AIM's portfolio and product agreed to waive all advisory fees of remain profitable, although increased
review process, various back office each Fund. The Board considered the expenses in recent years have reduced
support functions by AIM and AIM's irrevocable nature of this fee waiver AIM's profitability. Based on the review
equity and fixed income trading and noted that it cannot be terminated of the profitability of AIM's and its
operations. Based on the review of these without shareholder approval. The Board affiliates' investment advisory and
and other factors, the Board concluded considered the effect this fee waiver other activities and its financial
that the quality of services to be would have on each Fund's estimated condition, the Board concluded that the
provided by AIM was appropriate. expenses and concluded that the levels compensation to be paid by each Fund to
of fee waivers/expense limitations for AIM under the Advisory Agreement was not
o The performance of each Fund relative each Fund were fair and reasonable. excessive.
to comparable funds. Not applicable
because these are new Funds. However, o Breakpoints and economies of scale. o Benefits of soft dollars to AIM. The
the Board reviewed the performance of a The Board reviewed the structure of each Board considered the benefits realized
mutual fund and a variable insurance Fund's advisory fee under the Advisory by AIM as a result of brokerage
fund formerly managed by the portfolio Agreement, noting that it does not transactions executed through "soft
managers who will manage each Fund and include any breakpoints. The Board dollar" arrangements. Under these
concluded that these portfolio managers considered whether it would be arrangements, brokerage commissions paid
were qualified to provide satisfactory appropriate to add advisory fee by each Fund and/or other funds
services in accordance with the terms of
the Advisory Agreement. (continued)
10
AIM CORE ALLOCATION PORTFOLIO
advised by AIM are used to pay for agreement (the "Sub-Advisory Agreement") o Advisory fees, expense limitations and
research and execution services. This between INVESCO Institutional (N.A.), fee waivers, and breakpoints and
research is used by AIM in making Inc. (the "Sub-Advisor") and AIM with economies of scale. In reviewing these
investment decisions for each Fund. The respect to each Fund beginning on factors, the Board considered only the
Board concluded that such arrangements December 30, 2005. advisory fees charged to each Fund by
were appropriate. AIM and did not consider the
The Board considered the factors sub-advisory fees paid by AIM to the
o AIM's financial soundness in light of discussed below in evaluating the Sub-Advisor. The Board believes that
each Fund's needs. The Board considered fairness and reasonableness of the this approach is appropriate because the
whether AIM is financially sound and has Sub-Advisory Agreement at the meeting on sub-advisory fees have no effect on
the resources necessary to perform its June 30, 2005 and as part of the Board's either Fund or its shareholders, as they
obligations under the Advisory ongoing oversight of each Fund. In their are paid by AIM rather than each Fund.
Agreement, and concluded that AIM has deliberations, the Board and the Furthermore, AIM and the Sub-Advisor are
the financial resources necessary to independent trustees did not identify affiliates and the Board believes that
fulfill its obligations under the any particular factor that was the allocation of fees between them is a
Advisory Agreement. controlling, and each trustee attributed business matter, provided that the
different weights to the various advisory fees charged to each Fund are
o Historical relationship between each factors. fair and reasonable.
Fund and AIM. In determining whether to
approve the Advisory Agreement for each The discussion below serves as a o Profitability of AIM and its
Fund, the Board also considered the discussion of the material factors and affiliates. The Board reviewed
Board's knowledge of AIM's operations, the conclusions with respect thereto information concerning the profitability
and concluded that it was beneficial to that formed the basis for the Board's of AIM's (and its affiliates')
maintain the current relationship, in approval of the Sub-Advisory Agreement. investment advisory and other activities
part, because of such knowledge. The After consideration of all of the and its financial condition. The Board
Board also reviewed the general nature factors below and based on its informed considered the overall profitability of
of the non-investment advisory services business judgment, the Board determined AIM, as well as the profitability of AIM
currently performed by AIM and its that the Sub-Advisory Agreement is in in connection with managing each Fund.
affiliates for other mutual funds, such the best interests of each Fund and its The Board noted that AIM's operations
as administrative, transfer agency and shareholders. remain profitable although increased
distribution services, and the fees expenses in recent years have reduced
received by AIM and its affiliates for SERIES C AND SERIES M AIM's profitability. Based on the review
performing such services. In addition to of the profitability of AIM's and its
reviewing such services, the trustees o The nature and extent of the advisory affiliates' investment advisory and
also considered the organizational services to be provided by the other activities and its financial
structure employed by AIM and its Sub-Advisor. The Board reviewed the condition, the Board concluded that the
affiliates to provide those services. services to be provided by the compensation to be paid by each Fund to
Based on the review of these and other Sub-Advisor under the Sub-Advisory AIM under the Advisory Agreement was not
factors, the Board concluded that AIM Agreement. Based on this review, the excessive.
and its affiliates are providing Board concluded that the range of
satisfactory non-investment advisory services to be provided by the o The Sub-Advisor's financial soundness
services to other mutual funds advised Sub-Advisor under the Sub-Advisory in light of each Fund's needs. The Board
by AIM and that AIM and its affiliates Agreement was appropriate. considered whether the Sub-Advisor is
were qualified to provide non-investment financially sound and has the resources
advisory services to each Fund, o The quality of services to be provided necessary to perform its obligations
including administrative, transfer by the Sub-Advisor. The Board reviewed under the Sub-Advisory Agreement, and
agency and distribution services. the credentials and experience of the concluded that the Sub-Advisor has the
officers and employees of the financial resources necessary to fulfill
o Other factors and current trends. In Sub-Advisor who will provide investment its obligations under the Sub-Advisory
determining whether to approve the advisory services to each Fund. Based on Agreement.
Advisory Agreement for each Fund, the the review of these and other factors,
Board considered the fact that AIM, the Board concluded that the quality of
along with the rest of the mutual fund services to be provided by the
industry, is subject to regulatory Sub-Advisory was appropriate.
inquiries and litigation related to a
wide range of issues. The Board also o The performance of each Fund relative
considered the governance and compliance to comparable funds. Not applicable
reforms being undertaken by AIM and its because these are new Funds. However,
affiliates, including maintaining an the Board reviewed the performance of a
internal controls committee and mutual fund and a variable insurance
retaining an independent compliance fund formerly managed by the portfolio
consultant, and the fact that AIM has managers who will manage each Fund and
undertaken to cause each Fund to operate concluded that these portfolio managers
in accordance with certain governance were qualified to provide satisfactory
policies and practices. The Board services in accordance with the terms of
concluded that these actions indicated a the Sub-Advisory Agreement.
good faith effort on the part of AIM to
adhere to the highest ethical standards, o The performance of each Fund relative
and determined that the current to indices. Not applicable because these
regulatory and litigation environment to are new Funds.
which AIM is subject should not prevent
the Board from approving the Advisory o Meeting with each Fund's portfolio
Agreement for each Fund. managers and investment personnel. The
Board intends to meet periodically with
APPROVAL OF SUB-ADVISORY AGREEMENT each Fund's portfolio managers and/or
other investment personnel and believes
The Board oversees the management of that such individuals are competent and
each Fund and, as required by law, able to carry out their responsibilities
determines annually whether to approve under the Sub-Advisory Agreement.
the continuation of each Fund's
sub-advisory agreement. Based upon the o Overall performance of the
recommendation of the Investments Sub-Advisor. Not applicable because
Committee of the Board at a meeting held these are new Funds. However, the Board
on June 30, 2005, the Board, including considered the overall performance of
all of the independent trustees, the Sub-Advisor in providing
approved the initial sub-advisory sub-advisory services to other mutual
funds and concluded that such
performance was satisfactory.
11
AIM CORE ALLOCATION PORTFOLIO SERIES C
SCHEDULE OF INVESTMENTS
February 28, 2006
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
BONDS & NOTES-59.39%
AUTO PARTS & EQUIPMENT-3.70%
Johnson Controls, Inc., Sr. Notes, 6.00%,
01/15/36(a) $ 50,000 $ 49,592
=====================================================================
BROADCASTING & CABLE TV-1.14%
Comcast Corp., Unsec. Gtd. Notes, 6.45%,
03/15/37 15,000 15,236
=====================================================================
COMMODITY CHEMICALS-1.68%
BCP Crystal US Holdings Corp., Sr. Sub.
Global Notes, 9.63%, 06/15/14(a) 20,000 22,550
=====================================================================
CONSUMER FINANCE-8.69%
Capital One Bank, Sub. Notes, 6.50%,
06/13/13(a) 40,000 42,290
- ---------------------------------------------------------------------
HSBC Finance Corp., Global Notes, 4.75%,
05/15/09(a) 75,000 74,026
=====================================================================
116,316
=====================================================================
DEPARTMENT STORES-1.45%
Dillard's, Inc., Notes, 7.13%, 08/01/18(a) 20,000 19,400
=====================================================================
HOMEBUILDING-0.75%
Hovnanian Enterprises Inc., Sr. Unsec. Gtd.
Notes, 7.50%, 05/15/16(a) 10,000 10,000
=====================================================================
HOUSEWARES & SPECIALTIES-0.37%
Fortune Brands, Inc., Notes, 5.38%,
01/15/16(a) 5,000 4,922
=====================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-2.87%
Duke Energy Field Services Corp., Sr. Unsec.
Notes, 7.88%, 08/16/10(a) 35,000 38,484
=====================================================================
INTEGRATED TELECOMMUNICATION SERVICES-16.56%
AT&T Corp., Sr. Unsec. Gtd. Global Notes,
9.75%, 11/15/31(a) 35,000 43,950
- ---------------------------------------------------------------------
BellSouth Corp., Global Bonds, 5.20%,
09/15/14(a) 45,000 44,475
- ---------------------------------------------------------------------
British Telecommunications PLC, Global Notes,
8.38%, 12/15/10(a) 50,000 56,339
- ---------------------------------------------------------------------
Citizens Communications Co., Sr. Unsec.
Notes, 6.25%, 01/15/13(a) 20,000 19,600
- ---------------------------------------------------------------------
Telecom Italia Capital,
Global Notes, 5.25%, 10/01/15(a) 45,000 43,069
- ---------------------------------------------------------------------
Unsec. Gtd. Unsub. Global Notes, 6.00%,
09/30/34(a) 10,000 9,503
- ---------------------------------------------------------------------
Verizon Global Funding Corp., Global Bonds,
5.85%, 09/15/35(a) 5,000 4,779
=====================================================================
221,715
=====================================================================
MANAGED HEALTH CARE-1.88%
UnitedHealth Group Inc., Sr. Unsec. Notes,
5.80%, 03/15/36(a) 25,000 25,159
=====================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
<Caption>
MULTI-UTILITIES-4.26%
Pacific Gas and Electric Co., Unsec. Bonds,
6.05%, 03/01/34(a) $ 55,000 $ 57,042
=====================================================================
OIL & GAS REFINING & MARKETING-2.28%
Kaneb Pipe Line Operating Partnership, L.P.,
Sr. Unsec. Notes, 5.88%, 06/01/13(a) 30,000 30,552
=====================================================================
OIL & GAS STORAGE & TRANSPORTATION-2.90%
Kinder Morgan Energy Partners, L.P., Notes,
5.13%, 11/15/14(a) 40,000 38,804
=====================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.49%
Residential Capital Corp., Gtd. Notes, 6.00%,
02/22/11(a) 20,000 19,887
=====================================================================
PHARMACEUTICALS-3.01%
Wyeth, Unsec. Global Notes, 5.50%,
02/15/16(a) 40,000 40,295
=====================================================================
REAL ESTATE-2.91%
ERP Operating L.P., Unsec. Unsub. Notes,
5.13%, 03/15/16(a) 40,000 38,911
=====================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.45%
Sprint Capital Corp., Sr. Unsec. Gtd. Global
Notes, 8.38%, 03/15/12(a) 40,000 46,117
=====================================================================
Total Bonds & Notes (Cost $799,821) 794,982
=====================================================================
U.S. MORTGAGE-BACKED SECURITIES-22.62%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-22.62%
Pass Through Ctfs., TBA, 6.00%,
03/01/36(a)(b) 300,000 302,812
=====================================================================
Total U.S. Mortgage-Backed Securities
(Cost $302,063) 302,812
=====================================================================
U.S. GOVERNMENT AGENCY SECURITIES-9.89%
FEDERAL HOME LOAN MORTGAGE CORP (FHLMC)-8.74%
Global Notes, 4.13%, 07/12/10(a) 50,000 48,473
- ---------------------------------------------------------------------
Unsec. Global Notes, 3.88%, 06/15/08(a) 70,000 68,487
=====================================================================
116,960
=====================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-1.15%
Global Notes, 5.38%, 11/15/11(a) 15,000 15,318
=====================================================================
Total U.S. Government Agency Securities
(Cost $132,766) 132,278
=====================================================================
</Table>
12
AIM CORE ALLOCATION PORTFOLIO SERIES C
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
U.S. TREASURY SECURITIES-3.09%
U.S. TREASURY BILLS-0.44%
4.39%, 06/29/06(a)(d) $ 6,000(c) $ 5,910
=====================================================================
U.S. TREASURY NOTES-2.65%
4.88%, 02/15/12(a) 35,000 35,476
=====================================================================
Total U.S. Treasury Securities (Cost
$41,335) 41,386
=====================================================================
TOTAL INVESTMENTS-94.99% (Cost $1,275,985) 1,271,458
=====================================================================
OTHER ASSETS LESS LIABILITIES-5.01% 67,120
=====================================================================
NET ASSETS-100.00% $1,338,578
_____________________________________________________________________
=====================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) 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 February 28,
2006 was $1,256,222, which represented 93.85% of the Fund's Net Assets. See
Note 1A.
(b) Security purchased on forward commitment basis.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1F and Note 4.
(d) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13
AIM CORE ALLOCATION PORTFOLIO SERIES C
STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $1,275,985) $1,271,458
- -----------------------------------------------------------
Cash 115,434
- -----------------------------------------------------------
Receivables for:
Investments sold 63,277
- -----------------------------------------------------------
Fund shares sold 285,700
- -----------------------------------------------------------
Interest 14,206
===========================================================
Total assets 1,750,075
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 410,887
- -----------------------------------------------------------
Variation margin 610
===========================================================
Total liabilities 411,497
===========================================================
Net assets applicable to shares outstanding $1,338,578
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,344,622
- -----------------------------------------------------------
Undistributed net investment income 566
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures contracts (1,748)
- -----------------------------------------------------------
Unrealized appreciation (depreciation) from
investment securities and futures contracts (4,862)
===========================================================
$1,338,578
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Outstanding 134,702
___________________________________________________________
===========================================================
Net asset value and offering price per share $ 9.94
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14
AIM CORE ALLOCATION PORTFOLIO SERIES C
STATEMENT OF OPERATIONS
For the period December 30, 2005 (Date operations commenced) through February
28, 2006
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 9,488
=====================================================================
EXPENSES:
Advisory fees 404
=====================================================================
Less: Fees waived (404)
=====================================================================
Net investment income 9,488
=====================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (4,807)
- ---------------------------------------------------------------------
Futures contracts 3,059
=====================================================================
(1,748)
=====================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (4,527)
- ---------------------------------------------------------------------
Futures contracts (335)
=====================================================================
(4,862)
=====================================================================
Net gain (loss) from investment securities, and futures
contracts (6,610)
=====================================================================
Net increase in net assets resulting from operations $ 2,878
_____________________________________________________________________
=====================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
15
AIM CORE ALLOCATION PORTFOLIO SERIES C
STATEMENT OF CHANGES IN NET ASSETS
For the period December 30, 2005 (Date operations commenced) through February
28, 2006
(Unaudited)
<Table>
<Caption>
FEBRUARY 28,
2006
- ----------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 9,488
- ----------------------------------------------------------------------------
Net realized gain (loss) on investment securities and
futures contracts (1,748)
- ----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and futures contracts (4,862)
============================================================================
Net increase in net assets resulting from operations 2,878
============================================================================
Distributions to shareholders from net investment income (8,922)
============================================================================
Share transactions-net 1,344,622
============================================================================
Net increase in net assets 1,338,578
============================================================================
NET ASSETS:
Beginning of period --
============================================================================
End of period (including undistributed net investment
income of $566) $1,338,578
____________________________________________________________________________
============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
16
AIM CORE ALLOCATION PORTFOLIO SERIES C
NOTES TO FINANCIALS STATEMENTS
February 28, 2006
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Series C (the "Fund") is a series portfolio of AIM Core Allocation Portfolio
Series (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 two separate portfolios, each
authorized to issue an unlimited number of shares of beneficial interest.
Matters affecting each portfolio will be voted on exclusively by the
shareholders of such portfolio. 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 is used exclusively for
separately managed accounts (e.g. wrap fee or certain other programs advised or
sub-advised by A I M Advisors, Inc. ("AIM") or its affiliates for whom AIM or
its affiliates have a fixed income mandate). Clients pay a wrap fee or similar
fee to participate in such programs.
The Fund's investment objective is to achieve high total return consistent
with preservation 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 risk of material loss as a result of such indemnification claims
is considered remote.
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. Securities traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
is valued based on the basis of prices furnished by independent pricing
services, in which case the securities may be considered fair valued, or by
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 recorded at amortized cost which approximates 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 value as of the close of the NYSE.
Foreign securities meeting the approved degree of certainty that the price
is not reflective of current 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.
17
AIM CORE ALLOCATION PORTFOLIO SERIES C
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. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
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.
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 are declared daily and paid
monthly. Distributions from 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. 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 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.
G. 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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment management agreement with AIM
pursuant to which AIM provides all management and advisory services necessary
for the operation of the Fund. AIM benefits from the Fund being an investment
option in wrap fee and certain other programs advised or sub-advised by AIM or
its affiliates. AIM and/or its affiliates receive fees for advising or
sub-advising such wrap programs. Under the terms of the investment management
agreement, the Fund has agreed to pay an advisory fee to AIM based on the annual
rate equal to 0.23% of the Fund's average daily net assets. However, AIM has
agreed irrevocably to waive all fees and pay all expenses incurred by the Fund
in connection with its operations, except for (i) all brokers' commissions,
issue and transfer taxes, foreign taxes and other costs chargeable to the Trust
or the Fund in connection with securities transactions to which the Trust or the
Fund is a party or in connection with securities owned by the Trust or the Fund;
(ii) costs, including interest expense, of borrowing money; and (iii)
extraordinary items such as litigation costs authorized by the Board of
Trustees.
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. ("INVESCO"), AIM pays INVESCO 0.11% of the Fund's
average daily net assets.
For the period December 30, 2005 (date operations commenced) through
February 28, 2006, AIM waived fees of $404.
The Trust has entered into a master administrative services agreement with
AIM whereby AIM provides accounting, shareholder and other administrative
services to the Fund. AIM does not charge the Fund any fees under the
administrative services agreement. The Trust has also entered into a transfer
18
AIM CORE ALLOCATION PORTFOLIO SERIES C
agency and service agreement with AIM and AIM Investment Services, Inc. ("AISI")
whereby AISI provides transfer agency and shareholder services to the Fund. The
Fund is not charged any fees pursuant to such agreement.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Fund's shares.
The Fund is not charged any fees pursuant to the distribution agreement with
ADI.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
NOTE 3--BORROWINGS
The Fund is permitted to temporarily carry a negative or overdrawn balance
in its account with State Street Bank and Trust Company, 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 4--FUTURES CONTRACTS
On February 28, 2006, $300,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts.
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 3 Mar-06/Short $315,703 $(335)
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
NOTE 5--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
NOTE 6--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 period
December 30, 2005 (date operations commenced) through February 28, 2006 was
$1,718,764 and $746,380, respectively. For interim reporting periods, the cost
of investments for tax purposes includes reversals of certain tax items, such
as, wash sales that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 2,029
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,556)
===============================================================================
Net unrealized appreciation of investment securities $(4,527)
_______________________________________________________________________________
===============================================================================
Cost of investments is the same for tax and financial statement purposes.
</Table>
19
AIM CORE ALLOCATION PORTFOLIO SERIES C
NOTE 7--SHARE INFORMATION
The Fund currently offers one class of shares.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------
DECEMBER 30, 2005
(DATE OPERATIONS
COMMENCED) TO
FEBRUARY 28, 2006(A)
----------------------
SHARES AMOUNT
- ------------------------------------------------------------------------------------
Sold 133,803 $1,335,700
- ------------------------------------------------------------------------------------
Issued as reinvestment of dividends 899 8,922
====================================================================================
134,702 $1,344,622
____________________________________________________________________________________
====================================================================================
</Table>
(a) There is one entity that is a record owner of more than 5% outstanding
shares of the Fund and it owns 15% 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. In addition, 79% of the outstanding shares of the Fund are
owned by AIM.
NOTE 8--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding for the period indicated.
<Table>
<Caption>
DECEMBER 30, 2005
(DATE OPERATIONS
COMMENCED) TO
FEBRUARY 28, 2006
- ---------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09
- ---------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.07)
=================================================================================
Total from investment operations 0.02
=================================================================================
Less dividends from net investment income (0.08)
=================================================================================
Net asset value, end of period $ 9.94
_________________________________________________________________________________
=================================================================================
Total return(a) 0.25%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,339
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.00%(b)
- ---------------------------------------------------------------------------------
Without fee waivers 0.23%(b)
=================================================================================
Ratio of net investment income to average net assets 5.41%(b)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate(c) 80%
_________________________________________________________________________________
=================================================================================
</Table>
(a)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.
(b)Ratios are annualized and based on average daily net assets of
$1,050,170.
(c)Not annualized for periods less than one year.
20
AIM CORE ALLOCATION PORTFOLIO SERIES M
SCHEDULE OF INVESTMENTS
February 28, 2006
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
U.S. TREASURY SECURITIES-50.64%(a)
U.S. TREASURY BILLS-0.52%(b)
4.39%, 06/29/06 $ 7,000 $ 6,895
=====================================================================
U.S. TREASURY NOTES-43.52%
4.88%, 02/15/12 570,000 577,746
=====================================================================
U.S. TREASURY BONDS-6.60%
6.00%, 02/15/26 75,000 87,656
=====================================================================
Total U.S. Treasury Securities (Cost
$673,564) 672,297
=====================================================================
U.S. GOVERNMENT AGENCY SECURITIES-24.63%(a)
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-7.00%
Unsec. Global Notes, 3.88%, 06/15/08 95,000 92,946
=====================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-17.63%
Unsec. Global Notes, 3.88%, 07/15/08 95,000 92,917
=====================================================================
5.25%, 04/15/07 140,000 141,141
=====================================================================
234,058
=====================================================================
Total U.S. Government Agency Securities
(Cost $327,295) 327,004
=====================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
<Caption>
U.S. MORTGAGE-BACKED SECURITIES-22.81%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-22.81%
Pass Through Ctfs., TBA,(a)(c)
6.00% (Cost $302,063), 03/01/36 $300,000 $ 302,813
=====================================================================
ASSET-BACKED SECURITIES-9.46%
COLLATERALIZED MORTGAGE OBLIGATIONS-9.46%
Banc of America Commercial Mortgage Inc.(d)
Series 2006-1, Class A4 Pass Through Ctfs.
5.37%, 09/10/45 (Cost $125,629) 125,000 125,629
=====================================================================
TOTAL INVESTMENTS-107.54% (Cost $1,428,551) 1,427,743
=====================================================================
OTHER ASSETS LESS LIABILITIES-(7.54)% (100,130)
=====================================================================
NET ASSETS-100.00% $1,327,613
_____________________________________________________________________
=====================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
TBA - To Be Announced
Unsec. - Unsecured
</Table>
Notes to Schedule of Investments:
(a) 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 February 28,
2006 was $1,302,114, which represented 98.08% of the Fund's Net Assets. See
Note 1A.
(b) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(c) Security purchased on forward commitment basis.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at February
28, 2006 represented 9.46% of the Fund's Net Assets. See Note 1A.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
21
AIM CORE ALLOCATION PORTFOLIO SERIES M
STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $1,428,551) $1,427,743
- -----------------------------------------------------------
Cash 86,555
- -----------------------------------------------------------
Receivables for:
Investments sold 182,792
- -----------------------------------------------------------
Fund shares sold 283,851
- -----------------------------------------------------------
Interest 6,067
===========================================================
Total assets 1,987,008
___________________________________________________________
===========================================================
LIABILITIES:
Payables for investments purchased 659,395
===========================================================
Total liabilities 659,395
===========================================================
Net assets applicable to shares outstanding $1,327,613
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,342,246
- -----------------------------------------------------------
Undistributed net investment income (327)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures contracts (13,498)
- -----------------------------------------------------------
Unrealized appreciation (depreciation) from
investment securities (808)
===========================================================
$1,327,613
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Outstanding 134,680
___________________________________________________________
===========================================================
Net asset value and offering price per share $ 9.86
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
22
AIM CORE ALLOCATION PORTFOLIO SERIES M
STATEMENT OF OPERATIONS
For the period December 30, 2005
(Date operations commenced) through February 28, 2006
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 8,068
======================================================================
EXPENSES:
Advisory fees 403
- ----------------------------------------------------------------------
Less: Fees waived (403)
======================================================================
Net expenses --
======================================================================
Net investment income 8,068
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURE CONTRACTS:
Net realized gain (loss) from:
Investment securities (14,787)
- ----------------------------------------------------------------------
Futures contracts 1,289
======================================================================
(13,498)
======================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (808)
======================================================================
Net gain (loss) from investment securities and futures
contracts (14,306)
======================================================================
Net increase (decrease) in net assets resulting from
operations $ (6,238)
______________________________________________________________________
======================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
23
AIM CORE ALLOCATION PORTFOLIO SERIES M
STATEMENT OF CHANGES IN NET ASSETS
For the period December 30, 2005
(Date operations commenced) through February 28, 2006
(Unaudited)
<Table>
<Caption>
FEBRUARY 28,
2006
- --------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,068
- --------------------------------------------------------------------------
Net realized gain (loss) on investment securities and
futures contracts (13,498)
- --------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (808)
==========================================================================
Net increase (decrease) in net assets resulting from
operations (6,238)
==========================================================================
Distributions to shareholders from net investment income (8,395)
==========================================================================
Share transactions-net: 1,342,246
==========================================================================
Net increase in net assets 1,327,613
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income of $(327)) $1,327,613
__________________________________________________________________________
==========================================================================
</Table>
NOTES TO FINANCIALS STATEMENTS
February 28, 2006
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Series M (the "Fund") is a series portfolio of AIM Core Allocation Portfolio
Series (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 two separate portfolios, each
authorized to issue an unlimited number of shares of beneficial interest.
Matters affecting each portfolio will be voted on exclusively by the
shareholders of such portfolio. 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 is used exclusively for
separately managed accounts (e.g. wrap fee or certain other programs advised or
sub-advised by A I M Advisors, Inc. ("AIM") or its affiliates for whom AIM or
its affiliates have a fixed income mandate). Clients pay a wrap fee or similar
fee to participate in such programs.
The Fund's investment objective is to achieve high total return consistent
with preservation 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 risk of material loss as a result of such indemnification claims
is considered remote.
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. Securities traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
are valued based on the basis of prices furnished by independent pricing
services, in which case the securities may be considered fair valued, or by
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").
24
AIM CORE ALLOCATION PORTFOLIO SERIES M
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 recorded at amortized cost which approximates 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.
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. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
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.
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 are declared daily and paid
monthly. Distributions from 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. 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 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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment management agreement with AIM
pursuant to which AIM provides all management and advisory services necessary
for the operation of the Fund. AIM benefits from the Fund being an investment
option in wrap fee and certain other programs advised or sub-advised by AIM or
its affiliates. AIM and/or its affiliates receive fees for advising or
sub-advising such wrap programs. Under the terms of the investment management
agreement, the Fund has agreed to pay an advisory fee to AIM based on the annual
rate equal to 0.23% of the Fund's average daily net assets. However, AIM has
agreed irrevocably to waive all fees and pay all expenses incurred by the Fund
in connection with its operations, except for
25
AIM CORE ALLOCATION PORTFOLIO SERIES M
(i) all brokers' commissions, issue and transfer taxes, foreign taxes and other
costs chargeable to the Trust or the Fund in connection with securities
transactions to which the Trust or the Fund is a party or in connection with
securities owned by the Trust or the Fund; (ii) costs, including interest
expense, of borrowing money; and (iii) extraordinary items such as litigation
costs authorized by the Board of Trustees.
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. ("INVESCO"), AIM pays INVESCO 0.11% of the Fund's
average daily net assets.
For the period December 30, 2005 (date operations commenced) through
February 28, 2006, AIM waived fees of $403.
The Trust has entered into a master administrative services agreement with
AIM whereby AIM provides accounting, shareholder and other administrative
services to the Fund. AIM does not charge the Fund any fees under the
administrative services agreement. The Trust has also entered into a transfer
agency and service agreement with AIM and AIM Investment Services, Inc. ("AISI")
whereby AISI provides transfer agency and shareholder services to the Fund. The
Fund is not charged any fees pursuant to such agreement.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Fund's shares.
The Fund is not charged any fees pursuant to the distribution agreement with
ADI.
Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or ADI.
NOTE 3--BORROWINGS
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with State Street Bank and Trust Company, 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 4--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
NOTE 5--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 period
December 30, 2005 (date operations commenced) through February 28, 2006 was
$2,643,008 and $1,509,086, respectively. For interim reporting periods, the cost
of investments for tax purposes includes reversals of certain tax items, such
as, wash sales that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,637
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,445)
===============================================================================
Net unrealized appreciation of investment securities $ (808)
_______________________________________________________________________________
===============================================================================
Cost of investments is the same for tax and financial statement
purposes.
</Table>
26
AIM CORE ALLOCATION PORTFOLIO SERIES M
NOTE 6--SHARE INFORMATION
The Fund currently offers one class of shares.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------
DECEMBER 30,
2005 (DATE
OPERATIONS
COMMENCED)
THROUGH
FEBRUARY 28, 2006(a)
-----------------------
SHARES AMOUNT
- -------------------------------------------------------------------------------------
Sold 133,829 $1,333,851
- -------------------------------------------------------------------------------------
Issued as reinvestment of dividends 851 8,395
=====================================================================================
134,680 $1,342,246
_____________________________________________________________________________________
=====================================================================================
</Table>
(a) There is one entity that is a record owner of more than 5% outstanding
shares of the Fund and it owns 15% 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. In addition, 79% of the outstanding shares of the Fund are
owned by AIM.
NOTE 7--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
DECEMBER 30,
2005 (DATE
OPERATIONS
COMMENCED) TO
FEBRUARY 28,
2006
- ---------------------------------------------------------------------------
Net asset value, beginning of period $10.00
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08
- ---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.14)
===========================================================================
Total from investment operations (0.06)
===========================================================================
Less dividends from net investment income (0.08)
===========================================================================
Net asset value, end of period $ 9.86
___________________________________________________________________________
===========================================================================
Total return(a) (0.60)%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,328
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets:
With fee waivers 0.00%(b)
- ---------------------------------------------------------------------------
Without fee waivers 0.23%(b)
===========================================================================
Ratio of net investment income to average net assets 4.60%(b)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate(c) 161%
___________________________________________________________________________
===========================================================================
</Table>
(a) 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.
(b) Ratios are annualized and based on average daily net assets of
$1,048,841.
(c) Not annualized for periods less than one year.
27
AIM CORE ALLOCATION PORTFOLIO SERIES M
LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG")
filed a civil lawsuit against A I M Advisors, Inc. ("AIM"), INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M
Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds), 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 PLC, the parent company of IFG
and AIM, 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 Securities and Exchange
Commission 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 October 19, 2005, the WVAG lawsuit was transferred for pretrial purposes to
the MDL Court (as defined below). On July 7, 2005, the Supreme Court of West
Virginia ruled in an unrelated lawsuit that is similar to this action that the
WVAG does not have authority 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.
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Pending Litigation described above may
have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * *
As a result of the matter 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.
28
AIM CORE ALLOCATION PORTFOLIO SERIES
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Bob R. Baker Robert H. Graham 11 Greenway Plaza
President and Principal Suite 100
Frank S. Bayley Executive Officer Houston, TX 77046-1173
James T. Bunch Mark H. Williamson INVESTMENT ADVISOR
Executive Vice President A I M Advisors, Inc.
Bruce L. Crockett 11 Greenway Plaza
Chair Todd L. Spillane Suite 100
Chief Compliance Officer Houston, TX 77046-1173
Albert R. Dowden
Russell C. Burk TRANSFER AGENT
Edward K. Dunn Jr. Senior Vice President and Senior Officer AIM Investment Services, Inc.
P.O. Box 4739
Jack M. Fields John M. Zerr Houston, TX 77210-4739
Senior Vice President, Secretary and Chief
Carl Frischling Legal Officer CUSTODIAN
State Street Bank and Trust Company
Robert H. Graham Sidney M. Dilgren 225 Franklin Street
Vice Chair Vice President, Treasurer Boston, MA 02110-2801
and Principal Financial Officer
Prema Mathai-Davis COUNSEL TO THE FUND
Lisa O. Brinkley Ballard Spahr
Lewis F. Pennock Vice President Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Ruth H. Quigley Kevin M. Carome Philadelphia, PA 19103-7599
Vice President
Larry Soll COUNSEL TO THE INDEPENDENT TRUSTEES
J. Philip Ferguson Kramer, Levin, Naftalis & Frankel LLP
Raymond Stickel, Jr. Vice President 1177 Avenue of the Americas
New York, NY 10036-2714
Mark H. Williamson Karen Dunn Kelley
Vice President DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
SUB-ADVISOR
INVESCO Institutional (N.A.), Inc.
Fixed Income Division
The Aegon Center
400 West Market Street
Louisville, KY 40402-3346
</Table>
==================================================
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 PAMCAPS-SAR-1
[YOUR GOALS. OUR SOLUTIONS.]
--Registered Trademark--
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
ITEM 2. CODE OF ETHICS.
There were no amendments to the Code of Ethics (the "Code") that
applies to the Registrant's Principal Executive Officer ("PEO") and
Principal Financial Officer ("PFO") 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.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
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 INVESTMENT 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 March 21, 2006, an evaluation was performed under the supervision
and with the participation of the officers of the Registrant, including
the Principal Executive Officer ("PEO") and Principal Financial Officer
("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, as amended (the "Act"). Based on
that evaluation, the Registrant's officers, including the PEO and PFO,
concluded that, as of March 21, 2006, 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 the
report that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
12(a)(1) Not applicable.
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 Core Allocation Portfolio Series
By: /s/ Robert H. Graham
---------------------------
Robert H. Graham
Principal Executive Officer
Date: May 8, 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: May 8, 2006
By: /s/ Sidney M. Dilgren
--------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: May 8, 2006
EXHIBIT INDEX
<Table>
12(a) (1) Not applicable.
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.
</Table>